TCS Daily


Tsunami-nomics

By Jerry Bowyer - January 7, 2005 12:00 AM

On December 26, 2004 an immense wave rose up and slaughtered approximately 150,000 people. In addition, it left roughly 5,000,000 people homeless. In the week that followed,  the US and British markets saw significant increases and even Indian Ocean regional markets saw little, if any, declines (see chart below). This begs the question: how could hundreds of thousands of people and millions of homes be washed into the ocean in a single day and have no discernable economic effect? How could a gigantic hydrological wave not even amount to an economic ripple?

 



Tragically, it's because, economically speaking, the people who were washed away were, for the most part, not connected to the rest of the world. They were born, lived and died isolated from the world economy and largely forgotten by it. Their absence didn't affect world markets, because their presence had never affected world markets. Why is this a tragedy? Because if they had been connected to us, I think many of them would still be alive today. If they had spent the last 30 years trading rice or computer programming services or transcription services for dollars, then they would have been able to trade dollars for modern road-building materials, well built buildings and tsunami warning systems.

 

If they had been highly educated engineers selling their services to firms around the world and bringing dollars to their countries, then perhaps their governments would have cared about them enough to have set up emergency communication protocols. If the coasts of Indonesia and India had been dotted with growing engineering firms, someone would have insisted. This part of the world is known as 'the ring of fire' because of its seismological instability, isn't it?

 

By contrast, look at the economic impact of the terrorist attacks in America on September 11th, 2001. The 9/11 attacks were vastly smaller in terms of the impact on human life and at the same time, massively larger in terms of their impact on world markets (see chart below). Not only did American stock valuations fall, but so did virtually every exchange in the world, including Southeast Asian ones. In fact, the charts above show that Asian markets were more affected by the loss of 3,000 American lives than they were by the loss of 150,000 within their own region. Thats because most of the people who died in the terrorist attack worked in the World Trade Center, right in the center of worldwide capital markets. The slaughter of the American innocents caused the extension of a worldwide recession while the slaughter of 50 times as many innocents by the tsunami did not even amount to a speed bump in a worldwide economic recovery.

 



The declaration of Independence states that all human life is of equal value. That's just the point: if the governments of Southeast Asia genuinely believed that, then things would have been different for the victims on December 26th. If their governments had allowed the freedom to create wealth and trade it with us, then they would have been developed nations: a tsunami would have killed hundreds like they do in Japan. Instead the world has lost 150,000 souls and counting. Freedom matters.

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