Are London rioters an economic force?

This may sound horrible, but the riots will have an affect on the economy. Possibly even a strangely beneficial one for some people.


London Riots are horrific and terrible. People are being injured, losing everything they own, being robbed, and all for nothing. I mean, the thugs are just stealing because they’re greedy and poor. I wonder, however, if this does not shift money from the very wealthy to the very poor.

Unemployment is way up in the UK (7.7% according to The Economist). The people who are rioting probably have no jobs and few prospects of getting a job. Rioting may have made sense to them in some twisted way. But here’s how I think it shifts money from the rich to the poor.

All this stuff that is destroyed will need to be rebuilt. All the things that were burned and stolen will need to be replaced. Sadly, there’s a tonne of stuff that was not insured, was priceless, or personal. (How do you replace photos of your children that were burned up in a drunk teen’s mindless rage?) But there’s a lot of run-of-the-mill stuff that will be rebuilt and will be replaced new and was, in fact, insured.

Businesses and people—as much as they can—will use their insurance policies to replace burned out things and stolen things with new things. Those new things have to be built, sewn, created, delivered, assembled, etc. People will have more work to do. Locally, construction and such will likely pick up. Abroad, some of the gadgets, gizmos, cars, and clothes will be bought.

Insurance companies will pay—as little as they are required to—and some of that insurance is insured. At the end of the day, though, it is the insurance companies, their stockholders, and the run-of-the-mill people who pay premiums who will fund the insurance companies’ contributions to restoring the destruction. Does this represent a huge shift from the haves to the have-nots? The unemployed construction worker who hasn’t been able to get a job now gets to rebuild something. His job is created by an insurance company that is honouring its policy for a business. The rioting and lawlessness create a small increase in employment in the poorest communities, and it’s paid for by people who have jobs, pay insurance premiums, and own stock. So, a giant sum of millions of pounds, composed from very small bits of money (a few hundred pounds a year from hundreds of thousands of policyholders) will gradually “trickle down” to labourers, tradesmen, and some of the unemployed. A big shift of money.

There will be a huge pile of uninsured damage. Taxes and public funds will probably be used to assist those who were uninsured, meaning that, ironically, the very taxes that the rioters hate will stay high longer or even go up to pay for the damage they did. This will be a massive economic event, though.

I’m no economist. I’m just pondering the impact.

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