Large parts of the world are this week operating on a wing and a prayer: With high levels of damage, low levels of preparation and many unknown factors, desperate people are relying mainly on hope to avert potential disaster. Japan is racing to avert a nuclear catastrophe in the aftermath of the massive 9.0 magnitude earthquake and subsequent tsunami, which killed thousands, made almost half a million homeless and has significantly damaged the economy. The Libyan war has started, as UN-backed forces begin their mission to drive regime change in support of the Libyan rebel forces. Egypt is at a critical point in its transition, as people embrace their freedom in voting on constitutional reforms which will shape the country’s future. These events will reshape our world in ways we do not yet know: Our thoughts and hopes should be with those in the front line.
In Japan, the earthquake was not the issue, but rather the devastating tsunami waves that utterly destroyed towns and knocked out power at the Fukushima nuclear reactor complex. Since then, the hundreds of thousands displaced by the tsunami and radiation fears have been battling freezing weather, even as food, water, power and shelter run short. At Fukishima, desperate measures to cool the reactors have been taken all week, with hopes for stabilization by restoring power supplies today again knocked back as pressure rises in Unit 3. Radioactive gas will once again be released into the air to relieve pressure and try to bring the unit back under control. Radiation has already found its way into the food chain, with spinach and milk up to 120 kilometres from the plant showing iodine levels above safety limits. Tokyo, some 240 kilometres away, has seen miniscule amounts of radiation in tap water, while Taiwanese officials have reported higher than permitted levels of radiation on fava beans imported from Japan. While officials maintain that the amounts of iodine detected pose no threat to human health, the public is shunning potentially contaminated food and water – concerns are high and prices of basic necessities will rise.
These huge challenges highlight the vulnerability of the world’s third-largest economy with significant implications for the global economy. Japan has built its advanced industrial base on imported and nuclear energy. It lacks any significant mineral resources – the third of its power that comes from nuclear generation was a strategic move to reduce its dependence on imported oil and coal. Given the high geographic risk of just such disasters as occurred last week, this strategy in hindsight seems risky. The continuing unrest in the Middle East and North Africa which threatens critical oil supplies and has pushed up oil prices makes the energy situation for Japan even worse. Rebuilding Japan, even before we know the outcome of the nuclear disaster, will take billions of yen and many years of effort. Its industries are already affected by power shortages and damage from the disasters, along with the human cost – and economic output will take time to restore. Add in the fact that Japan has the highest debt to GDP levels in the world and there are worries that the government will struggle to finance the costs of rebuilding – although given the structure of Japanese debt which is largely held domestically, experts suggest that a sovereign debt crisis is unlikely. However, G7 nations have already intervened to stabilize the yen, as traders pushed the currency up in anticipation of investors trying to repatriate funds for reconstruction. Global stock markets have taken a beating over the last week, with shares of major Japanese corporations and global insurers falling significantly. RMS, the only catastrophe loss forecaster to publish an estimate according to the Financial Times, suggests that the economic losses in Japan could reach US$ 200 billion to US$ 300 billion. The bottom line: The economic and financial repercussions of the Japanese crisis will be felt worldwide, impacting global growth and potentially recovery from recession.
One “wild card” event would be enough to have destabilizing effects on the world. But we have two – or more – happening simultaneously. Libya may only produce around 2% of world oil supplies, but the passing of the UN Security Resolution on Friday authorizing the use of military action against Muammer Gaddafi’s forces significantly upped the impact as many other countries became actively involved. The war has begun. Regime change is the mission. However, the question is less whether the UN-backed forces, operating from the air, will succeed and more what will happen afterwards. Stratfor offers an excellent analysis of the key questions: Will the coalition forces need to move from the air to a ground invasion, and potentially occupation, to complete the mission? If so, what resources are they prepared to commit, for how long? Is there a risk of insurgency, as in Iraq and Afghanistan, which may prolong the war and increase human suffering – something the coalition forces want to avoid? What geopolitical tensions will be heightened if coalition forces embark on a prolonged operation in a third largely Muslim country – even as tensions in other Persian Gulf states continue? The strategy for Libya is not yet clear, but its impact will be significant worldwide, in particular in the Middle East oil-producing states.
Even if coalition forces succeed rapidly and without high civilian cost in achieving regime change in Libya, the question will be who or what comes next. At which point it is appropriate to look across the border to Egypt. As many as 30 million Egyptians have enthusiastically embraced the opportunity for the first free vote in decades on constitutional reform. Yet the vote has polarized the newly liberated forces that opposed and deposed Hosni Mubarak. While many, including the remnants of the former ruling NDP party and the Muslim Brotherhood, support the changes as a way to bring stability during the transition, others fear it is too little, too soon. One amendment is particularly controversial: It allows for the complete overhaul of the constitution by elected members of the next parliament, which is intended to be formed in September. Critics suggest this will put power squarely in the hands of the NDP and Muslim Brotherhood as these are the only two organized parties – secular groups and many of the young activists who came to the fore in the popular revolt fear their voices will be excluded as they do not have time to organize effectively for the parliamentary elections. They are calling for a new constitution before the elections. The referendum highlights the uncertainty that remains in Egypt as it begins its transition to a freer society – as with Libya, the toppling of the old regime is only a first step on a journey towards a future that will see many ups and downs along the way.
How these “wild card” events play out in the near future and the longer-term will impact the world profoundly, not just economically, financially and in terms of human suffering, but in how we face up to the challenges ahead and live fundamental beliefs and values – social, political and religious. Today, the uncertainities are great, but the resilience of the human spirit and the power of hope, as is being demonstrated in Japan, Libya and Egypt, has the potential to bring us towards a better future. Let us all embrace this hope.
