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January 6, 2005
Tragedy in Southeast Asia
A reader asks:
I was wondering whether economicswithaface would review the recent devastation in SE Asia in terms of economic development (or lack thereof). I know that Malaysia will probably get build really quickly, simply because they have tons of money. However, places like Sri Lanka, Indonesia (racked with civil war), and Thailand will not get rebuilt simply because they are not as wealthy.
One of the saddest aspects of this tragedy is that those countries who already had the least, were not only hit the hardest by the tsunami, but also were in many cases the least equipped to deal with such a crisis. Lack of insurance markets, infrastructure, and effective government and private networks to come to the aid of their citizens have made an already horrible situation even worse.
As mentioned above, a wealthier country like Malaysia (who was also the least affected by the tsunami) will have an advantage over it's poor counterparts. To put this in perspective Malaysia has an average annual income of $4,806 per person. This is compared with $3,000 in Thailand, $1,059 in Indonesia, and $899 in Sri Lanka.[1] The aforementioned are also dealing with a host of other problems such as higher degrees of corruption, civil wars and weak judiciaries.
Still, I am optimistic that even these poorer countries will get back on their feet faster than expected. Huge amounts of aid coming from both private and government sources will provide an immediate source of relief, while, as The Economist pointed out in its last issue, the disaster has the potential to smooth internal relations among hostile communities. This alone will help to move these countries forward.
More than anything though my optimism stems for the fact that human being are resilient. This thought was conveyed by Nobel laureate in economics Gary Becker in a recent article on the disaster:
John Stuart Mill, the great 19TH century English economist and philosopher, optimistically, but I believe accurately, remarked on “…the great rapidity with which countries recover from a state of devastation, the disappearance in a short time, of all traces of mischief done by earthquakes, floods, hurricanes, and the ravages of war”. The history of both natural and man-made disasters during the subsequent century and a half generally supports Mill.
So in terms of rebuilding houses, businesses and infrastructure I'm optimistic. But what won't be easy to recover from is the sheer loss of life on a personal level. Parents losing their children and children losing their parents in these numbers is something that is so depressing it's hard to even comprehend.
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[1] It should be noted that per capita income is not the only way to measure a county's wealth. India, which has refused outside aid as it feels it has the resources to deal with the crisis itself, has a per capita income of $493. But it also has a total economy (GDP of $517 billion) that is more than double any of the previously mentioned nations. While the wealth is concentrated, the government has the ability to tap this money for the relief effort. I'd be interested in any feedback others might have on this point.
Update: A friend points out another reason India refused aid: pride. This article in the WSJ, "Proud India Gets Mixed Reviews For Refusing Aid," has the details.
Update 2: KipEsquire writes to remind me about Burma, the second least-free nation on earth. Head over to his site to learn how bad it might be in this military dictatorship.
Posted by Peter Mork at January 6, 2005 9:58 AM
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