Asian earthquake adds injury to insult

The reaction to the tsunami illustrates in brutal detail how marginal the countries involved are to the global economy and world markets. It shows there is little connection between human welfare, current levels of economic attainment and market movements.

In human terms, there can be no doubt of the scale of the disaster. At least 150,000 were killed, while many millions were left homeless and destitute. Disease could easily kill tens of thousands more as a result of the destruction of the infrastructure for water supply and sewerage. Some of the world’s most populous countries have suffered, including India (1.1 billion people) and Indonesia (240 million).

But what most commentators seem to have missed is that even before the tsunami, the countries involved were locked into a poverty-stricken existence. The total GDP of all the countries – including India, Indonesia, Malaysia, the Maldives, Somalia, Sri Lanka and Thailand – accounts for less than 3% of global output (at market prices). In contrast, they account for just short of a quarter of the world’s population.

India provides a graphic example of the scale of this ongoing tragedy. Although the financial press is full of hype about dynamic growth in India, the average Indian still has to live on less than a pound a day. The small areas of dynamic growth, such as Bangalore, are relatively isolated from the rest of the economy, which is not booming. It is true that a pound can buy a lot more in India than in Britain, but it still means that about a billion Indians are living in dire poverty.

To compound the disaster still further, the areas hit by the tsunami were already marginal in their own national economies. According to David Hale, an economist writing in the New York Times, Aceh in Indonesia accounts for only 2% of the country’s GDP. Thailand’s southern provinces, where the tsunami hit, also account for 2% of that nation’s economy. Tamil Nadu, the Indian region hit by the tsunami, is just one of 28 states in the country. Some of the regions hit by the tsunami, such as Aceh and the Tamil areas of Sri Lanka, are also wracked by civil war.

In stockmarket terms, too, the countries are marginal. India accounts for less than 6% of the MSCI Emerging Markets index, Indonesia about 2% and Thailand less than 3%. And the developed markets are in aggregate about 18 times larger than the emerging markets.

There is no doubt the Indian Ocean tsunami was a tragedy for many millions of people. But the marginalisation of billions of people from the world economy is an even greater disaster.