At 7.50 today I flew from Barcelona to London. Before going to the airport I read an article on Huffington Post about the possible economic impact of Japan’s “verge of apocalypse” (words of the EU commissioner) on the world economy.
The full impact of the disaster, and the extent to which it could harm economies globally, cannot yet be assessed, experts say. In economic terms, the tragedy might not have much effect on other countries, as companies compensate for devastated facilities, say economists. But even once the crisis subsides and Japan begins to rebuild, that country’s economy could face major challenges.
The world’s third biggest economy gets a big chunk of its territory wiped out, one of the country’s nuclear plants explodes and starts releasing considerable amounts of very dangerous radiation reaching even Tokio, many of its main manufacturers have stopped production, thousands of people flee the capital and foreigners the country, all in a matter of days. In the meantime, the Arab world (where the biggest reserves of oil are) is exploding in revolution against its authoritarian rulers, food prices soar, and we’re approaching the peak oil is seems to come much sooner than expected.
The question is not anymore whether the Japanese disaster has an impact on the outside, for there is no “outside” anymore. There is no Japan and the rest of the world. We live in a densely connected world.
(1) Japan earthquake-tsunami-nuclear meltdown (only one of these would have been enough…) has slowed down considerably its production and consumption of manufactured goods. This is meant to affect importers and exporters alike (nearly everyone).
The affected companies produce key components for computers, televisions, camcorders, DVD players and iPads. Now, the high-tech industry, which experts have seen as a key source of economic growth, contends with the prospect of a shortage.
“There will be individual companies in the U.S. that are not going to be able to get their supplies for anywhere from weeks to months,” Alexander, the Georgetown economist, said. “There certainly will be suppliers who are either out of business or have lost their capabilities for the moment.”
(2) Japan’s food industry and agriculture, affected by the destruction of the tsunami and its effects on infrastructure, will also reduce production considerably. Japan will, therefore, need to import much more food very soon. Nuclear contamination will also affect the food chain affecting even further food production in the country, making unsuitable for human consumption vegetables, meat and fish coming from the affected area.
A country of 127 million people suddenly increasing their food imports will have a great impact on food prices, pushing them even higher. This will produce further instability in poor countries.
(3) The nuclear disaster doesn’t only concern the Fukushima plant. It’s having an impact on Japan’s reliance on nuclear plants as source of energy. Japan is highly dependent on this source (around 30% of the country’s electricity today, and before March 11 it was increasing rapidly). Japan needs to import some 80 percent of its energy requirements. Now it will need to import even more.
In addition, many countries using nuclear energy are seriously questioning their past policies of encouragement of the nuclear option, chiefly among them Germany.
With no realistic replacement to keep the energy demands of our current economic system, we’ll need to increase our reliance on oil and other fossil fuels. Oil prices will increase even further in a very short period. Political instability and new political regimes, less amiable to cheap oil policies to satisfy Western/capitalist demands, in the region with greater oil reserves will put even further pressure. On top of that, we’re approaching rapidly the infamous peak oil.
These are only a few quick notes on the “impact” of the recent terrible events in Japan. We cannot say that one or another event or phenomena has an effect or the other outside the world’s web of increasingly more dense and intense connections. In a networked world, everything is connected.