Real problems start when natural disaster goes nuclear
Published 15/03/2011 | 05:00
Distressing, appalling and traumatic as they are in human terms, the basic economic template for natural disasters is that they cause disruption, but are essentially ephemeral; and the longer-term boost to spending from reconstruction and development may even help an economy.
That, for example, is pretty much what happened after the Kobe earthquake in 1995, after the South Asian tsunami of 2004, Hurricane Katrina a year later and many others. The Kobe shock did not trigger any wider systemic financial crisis. The earthquake cost about $100bn (€71bn) -- material, but dwarfed by Japan's $5,000bn (€3,500bn) annual GDP.
The problem for Japan, and the rest of the world, will be if this natural disaster turns into a nuclear one. Once we start thinking in nuclear terms the outlook for the world's third largest economy and the rest of the planet is much less reassuring. For a nuclear meltdown will trigger an economic meltdown, and at just the moment when the world least needs it.