Dams, storage and economics
Economists have not been able to predict the economic whammy which hit the South eastern Tiger economies in 1998. Reviews by World Bank and leading private analysts painted a very rosy picture a week before these economies tanked. The currencies of Thailand, Indonesia , south Korea and Indonesia dived to half their values overnight. How could this have happened with all the tools and prescience economics and analysts are supposed to have ?
A similar thing happened again in USA and developed world in 2008. The housing sub prime crisis exploded. Now everybody says that this was waiting to happen but nobody cautioned for preventive action until the bubble burst. A few economists warned of the impending disaster waiting to happen due to poor quality housing loans being given to all and sundry with little or no income. But they were very few and theirs was a cry in wilderness. The vast majority were going gaga over the blooming economy brought on by the housing boom. When the borrowers defaulted on repayment, the bubble burst and the impact was made worse by the derivatives sold in the market which were bundles of the housing loan repayable.Several banks went bankrupt and this also drove some insurance companies to bankruptcy. Government poured in lot of tax payers' money saving the big fat banks and mortgage companies leaving the tax payers on the lurch.
The worst is not over with fears of another economic crisis looming large on the horizon in US. Once again the question is how come the vast majority of the highly qualified economists could not predict and prevent the catastrophe ?
There are dams of various sizes built world over for storing water for irrigation and power generation. These dams have sluice gates and spillways to let out water when ever the water inflow is higher than the storage capacity and these allow the water to be taken smoothly without flooding the areas on the downstream side of the dams.
The officials are happy when the reservoirs fill up gradually and publicise the level of water for public information.
But when there is a heavy inflow of water resulting in rapid increase in level of water in the dam, these officials are always on the look out. Though they issue public circulars stating how the water situation in the next summer would be satisfactory, they are ever alert to the danger of rising water level damaging the dam and flooding the downstream areas. The water is let out through the spillways and sluice gates if the water level keeps rising rapidly with advance warning to people staying in low laying areas in downstream side.
There is no point warning people after the dam has been breached or the water overflows above the embankment. The public can see the sudden rise in water level in downstream side themselves with most of them being marooned on the roofs of their houses. There is no point in an expert hydrologist in stepping in at this stage to pronounce that there was a flood.
When will the economists be able to device warning systems and proactive corrective measures the way the dam officials do ? In the case of economics, the people on the downstream side are the havenots and inadequately compensated masses in millions. Once an economic crisis strikes developed countries, the first and the worst sufferers are the beneficiaries of food and education programmes of UN and other multilateral agencies as the fund flow for such activities9es dry up. To give hope to the underprivileged and then taking it away is the worst thing human race can do and it is very unfair.
I would urge our economists to work towards an early warning systems with sluice gates and spillways thrown open reasonably well before the economic dam is breached. That is the greatest service they can do for the poor of the world.
A similar thing happened again in USA and developed world in 2008. The housing sub prime crisis exploded. Now everybody says that this was waiting to happen but nobody cautioned for preventive action until the bubble burst. A few economists warned of the impending disaster waiting to happen due to poor quality housing loans being given to all and sundry with little or no income. But they were very few and theirs was a cry in wilderness. The vast majority were going gaga over the blooming economy brought on by the housing boom. When the borrowers defaulted on repayment, the bubble burst and the impact was made worse by the derivatives sold in the market which were bundles of the housing loan repayable.Several banks went bankrupt and this also drove some insurance companies to bankruptcy. Government poured in lot of tax payers' money saving the big fat banks and mortgage companies leaving the tax payers on the lurch.
The worst is not over with fears of another economic crisis looming large on the horizon in US. Once again the question is how come the vast majority of the highly qualified economists could not predict and prevent the catastrophe ?
There are dams of various sizes built world over for storing water for irrigation and power generation. These dams have sluice gates and spillways to let out water when ever the water inflow is higher than the storage capacity and these allow the water to be taken smoothly without flooding the areas on the downstream side of the dams.
The officials are happy when the reservoirs fill up gradually and publicise the level of water for public information.
But when there is a heavy inflow of water resulting in rapid increase in level of water in the dam, these officials are always on the look out. Though they issue public circulars stating how the water situation in the next summer would be satisfactory, they are ever alert to the danger of rising water level damaging the dam and flooding the downstream areas. The water is let out through the spillways and sluice gates if the water level keeps rising rapidly with advance warning to people staying in low laying areas in downstream side.
There is no point warning people after the dam has been breached or the water overflows above the embankment. The public can see the sudden rise in water level in downstream side themselves with most of them being marooned on the roofs of their houses. There is no point in an expert hydrologist in stepping in at this stage to pronounce that there was a flood.
When will the economists be able to device warning systems and proactive corrective measures the way the dam officials do ? In the case of economics, the people on the downstream side are the havenots and inadequately compensated masses in millions. Once an economic crisis strikes developed countries, the first and the worst sufferers are the beneficiaries of food and education programmes of UN and other multilateral agencies as the fund flow for such activities9es dry up. To give hope to the underprivileged and then taking it away is the worst thing human race can do and it is very unfair.
I would urge our economists to work towards an early warning systems with sluice gates and spillways thrown open reasonably well before the economic dam is breached. That is the greatest service they can do for the poor of the world.
Imagine if there were people with a vested interest in dams building up. They would get annoyed if anyone tried to open the sluice gates or even warn the people downstream of a possible flood.
ReplyDeleteThis is difficult to visualise, right? But it happens all the time in the financial world. Human beings who can be responsible and selfless when it comes to dams fail to live upto those standards when it comes to matters financial.
The reason is simple - No one wants too much water, but no one will say no to too much money.
True.Very few say no to money even when they are extremely rich.
ReplyDeleteBut then economists are not the richest guys around.But financial analysts and Wall Street wizkids are.