Economic Impacts of the PhilippinesTyphoon

Look at just how badly the Phillipines, a once thriving, built up area, was ravaged by the typhoon. Perhaps seeing a before an after image will  inspire action. After all, a picture speaks a thousand words.

Look at just how badly the Philippines, a once thriving, built up area, was ravaged by the typhoon. Perhaps seeing a before an after image will inspire action. After all, a picture speaks a thousand words.

About two weeks ago, a Typhoon named Haiyan ripped through the Philippines. While all natural disasters are unfortunate, this catastrophe was particularly destructive; it was deemed one of the worst in history. The death toll keeps rising, currently at an estimated 10,000, and the area is completely ravaged. Last year, when Hurricane Sandy struck, I lived without heat, electricity, and phone reception for a week, and I received the utmost sympathies from friends abroad. Yet this type of suffering is nothing compared to the dire situation of those in the Philippines, where entire communities were ravaged. The effects of this typhoon will impact the state of the Philippines both in the short and long run. While health is clearly the top concern in such a situation, one such important effect is of that on the economy. Businesses and economic markets manifest themselves in all circumstances, and the ruined state of the Philippines is no exception.

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There are many immediate, obvious consequences of a natural disaster. For one, the amount of resources available is heavily diminished, there is less clean water, transportation is halted, and shelter is limited due to the fact that homes are destroyed. Labor is also put on hold not only because of the priority to keep people healthy, but also because there are casualties; fewer people means less manpower.  Thus trade, which benefits both parties involved, comes to a grinding halt.  A better off country does not consider morality, but rather its own best interests, when it donates money and sends volunteers. The sooner the afflicted country recovers, the sooner they can both proceed with trade.

Volunteers witness firsthand the desperation in disaster areas. Often, before help arrives, individuals are so desperate for resources that they loot stores. People who are normally law abiding citizens go to uncharacteristically extreme measures because they feel that their lives are in danger. This has clear financial implications for store owners. Looted inventory means lost profit, and people whose businesses were destroyed must start building from scratch.

The demand for resources such as food and water increases in areas ravaged by the typhoon, as evidenced by  the shift of the Demand curve from D1 to D2. However, the supply curve remains unchanged. As a result, the equilibirirum point, where the supply and demand curve intersect, moves, causing the equilibrium price to increase from P1 to P2.

The demand for resources such as food and water increases in areas ravaged by the typhoon, as evidenced by the shift of the Demand curve from Q1 to Q2. However, the supply curve remains unchanged. As a result, the equilibrium point, where the supply and demand curve intersect, moves, causing the equilibrium price to increase from P1 to P2.

Those who are fortunate enough to have businesses that remain unscathed are in an advantageous position. They have the power to exploit desperate customers by charging inflated prices for goods. The reason for this is economically based: there is a high demand and an unchanging supply. In this situation, the equilibrium price is high; if it were lower, people would clear the shelves, and owners would not profit. High prices acutely affect the poor, who might have a greater need than those who are willing to pay. Therefore, what is arises is an unfair allocation of resources, which an economy focused on equality attempts to avoid. