Disasters Can Destroy Economies
For many 2012ers economics is a boring topic. Unless you have achieved the dream of 100% self-sufficiency, any decline in the economy will affect you. And that could range from hardship to starvation.
In the current economic climate there are three factors that put businesses at risk:
- high debt levels
- just-in-time supply chains
- globalization
High debts leave little room for unexpected events, such as natural disasters. Volcanic ash can drive airlines to bankruptcy, simply because they couldn’t fly some routes for a while.
Just-in-time supply chains are the equivalent of people living from hand to mouth. No stockpiles of supplies, totally dependent on others. Where that most affects you and I is supermarkets. Without their supply chain, supermarket shelves would be empty after just three days of regular purchasing, or less than one day if people learned of the problem and made panic purchases.
Globalization means that disasters far away can affect us. For example, the recent floods in Thailand have caused the price of hard drives to rise dramatically.
Chatham House have released a report highlighting the risks to economies of natural disasters or terrorist attacks:
The 2010 volcanic ash cloud cost the European Union 5-10 billion euros and pushed some airlines and travel companies to the verge of bankruptcy.“I would like to think we can learn from those experiences and be more resilient for longer but it won’t happen unless governments and businesses are better prepared and put in place different supply chains which can be relied on when disasters strike,” said Alyson Warhurst, chief executive of UK-based risk analysis company Maplecroft.
