Homeland Security Watch

News and analysis of critical issues in homeland security

March 16, 2011

Ruthless Resilience

Filed under: Catastrophes — by Mark Chubb on March 16, 2011

Some observers have commented that the still unfolding events in northeastern Japan represent a triple-whammy of sorts or the ultimate trifecta of awfulness. It’s nice to think these things come in threes, but just as the nuclear power plant travails continue well after the main event of the M9.0 earthquake and resultant tsunami so too do the economic impacts.

Japan’s stock traders, as reflected by the Nikkei average, have expressed worry that these events will cripple any hope of recovery from a decade of stagnant growth. The U.S. and other world markets have likewise responded with pessimism suggesting they too fear that these events will undermine the embryonic economic recovery from the Global Financial Crisis some thought we were finally seeing. By some estimates as much as $1 trillion has been wiped off corporate balance sheets in the trading sessions since the earthquake and tsunami struck five days ago, an amount almost as great as that lost after Lehman Brothers collapsed near the beginning of the financial crisis in 2008.

These worries seem understandable if not completely reasonable in light of the images of devastation and hopelessness we see coming from the disaster area. But do they accurately reflect the long-term prospects of these countries or their economies?

Of all human inventions, economies and their ability to facilitate the exchange of goods and services among individuals, groups and societies may be the most resilient of all. But this illustrates one of the issues with which advocates of resilience must wrestle: all recoveries take time, some take much longer than others and the results often do not turn out the way we expected.

It took Japan less than two decades to recover from the Great Kanto Earthquake of 1923, which nearly destroyed Tokyo. Peter Hadfield credited this event, in part, with precipitating the rise of nationalism that led Japan to invade China and ultimately launch a war that ultimately spanned the Pacific and led to the far more catastrophic consequences that resulted from the United States unleashing the first nuclear weapons on Hiroshima and Nagasaki to end the bloodshed of World War II.

Governments intervene in (some would say interfere with) markets or the economy to address what we blithely call market failures. In most cases, these failures reflect the inability of markets to produce what we want when we want it, rather than their inability to adapt over time to the resource constraints and expectations of market participants. In other words, our tendency to expect more than we can get quickly lead us to both boom and bust conditions that although they may ultimately correct themselves often result in other undesirable social, political or technical consequences or discontinuities that we experience as negative externalities.

The Great Tohoku Earthquake of 2011 illustrates the capacity of these discontinuities alone to disrupt economic recovery, but only in the short term. All of us would agree that the economy and  the underlying structural conditions affecting recovery in employment and GDP growth did not trigger the earthquake and tsunami. Some might try to suggest that the nuclear power plant accident is somehow related, but this would be a stretch and remains to be proved. By the same token, the earthquake, tsunami and nuclear accident cannot rightly be considered the cause of the underlying economic problems affecting Japan and the rest of the industrialized world despite the shockwaves now reverberating through the markets. Stronger economies have absorbed these shocks or managed to take them more or less in their strides.

In the short run, the significant price tag accompanying the damage and devastation will suppress economic growth in Japan. But over the long term, rebuilding, especially if it is approached from a strategic perspective may well increase economic output beyond what it would have been had these disasters not occurred.

What does this mean for other world markets? It may well create an opening for others, especially China and the Asian tiger economies, to fill the void created by a diversion of capital from export sectors to meeting Japan’s internal needs. This could, help the United States as well, by creating opportunities for us to capitalize on the President’s strategy of out-educating, out-innovating and out-building the rest of the world.

Call me a pie-eyed optimist, but something good might well come of all of this terrible destruction. But we might just have to wait awhile and accept that it won’t look the way we might like when it gets here, or more likely, when we arrive where it takes us.

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Comment by Christopher Bellavita

March 16, 2011 @ 7:00 pm

Americus, Georgia is not Sendai, Japan, so any parallels between the two may border more on insensitive metaphor than reality.

You write, “But over the long term, rebuilding, especially if it is approached from a strategic perspective may well increase economic output beyond what it would have been had these disasters not occurred.” I read an article a few weeks about that made a similar observation about the longer term recovery impacts of a 2007 tornado in Americus. (http://www.hsaj.org/?article=7.1.5). According to the authors of that study, their finding “project the theory that natural disasters of this magnitude have minimal negative to potentially positive effects on the economy, technology, and physical makeup of local regions in the medium to long term.” One can only hope for such pie-eyed results in Japan.

