Global Trends by Martin Khor

Monday 27 December 2010

Goodbye to a year of natural calamities

The year 2010 saw many natural calamities and extreme weather events, while the global economy was shaken by the debt-crisis turbulence in Europe.

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2010 was a year of natural calamities, when Nature showed its power and humanity across the world had to cope with the consequences.

The year started with the 12 January earthquake in Haiti, which killed an estimated 223,000, made 2 million homeless, with widespread cholera now one of its many effects. 

Earthquakes also struck in many other areas, including Chile and China (April), Sumatra (April and October, accompanied by a tsunami that killed hundreds) and Iran (December).

There was also extensive flooding.  The most devastating was in Pakistan, affected 20 million people and a fifth of the land area, causing US$10-20 billion damage.  Floods and mud-slides also affected China (with over 4,000 deaths), India, Bangladesh, Indonesia, Thailand, Malaysia, Colombia, Venezuela and other countries.

There were other weather extremes, with a big heat-wave in  Russia (killing 15,000) and forest fires, and the heavy snow in Europe and blizzards in the American East Coast as the year ended, disrupting plane flights,

The most notable man-made environmental disaster this year was the spilling of 172 million gallons of oil by a BP offshore rig into the Gulf of Mexico.

Worldwide economic losses from natural catastrophes and man-made disasters were US$222 billion in 2010, more than triple the $63 billion in 2009, according to SwissRe, the reinsurance firm.    Altogether 260,000 people died, the highest since 1976.

According to scientists, climate change made worse the extreme weather events.  The severity of the calamities is Nature's way of warning humanity that worse is to come unless it changes its way of life and production.

2010 is predicted to be among the one or two warmest year in the world since records were kept.   “The extremes are changed in an extreme fashion,” said Greg Holland of the National Centre for Atmospheric Research, U.S.  

“The science is clear we can expect more of these kinds of damaging events unless society's emissions of heat-trapping gases are sharply reduced,” according to John Holden, the White House's science advisor.   Both were quoted in an Associated Press article “2010's World Gone Wild.”

The turbulence in the Earth's climate was reflected in the roller-coaster climate talks during 2010, which tried to recover from the disaster of the Copenhagen conference of 2009.

Developed countries succeeded in having their way at the Cancun climate conference in December, preparing the way to downgrade their commitments whilst cajoling developing countries to upgrade their actions.  But the battle for adequate climate actions will start anew next year.

Also turbulent were the developments in the world economy.  The recovery that looked promising in 2009 became uneven in 2010.  Most shocking was the sovereign debt crisis that engulfed Greece and Ireland and threatened to spread to Portugal, Spain and beyond, and even raised the question of the euro's viability.  

The rapid switch in many European countries from fiscal stimulus to extreme austerity policies also began to dampen the prospects of global recovery.  In the United States, the Obama administration is hindered from further fiscal stimulus by the Republicans (which captured the House of Representatives).

The Federal Reserve is resorting to pumping hundreds of billions of dollars into the banks.  But critics predict most of this will be transferred through investors to abroad, rather than loans to the productive sectors.      

In contrast to these problems in the West, the engines of growth continued to work quite well in the developing countries, especially in Asia.  China and India remained in the lead, with Asean countries doing moderately well.

Their challenge is to avoid inflation and new speculative bubbles resulting from large capital inflows, and to maintain growth even as Western demand for their exports slows.

During the year, many analysts raised the issue (or for some, the concern) that the centre of gravity of the world economy and eventually politics was shifting perceptibly from the West towards emerging developing countries, particularly China.  This theme became the topic of several new books and numerous magazine articles.

Hundreds of billions of dollars more were spent in 2010 to rescue fallen banks, companies and countries, especially in Europe.  But financial institutions seemed to reassert their authority, with investors calling the tune as to which countries' bonds to pull out of (thus causing panic) and which countries to place money in.

The profits of the banks are soaring, and bankers are fighting to restore their year-end bonuses, causing a skeptical public to wonder how quickly the situation has gone back to “business as usual”, and whether the correct lessons have been learnt from the financial crisis.