Economic Backwardness and Social Tension*

• Author: Christa N. Brunnschweiler,Päivi Lujala
• Published date: 01 April 2019
• DOI: http://doi.org/10.1111/sjoe.12281
• Date: 01 April 2019

Scand. J. of Economics 121(2), 482–516, 2019

DOI: 10.1111/sjoe.12281

Economic Backwardness and Social

Tension*

Christa N. Brunnschweiler

University of East Anglia, Norwich NR4 7TJ, UK

c.brunnschweiler@uea.ac.uk

P¨aivi Lujala

Norwegian University of Science and Technology, NO-7491 Trondheim, Norway

paivi.lujala@svt.ntnu.no

Abstract

Wepropose that relative economic backwardness contributes to the build-up of social tension and

non-violent and violent conflict. Wetest our hypothesis using data on organized mass movements

and armed civil conflict. The findings show that greater economic backwardness is consistently

linked to a higher probability of onset of violent and especially non-violent forms of civil unrest.

We provide evidence that the relationship is causal in instrumental variables estimations using

new instruments, including mailing speeds and telegram charges around 1900.The magnitude of

the effect of backwardness on social tension increases in the two-stageleast-squares estimations.

Keywords: Conflict; economic backwardness; economic development; instrumental variables

estimation; social tension

JEL classification:C23; F50; O10

I. Introduction

“[...] great delays in industrialization tend to allow time for

social tensions to develop and to assume sinister proportions.”

(Gerschenkron, 1962, p. 28)

Human history is marked by social and political upheaval and violence,

and we are regularly confronted with images of mass demonstrations, civil

unrest, and conflict. In this paper, we develop and test a hypothesis on how

relative economic backwardness affects social unrest and armed conflict,

*The authors are grateful to three anonymous reviewers for their useful suggestions. We thank

Indra de Soysa, Ted Miguel, Bjarne Strøm, Krishna Chaitanya Vadlamannati, Simone Valente,

and seminar and conference participants at NTNU, UEA, RES (Brighton), and NEPS (Antwerp)

for their helpful comments. Special thanks to Jenny Lynch (US Postal Service) and employees

of The Royal Mail Archive for help finding data.

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The editors of The Scandinavian Journal of Economics 2017.

C. N. Brunnschweiler and P. Lujala 483

inspired by a classic essay by Alexander Gerschenkron (1962),1and thus

add to the understanding of the economic origins of social tension and

organized political violence.

Gerschenkron’s work was published at a time when income gaps and

economic backwardness between countries around the world were on the

rise. The end of the colonial era across Africa and many parts of Asia

brought a large number of newly independent (and very poor) nations on

to the global stage. Many of these countries have still not seen economic

take-off, and they lag ever further behind the most highly developed nations.

We contend that Gerschenkron’s insights into how economic backwardness

can contribute to the emergence of social tension and large-scale violence

are still useful today, particularly when combined with the concept of

international comparison and status-seeking behavior.

In this paper, we make three important contributions to the existing

body of literature on the causes of social unrest. First, in our analysis, we

distinguish between relative and absolute economic development. Second,

we consider both non-violent and violent forms of social tension, including

armed civil conflict. Third, we introduce two entirely novel instruments

(mailing speed and telegram charges around 1900) to determine the effect

of backwardness on social tension.

Our focus is on a measure of between-country inequality. We

interpret economic backwardness in terms of a country’s distance from

the world development frontier: it is a measure of relative economic

(under-) development that includes technological know-how, welfare, and

consumption possibilities.2Particularly in an era of the globalization of

information, a backward country’s poor or underprivileged population

compares its situation not only with that of its better-off co-nationals, but

also with the situation of peers in neighboring countries and places farther

afield (James, 1987; Valente, 2009). An unfavorable comparison, coupled

with a political regime’s inability or unwillingness to respond to g rowing

popular discontent, can then lead to a dangerous build-up of social tension.

We propose that the greater a country’s economic backwardness with respect

to the development leader, the higher its probability of witnessing organized

forms of social tension such as mass demonstrations for political regime

change, or even armed civil conflict.

1We refer to the collection of essaystitled “Economic Backwardness in Historical Perspective”,

published in 1962, whichincludes the title essay (first published in 1951) and other related essays.

2We discuss within-country inequality and how it relates to backwardness and conflict in

Section II. Our concept of economic backwardness is similar to distance to the technological

frontier found in the recent body of literature on economic growth (e.g., Acemoglu et al., 2006;

Madsen et al., 2010).

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The editors of The Scandinavian Journal of Economics 2017.

484 Economic backwardness and social tension

We empirically test the hypothesized link between economic

backwardness and social tension at the country–year level for the period

after World War II (WWII) by using new data on violent and non-violent

mass movements (Chenoweth and Lewis, 2013), as well as established

data on armed civil conflict from the Uppsala Conflict Data Program/Peace

Research Institute Oslo (UCDP/PRIO) Armed Conflict Dataset (Gleditsch

et al., 2002). Our indicator of backwardness is a simple measure of a

country’s distance to the world economic (and technological) leader: we

use the ratio of a country’s per capita (p.c.) income relative to that in the

United States.

Across a series of pooled ordinary least-squares (OLS) estimations, we

find that economic backwardness is an important and hitherto neglected

factor particularly in explaining the onset of non-violent and any type

of mass movements, and to a lesser degree also of armed conflict. In a

second step, we take potential endogeneity issues seriously by instrumenting

our backwardness measure together with income per capita. We use

the minimum physical distance to either London or Washington DC,

and mailing speed and telegram charges around 1900 as instruments.

Linear two-stage estimations reinforce our findings of a positive link

between backwardness and the probability of witnessing new violent and

non-violent mass movements, and suggest moreover that backwardness

is endogenous. Instrumental variables (IV) results for armed conflict

onset remain weak, but still show a clear positive relationship with

backwardness.

In addition, we find some evidence that the impact of backwardness

has been on the increase in recent decades, coinciding with deepening

globalization and the rise of the Internet. This supports the idea that

between-country inequality is an important conflict-generating mechanism.

Our proposition is further supported by the fact that our measure for

backwardness is robust to controlling for several other mechanisms,

including income and within-country inequality levels. Overall, our results

suggest that backwardness is a new and complementary factor that can help

us explain the onset of social unrest across countries.

The rest of the paper is organized as follows. In Section II, we develop

the theory and testable hypothesis; in Section III, we describe the data and

methodology; in Section IV, we discuss the results of the empirical analysis;

and in Section V, we present our conclusions.

II. On Economic Backwardness and Social Tension

Gerschenkron (1962) studied the history of industrialization in Europe

up to the mid-20th century and pointed out that Russia’s “delayed

industrial revolution” was to blame for the violent revolution of 1917

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The editors of The Scandinavian Journal of Economics 2017.