“Perfect storm” is one of those cliches that writers strive to avoid, but it’s also an apt description for the economic maelstrom ravaging countries around the world.
Driving to work Friday morning, I listened as one Wall Street analyst posited that we could see some smaller companies, unable to get credit to make their pay rolls, begin layoffs within a few days. Another expert, this one based in Europe, offered an even gloomier forecast, seeing the possibility of wholesale bankruptcies involving companies like General Motors, once seen as stalwart engines of capitalism. What’s bad for General Motors is bad for the global industrial complex.
When you have people losing their jobs, massive volatility in equity markets, dire predictions of widespread bankruptcies, a credit freeze and ordinary people seriously contemplating pulling their money out of banks, it is indeed a perfect storm ó and it has put me in mind of one of the more thought-provoking books I’ve read in the past few years.
The book, “The Silver Lining: the Benefits of Natural Disasters” (Princeton University Press) was written by Dr. Seth Reice, a biology professor at UNC-Chapel Hill. I wrote about Dr. Reice and the ideas in his book three years ago, in an article examining the environmental consequences of Hurricanes Katrina and Rita, which had devastated the Gulf Coast, exacting billions of dollars in damage and taking hundreds of lives as well.
From our short-term human perspective, it’s the devastation that overwhelms us. Homes and businesses destroyed. Roads and bridges wiped away. Entire blocks of cities left in shambles. Families displaced. We brood upon the destruction, perhaps as a kind of ingrained defense mechanism reminding us of the perils that can wash over us unexpectedly, or shake the ground under our feet.
But from a biological perspective, Reice explains, what we see as wanton ó perhaps even malevolent ó destruction is actually an essential part of the planet’s ecosystem. Hurricanes, wildfires, floods, even earthquakes, are essential to a sustainable ecosystem. Hurricanes, for instance, dissipate warm, moist air in the tropics and carry it to more temperate latitudes. Without this vast feedback loop, the system would go permanently haywire, with some areas subjected to perennial drought and others forced to endure perpetual monsoons. Hurricanes also help promote biodiversity by reconfiguring coasts and wetlands and speeding the succession of various species of plant life. The same holds true for wildfires, which perform an essential role in the regeneration of healthy forests.
Yet … try telling that to a victim of Katrina, or someone who’s seen their hillside home consumed by one of California’s raging brush fires or the victims of China’s recent earthquakes.
Contemplating the perfect economic storm raging around us, I’ve wondered whether the idea of creative disaster holds true for the global economy as well as the global ecosystem. Reice’s area of expertise is biological systems, of course, not macroeconomics. He doesn’t extrapolate from hurricanes to the gale force winds sweeping through Wall Street, and I’ll admit it seems almost willfully perverse to view what’s happening now as some sort of healthy purging of economic excess that was not only inevitable but necessary to sustainable economic growth. Although there is a strain of economic theory that holds to a notion of the necessity of “creative destruction,” in which upstart companies gradually usurp the place of venerated giants such as GM or Lehman Brothers, it’s hard to find much comfort in that idea right now.
The obvious difference is that natural disasters occur through the forces of nature, although our propensity to put ourselves in harm’s way by building on sea coasts and amid brushy canyons certainly exacerbates the ultimate destruction. Our economic systems, on the other hand, are entirely manmade; we can’t blame nature for credit defaults or speculative short-selling.
Some economists and historians might argue that our manmade economic storms can ultimately have a positive impact. The Great Depression did ultimately lead to a more stable banking system, stronger regulations and greater protection for individual savers. The same might be argued for the S&L crisis of a few decades back. Yet, here we are once more: The winds rage around us, and the foundations of our lives lean and sway.
As for suggesting that there’s a silver lining somewhere over the horizon, if we can just hang on … well, try telling that to the people who are on the verge of losing their homes, or have lost their jobs, or are wondering how they’re going to put meals on the table and medicine in the cabinet.
Rather than search for silver linings in this perfect storm, a lot of people are taking refuge in gold.
– – –
Chris Verner is the editorial page editor of the Salisbury Post.