Rachel Reeves has been in the US this week trying to lure investment into the UK. Good luck with that, chancellor. With racist riots occurring nightly, it is perhaps not the best time to be declaring that Britain is open for business. Rather, the message likely to be picked up on the other side of the Atlantic is that Britain is awash with thuggery, that xenophobia is rampant and that the country’s economy is broken. The government seems to have been taken by surprise by the far-right violence. Britain is not remotely close to the “inevitable” civil war Elon Musk has been talking about, but it says something when Nigeria, Australia and Indonesia start cautioning their citizens about the dangers of travelling to the UK. The hatred shown on the streets has been vile and shocking, and threatens to do serious damage to Britain’s international reputation. Let’s be clear: mass arrests followed by punitive sentences are necessary and justified. Rioters are responsible for their own actions – and what they are doing is criminal, pure and simple. I was a magistrate back in 2011, the last time there was serious widespread disorder, and the message received from on high was that we should crack down hard. A similar message will have gone out this time, with harsh sentences meted out for offences that would normally be treated far more leniently. A trickier question is whether this is an example of the sort of hooliganism that has led in the past to riotous behaviour when the England football team has been playing abroad or whether it is a symptom of a deeper malaise. If it is the former, tough sentences for the perpetrators may work. If it is the latter, there is a much bigger problem, and banging people up and throwing away the key won’t be enough to restore harmony to the many parts of England where violence has erupted. A clampdown on the social media companies that have been accused of helping the perpetrators orchestrate their actions is also not a silver bullet. It would be unquestionably easier to decide that this is simply a case of rooting out a few hundred rotten apples, because it avoids the need to address thornier issues such as inequality, the increase in working-age poverty and the impact of immigration on pay and public services. Put simply: is Britain a country where the conditions are ripe to be exploited by the far right? The answer, sadly, is that it probably is. For years, charities and thinktanks have been warning that this is a country where the gulf between the haves and the have-nots is enormous. Just this week, the Resolution Foundation – a thinktank that focuses on issues affecting those on low and middle incomes – published a report showing that regional inequalities have not narrowed at all in the past 25 years. Poor places have remained poor and rich places rich. As far as child poverty is concerned, things have got worse. In 2014-15, 19 of the 20 child poverty hotspots were in London, but by 2022-23, only three remained in the capital, with the rest split between the north-west and West Midlands. There has been no rioting in places such as Cambridge, no attacks on asylum seekers in Winchester or St Albans – and it is not hard to see why. These are the parts of the country where people have well-paid jobs and comfortable lives, and where the biggest cause for concern is whether bits of the green belt are going to be developed under Labour’s housebuilding plan. If, by some miracle, Reeves does persuade US entrepreneurs to put their money in the UK, these are the sort of prosperous places where it will go. It almost certainly won’t go to Rotherham, Middlesbrough, Stoke-on-Trent or Hartlepool – four of the towns where rioting has been the most furious – despite the fact that they are in greater need of the boost that investment provides. These are all classic examples of post-industrial Britain – places that had the heart of their economies ripped out in the 1980s and 90s, and where the factories have been replaced by call centres and distribution warehouses. They have suffered more than most from the austerity imposed after the 2010 election. Add in a decade or more of flatlining real wages, a cost of living crisis and legal migration reaching a record level in 2022 and you get a highly combustible mixture. These are the towns and cities that voted for Brexit in the expectation that things would change, and they didn’t. They were seduced by Boris Johnson’s idea that he would level up Britain after the 2019 election and were again sold a pup. Faith in the state is at rock-bottom levels. Respect for the police has drained away. Asylum seekers and migrants more generally have become the scapegoats for discontent. More worrying perhaps than the pictures of racists hurling bricks are the bystanders – not actively involved but appearing to be willing them on. Make no mistake: nothing justifies attacking a mosque or a hotel where asylum seekers are housed – not benefit cuts, nor the loss of a job or longer NHS waiting lists. Yet, as I said back in 2011, we are kidding ourselves if we think a spell under lock and key – even when richly deserved – is going to solve deep-seated problems. To imagine that economic and social factors play no part in what has happened over the past week or so is to inhabit the farthest shores of fantasy island. To borrow a phrase, the government needs to be tough on riots, tough on the causes of riots. Larry Elliott is the Guardian’s economics editor