The Economics of America’s Civil Unrest

High consumption and low savings helped set the stage for the explosion of violence across America.

By Spengler and cross-posted from Asia Times.

Economics doesn’t explain everything. Heartbreakingly high rates of incarceration, illegitimacy, disease and poverty among black Americans are tinder waiting for a spark like the death of Minneapolis resident George Floyd in police custody.

“What the great French sociologist Emil Durkheim called “anomic suicide” is the Great Plague of our times. Self-destructive behavior in the form of opioid addiction, alcoholism, and violent behavior is destroying the lives of large parts of the US population,” I wrote in this space March 30.

Nonetheless economics does tell us something, and the chart below gives context to the riots which have wracked American cities during the past several days.

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Thirty years ago the United States had twice as many workers in factories than in restaurants, hotels and other leisure and hospitality businesses. Over those 30 years the number of manufacturing workers fell by about half and leisure-and-hospitality employment doubled.  Then came Covid-19, and all the employment gains of the past 30 years evaporated in two months (these are April data, and the picture has worsened since then).

Minority workers in the United States benefited from an employment boom during the Trump Administration, and black unemployment fell to just 5.8%, the lowest level in American history, thanks in large measure to the availability of low-skilled service industry jobs. These jobs disappeared the fastest and are least likely to come back in the foreseeable future, as Americans save more of their income and avoid crowded public places like restaurants.

Black Americans suffered disproportionately in the epidemic, with death rates much higher than whites, Asians or Hispanics. That may be due to the prevalence of co-morbid medical conditions among blacks, for example hypertension.  Forty percent of adult blacks suffer from high blood pressure, vs 28% of whites and non-black Hispanics and 25% of Asians.

According to one study American blacks died from Covid-19 at triple the rate of other races. Whether this is due to poor diet, inadequate preventive care or other factors is outside my area of competence. But it is clear that blacks suffered more.

With the Covid-19 epidemic, the economic prospects of black Americans suddenly turned bleak. As the American economy shifted out of industry and into services, personal consumption took up a larger share of gross domestic product (GDP). Seventy percent of US GDP goes to personal consumption vs. an industrial-nation average of 60%

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