Credit Crisis Fuels Civil Unrest

Iceland’s economy had flourished on speculative funds for years, but then suddenly, during one week last October, all three of its major banks imploded and the value of its currency disintegrated. Shortly thereafter, its citizens took to the streets in protest and the government’s collapse quickly followed.

Across China, protests over plant closures, pay losses and illegal land seizures have been the rule of the day. Protester demands for compensation from company management or government officials have been met by a police crackdown. These economically driven conflicts increased dramatically last year across the country's eastern seaboard, where much of China’s manufacturing base is located.

In Russia, with automobile sales expected to slump by up to 50 percent this year, then-prime minister Vladimir Putin moved late last year to impose high tariffs on imported automobiles in an effort to shore up the flailing domestic auto industry. But what followed was an outburst of violent anti-tariff protests.

High unemployment and a fall in income are expected to lead to even more violent mass actions across the globe this summer. These demonstrations - sometimes referred to as "credit crunch riots"- illustrate the social impacts of the global financial crisis.

Civil unrest of this kind can both contribute to and result in an erosion of longstanding values that undergird a society. Values such as social equality and individual freedom can be severely compromised. For example, a resurgence of nationalism, which often lies dormant until a threat to the nation is perceived, can external pageunderminecall_made belief in the value of individual freedom because the social pressure to conform to group norms espousing nationalist ideals can be intense.

As individuals in groups struggle to maintain balance, consistency and positive social identity, the decision to partake in nationalistic behavior from flag-waving to xenophobia can be attributed to conformity to group norms in order to gain acceptance. The risk is that if individuals succumb to this conformity, the intensity of their emotional response – to protest, riot or engage in violence – could prove socially and politically destabilizing.

This pressure toward conformity has been illuminated through the psychological study of group dynamics.

Groups and group membership have a profound impact on our behavior; being part of a group fulfills basic human needs. Indeed, groups are functional and can fulfill a range of needs – from basic survival to less tangible but equally important needs such as inclusion, control and affection.

Once in a group, people begin to measure their group against others to establish positive comparisons, which, in turn, causes intergroup competition. This competition can result in prejudice and stereotyping against rival groups, or “out-groups” – even in the absence of conflicting goals. In fact, research has demonstrated that “in-groups” automatically assume that out-groups are intent on hindering their goals. As a result, out-groups meet with negative connotations and emotions.

Engaging in social mobility, social creativity (others might be wealthier but we are happier / we lost but they didn't play fair) and social competition are all strategies involved in group dynamics. This is a natural occurrence and under relatively stable conditions is likely to remain benign.

However, intergroup competition can become dangerous under difficult circumstances or in the presence of diminished resources, and it often elicits an acute emotional response. Discrimination against an out-group can be a result of competition over scarce resources, such as jobs, housing and good schools. Whenever such commodities are in short supply, demand for them increases. Additionally, research suggests that as competition becomes more severe, those involved tend to view the 'other' in increasingly negative terms.

The impulse to discriminate against a competing group – made more acute when resources are scarce – can result in external pagescapegoatingcall_made, where "in conditions of severe socioeconomic and political despair and depression, the environment is often conducive to the identification of one group as a scapegoat, a group that is blamed for all of society’s illnesses. During hard times, the groups that people are particularly attracted to are those that ‘provide an ideological blueprint for a better world.'"

Increased scapegoating has been witnessed in the wake of the current financial crisis, and the external pagemiddle classcall_made could prove particularly vulnerable to engaging in the phenomenon. This rapidly growing socioeconomic stratum - two billion people have joined the ranks of the middle class in the last 15 years - has been the engine of economic growth. As The Economist recently external pagenotedcall_made, "They are products of globalization, and as globalization goes into reverse, they may well be hit harder than the rich or poor." In a fight for their way of life, this critical group has been compelled in some instances to compete fiercely with other socioeconomic groups in the battle over economic resources. A thriving middle class is essential to global economic recovery and mitigating social turmoil and scapegoating behavior.

Middle class scapegoating has been taking place throughout Central and Eastern Europe in the past year, for example, where violence against Roma (Gypsies) has been on the rise. The murder of Roma has been fueled by the increasingly aggressive rhetoric used by extreme right-wing party leaders, who stereotype the population of one of Europe’s oldest and most oppressed minority groups as consisting of common criminals who take advantage of social welfare systems. With unemployment on the rise, there is fear the attacks will only intensify, as xenophobic movements work in earnest to solicit increased support from the middle class, which is more open to extremist ideas under difficult economic circumstances.

Xenophobic movements are also recruiting heavily in the US. According to a recent Department of Homeland Security external pagereportcall_made, anti-Semitic extremists are working to exploit the economic downturn by blaming the "Jewish financial elites" for the current job losses in the US. "These 'accusatory' tactics are employed to draw new recruits into rightwing extremist groups and further radicalize those already subscribing to extremist beliefs."

High unemployment is also expected to raise anti-immigrant feelings because migrants are perceived to take away jobs. In Madrid, for example, police recently have been given weekly quotas for arresting illegal immigrants. While the removal of such individuals may be a legitimate policy, the process of questioning people from African or Middle Eastern descent is causing tension with legal Spanish residents and citizens originally from these parts of the developing world. A number of demonstrations have taken place against alleged racism and police raids, as thousands of legitimate migrants have flooded the countryside looking in vain for olive harvesting work.

In such a competitive economic context, politicians and policymakers must pay careful attention to the way issues are framed to avoid producing particular anxieties in the minds of citizens. For example, surveys from the external pagePew Global Attitudes Reportcall_made show that Europeans fear immigrants will change their 'European' culture and are responsible for increased levels of crime. The Spanish government’s illegal immigrant arrest quota appeared to heighten tensions between Spaniards and immigrants, thereby increasing chances of social unrest.

Group identities manipulated by leaders for political gain increase the likelihood of negative social comparison and can lead to prejudice – even violence - like that being committed against the Roma. The violence taking place in Central and Eastern Europe serves as a chilling reminder of what happens when others are not seen as individuals but are categorized as members of out-groups only, activating negative intergroup attitudes toward them. When individuals are categorized into groups, similarity to their fellow in-group members and the dissimilarity of in-group members to out-group members can be exaggerated. As such, identity is oversimplified, defining individuals only through the prism of their group membership.

Thus, it is critically important that governments take account of the potential consequences of identity manipulation of groups for political advantage - particularly during a financial crisis where competition for resources is so acute - to ensure the scapegoating like that taking place in Central and Eastern Europe, Spain, the US and elsewhere is halted.