Trials of Globalization: And We All Melt Down
We are now on the brink of the mother of all meltdowns in more ways than one.
Last weekend, The Times quoted Alan Hansen, a nuclear engineer and executive vice president of Areva NC, a unit of Areva, a French group that supplied reactor fuel to the Fukushima Daiichi nuclear power plant, who spoke before a private gathering at Stanford University. “Clearly,” he summarized, “we’re witnessing one of the greatest disasters in modern time.” What the on-going release of cancer-causing radioactive fragments means in terms of human health and the environment is only beginning to come to light.
It’s certainly not my expertise. What I do know is that, on top of the terrible calamities brought on by the tsunami and the scary portents of the radiation spewing into the air, the ocean, and into the ground surrounding Fukushima and beyond, we are facing an economic juggernaut that is likely to shatter the world’s fragile recovery. You don’t take out the world’s third biggest economy – until recently, the second -- with no impact, despite the recent assurance by that reliable sage Timothy Geithner that the crisis in Japan would not hinder the U.S. recovery. (Meanwhile, Tim’s banking buddies are busy reviewing their clients’ exposure.)
Up until the last few days, media and stock market pundits continued to drool over the prospect of some $310 billion worth of new business anticipated to rebuild earthquake and tsunami-ravaged Japan. Newsweek featured an article by Bill Emmott, a former editor of The Economist, stating:
“Typically, if economic effects are measured simply by gross domestic product, natural disasters cause a short-term loss in output, thanks to the destruction of offices and factories and the disruption to transport links, but after just a few months they actually act like an economic stimulus package.”
Needless to say, these are far from typical times, and this is no typical disaster. Japan is suffering huge shortages as production capacity shrivels and logistical issues mount. The Financial Times reports that Japanese manufacturing activity plummeted to a two-year low in March, according to the Markit/JMMA purchasing managers’ index, which hit its worst low since its inception in 2001. Faced with the loss of a critical supply partner, many companies around the world are confronting an ominous reality.
We’re not just talking about the now infamous Japan-made five components that go into the iPad 2 or the wafer material needed to manufacture semiconductor chips or the metallic paint required to produce shiny red and black cars. I can attest that companies of all sizes find themselves in the same pickle, with normally efficient Japanese production and transportation chains hobbled by power interruptions, radiation fears, earthquake damage, and severe after-shocks. These days, many global shipping lines won’t even dock at Japan’s busiest ports, Tokyo and Yokohama, for fear of radioactive contamination. And that’s not just being paranoid. If their hulls pick up any radioactivity, they could be barred later from other ports, from the U.S. to China.