Greg Ip

Articles by The Economist’s U.S. Economics Editor

Natural disasters: Counting the cost of calamities (feature article)

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Death rates from natural disasters are falling; and fears that they have become more common are misplaced. But their economic cost is rising relentlessly

Jan 14th 2012 | ROTTERDAM, NETHERLANDS AND WASHINGTON, DC | from the print edition

[Greg Ip] THE world’s industrial supply chains were only just recovering from Japan’s earthquake and tsunami in March when a natural disaster severed them again in October. An unusually heavy monsoon season swelled rivers and overwhelmed reservoirs in northern Thailand. The floodwaters eventually reached Bangkok, causing a political crisis as residents fought over whose neighbourhoods would flood. But before that the economic toll was being felt farther north in Ayutthaya province, a manufacturing hub. The waters overwhelmed the six-metre-high dykes around the Rojana industrial estate, one of several such parks that host local- and foreign-owned factories.

Honda’s workers rescued newly built cars by driving them to nearby bridges and hills. The factory ended up under two metres of water and is still closed. Honda was hardly alone: the industrial estates that radiate out from Bangkok are home to many links in the world’s automotive and technology supply chains. Western Digital, a maker of computer disk drives which has 60% of its production in Thailand, had two of its factories closed by the floods, sending the global price of drives soaring.

Thailand is no stranger to floods. Europeans once called Bangkok the “Venice of Asia”. But rarely have they done so much economic damage. October’s deluge cost $40 billion, the most expensive disaster in the country’s history. J.P. Morgan estimates that it set back global industrial production by 2.5%.

Such multi-billion-dollar natural disasters are becoming common. Five of the ten costliest, in terms of money rather than lives, were in the past four years (see map). Munich Re, a reinsurer, reckons their economic costs were $378 billion last year, breaking the previous record of $262 billion in 2005 (in constant 2011 dollars). Besides the Japanese and Thai calamities, New Zealand suffered an earthquake, Australia and China floods, and America a cocktail of hurricanes, tornadoes, wildfires and floods. Barack Obama issued a record 99 “major disaster declarations” in 2011.

Read the entire article, linked here.


Written by gregip

January 12, 2012 at 1:51 pm

Posted in Uncategorized

One Response

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  1. Yes, the economic damage to this region will be felt for some time to come.

    Recruitment Auckland

    January 16, 2012 at 6:06 am

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