The concept that war stimulates the economy has long been disproven, but a look at international headlines indicates that many people still haven't gotten that memo. In recent days, rioters worldwide have taken to the streets to protest the economic crises that have send stock markets plummeting, job markets reeling and Forex markets into a tailspin of volatility. Although it has yet to be seen whether these riots will have any palpable effect on the economies which they seek to improve, it stands to reason that such discord will serve only to aggravate an already unstable situation instead of ameliorating it.
Israel regularly makes the news for its discord with its neighboring countries, but seldom does it grace the news because of internal friction and economically-driven protests. And yet, demonstrations on the streets of Tel Aviv and other Israeli cities have united over 50,000 people with a singular goal – to protest the rising housing costs in the region. Protesters are also asking for higher minimum wages and free education from the age of three months. In May, thousands of rioters took to the streets in the Philippines to complain about their wages in comparison to higher gas and oil prices and rising inflation in the region.
And, while higher wages are always critical, job creation is on the minds of other protesters, including those in the PIIGS countries. In Spain, for example, unemployment has reached a shocking 21%, and government cutbacks and austerity measures show give little hope about increased job creation in the near future. Analysts have also begun speculating that recent riots in London and other English towns have also been fueled by regional financial disruptions.
Although it's too early to tell whether recent riots will have any impact on national economies, historical evidence points to the fact that riots may, in fact, cause more harm than good. A study published by the National Bureau of Economic Research found that as a result of the 1960s rioting in Los Angeles to improve the salaries of African Americans, a negative spiral actually ensued. More recently, riots in Egypt in January 2011 caused more harm than good, as oil prices were affected following revolts against the economic and political policies of President Mubarak. Finally, riots in England in recent days have caused significant financial damage to small business owners, who may be forced to close their doors or declare bankruptcy, damaging the economy even further.
The global economy may not look too sunny right now, but there's no question that political discord will not solve the problems any time in the near future. We haven't seen sufficient economic stimulus in the US since the war in Afghanistan began, nor have we seen any local riots yield dramatic economic upswings. So, instead of being angry about the global economic crisis, why not spend our energies searching for ways we can profit from the volatility, if not in immediately, then in the long run?