The disaster in Japan is devastating to see. Although my friends in Japan are all safe, many of their friends and family are still missing. The death count is high. The destruction is staggering.
I don’t want to make light of the horrible tragedy, and indeed I pray for them and wonder what we can do to help. This is a discussion about some of the after effects based on scenarios run years ago.
The prognosis is bad.Many years ago, a variety of different people were running the Tokyo Earthquake scenario. In it, a earthquake of 8.0 magnitude or greater hits Tokyo, greatly destroying the city. Several social and economic models were used, taking into account Japanese values and historical precedents.
This scenario was always laughed off, and those who ran it were seen as cranks and naysayers. Back when I was modeling this (just as an intellectual exercise) the Japanese economy was just beginning its collapse. China had not risen anywhere near to being the world’s second largest economy. The US had not hit a mortgage crisis. Even the Internet bubble hadn’t quite taken off.
It was a long time ago.
Here’s what people came up with.
I am always amazed at how we can never think bad enough to get things right. We likely under-estimated the damage that actually from the earthquake by an order of magnitude. Or two. What we thought would be a trillion (1995 USD) will likely be more. The death toll that we thought would be centered on Tokyo is more widespread, farther north. The devastation to the great nation of Japan is beyond any of the horrible scenarios.
The old scenarios didn’t include the current financial vulnerability. The United States, whose economy still dominates the world’s, almost teeters on another market collapse. Its debt is staggering. The future costs of the aging population are denied. Current attempts to curb pensionary costs are half-hearted and not fairly distributed.
The middle east is in turmoil, with the rise of Iran as the dominant force in the region almost a foregone conclusion now. The threat of Bahrain’s revolution to the West’s security (and oil security) is massive. There is no balancer to Iran any longer now that the United States has destroyed Iraq’s ability to wage war.
I just don’t see how we get out of the problems that these earlier — and much less horrible than reality — scenarios concluded as likely.
It’s an interesting time.
There are a few wild cards. India is the world’s largest economy and has the ability to do some interesting things. However, they are mountain-locked as a nation, reducing their ability to influence the military reality of the region. China’s west coast is heavily Japan-looking (they get a lot of money from there) and it could make a lot of money. However, traditional hatred of Japan, and the memory of their atrocities of the second world war, could drive Chinese conservatives to look for a new way to secure themselves against their traditional enemy.
So will the Japanese disaster tank the world’s economy? My answer would be “probably, but it may take a year to take hold”. The run on Northern Rock made it clear that the mortgage crisis would tank the world’s economy in September 2007 and that took several months to become obvious to everyone.
Keep your day job. Be thankful that you are alive.