Extractive summaries and key takeaways from the articles curated from TOP TEN BUSINESS MAGAZINES to promote informed business decision-making | Since September 2017 | Week 308 | August 4 – 10, 2023
Soaring temperatures and food prices threaten violent unrest
The Economist | July 27, 2023
As the world warms, the link between heat and social disturbance is an increasingly important one and, this summer, an especially concerning one.
In the first week of July the mean global temperature crossed the 17°C threshold for the first time, reaching a steamy 17.08°C. The average global temperature for the month as a whole is poised to be warmer than the hottest previous single-day average on record. This sort of weather spells trouble. In a study published in Science shows that an uptick in temperature of just one standard deviation above the long-term mean—the kind of deviation a statistician expects to observe about once every six days—drives an increase in the frequency of unrest of almost 15%.
In the eight weeks since the start of June, the average global temperature has simmered at a consistent four to six standard deviations above levels recorded from 1980 to 2000. The Economists’ rough calculations, which extrapolate the relationship indicated in the Science study, suggest that record temperatures in June and July could have raised the global risk of violent social unrest by somewhere in the region of 50%.
Verisk Maplecroft, a risk-intelligence company, maintains a civil-unrest index that forecasts the potential for business disruption caused by social disturbances, including violent upheaval, on a country-by-country basis. According to the firm’s estimates, the risk of global social unrest in the third quarter of 2023 is the highest since the index was created in 2017. That is because of both heat and the higher cost of living. Global inflation seems to have passed a peak, and international grain prices are lower than last year’s high. But that does not mean prices paid by consumers have stopped rising. If prices do not start to fall soon, people will only get hungrier. And hungrier people are more likely to hit the streets.
Fiscal austerity may further destabilise things. Many governments have committed to raising taxes or cutting expenditures in order to bring debt under control after lavish spending during covid-19.
Social upheaval can have a scarring effect on economies, too. A study found that even 18 months after a moderate episode of social unrest a country’s GDP remains 0.2% lower. By contrast, 18 months after a major episode of unrest a country’s GDP remains 1% lower.
Countries beyond the rich world have a more concerning outlook. The damage done by unrest is about twice as large in emerging markets as in advanced economies with lower business and consumer confidence, and heightened uncertainty, exacerbating the much greater risk of sudden capital flight.
3 key takeaways from the article
- As the world warms, the link between heat and social disturbance is an increasingly important one and, this summer, an especially concerning one. Each upheaval has its own causes, but certain factors make disturbances more likely everywhere.
- Surging temperatures, rising food prices and cuts to public spending—three of the strongest predictors of turmoil—have driven estimates of the potential for unrest to unprecedented highs in recent months. These estimates will probably rise higher still this summer.
- Temperatures are unlikely to have peaked. Russia’s exit from the Black Sea Grain Initiative to export supplies from Ukraine and India’s recent ban on rice exports may raise the price of staples. Social unrest is already bubbling in Kenya, India, Israel and South Africa.
Topics: Inflation, Violence, Global Economy