Comment by Earthquake/Landslide Preparedness In the US

March 17, 2011 @ 5:12 am

Demand for heavy equipment came across my desk within hours after the quake and the realization of the enormity of this unfortunate, deadly and devastating scenario.

As an independent Global Internatinal Commodities Trader for many, many years now, I see continued demand for substantial supplies of iron ore, steam coal, olive stones and olive cakes, #2 corn, soya beans, sugar and so, so much more w/the Chinese with outstretched hand everywhere as much product as they can secure from my suppliers. Wherever our resourcing contacts spanning the continents, the Chinese are on sceme.

Now w/the earthquake, heavy equipment – certainly jobs created to somehow clean up the debris, however as Chris says, maybe not the resulting economic benefits – the rebuild will be enormous as we all see from new footage being received –

In my own community spirit and while I am extensively involved in every continent in the various commidities markets, I am very concerned about not only the necessity of revamping our own nuclear facilities to withstand substantial earthquake far freater that 7.5 and from my information, none of the 104 facilities in 31 states can withstand much after 7.5…let’s get to work – Also, very concerned about the ineptness of local, state and certainly natinal preparedness as I have seen w/you Katrina, but I am engaged in Haiti — a very slow progress and very disappointing to say the least – wastewater and water purification project and manufacture of eco-friendly and earthquake resistent housing which I represent in US and Canadian “expertise” in coolaborative effort,frustrating at best…Hurricane season begins 1st June, still the good people of Haiti in tatterted tent —

My concern, while we here on Cape Cod look to califrnia or the heartland of our beloved Republic for the next “big one” – few, if any understand that it is We here along the eastern seaboard who could very well have a much higher tsunami wall of water – far in excess of the usual 30 ft. tsunami caused by earthquake crossing the Atlantic sme 3,000 miles – the fact is that a volcanic landslide from the western Canary Islands could result in a wall of water inundating more than just us here along the coastal plain and educating the public is essential – I also ask the lackluster and self-fulfilled Congressional members who I have little respect for to pass an immediate (my) request to appropriate funding to set up deep water tsunami warning buoys just west of the Canary Islands –

It was the US that set up the Pacific warning system going back to the very early 1960’s and have improved it – however with the possibility however slight of a volcanic collapse, a landslide into the ocean creating a much larger wave which would travel onshore here, it is time to set up an early warning system and to educate fellow Americans — the danger is very real, maybe not a possibility with imminent danger, but no one knows –

God Bless the resilience and discipline of the Japanese people as portrayed on our Fox News and CNN television screens, their patience, their respect and dignity for self and their neighbor – here we trash the local Wisconsin State House and a “charade” depicted from not only the “entrusted” representatives fleeing their respnsibilities, but a Congress of the US which continues its ineptness in not addressing after all these decades, the immediacy, the urgent requirement that we drill for oil – w/our oil reserves remaining intact as we will require such access as the Middle East becomes far more volatile than presently perceived – the quest for Jerusalem is present and forthcming – the German led EU fast deployment Army and shiny new battle vessels and the “Brutes of Tehran” soon to engage and just as in the 1930’s..the world blinks and turns its cheek to the necessity to address the unfolding global shock and awe soon to be an unimagineable conflagration….

God Bless the good people of Japan, the good people in Haiti and each and everyne of us all! Keep your Bibles close by….

At this time of passover and Easter in this Judeo-Christian nation which has until late been the beacon of hope for so many, pray for the salvation of mankind as it has not heeded the message to repent, it has failed as every man-made government, no matter what form, since Babylon. Selfish and arroogant greed the dimise as clearly depicted by local, state , national and international thieves – lusting so!

Christopher Tingus
PO Box 1612
Harwich, MA 02645 USA

Comment by William R. Cumming

March 17, 2011 @ 3:27 pm

The data set for economic projections from consequences of this event yet to be developed. If I had to guess some hedges will work and some will not.

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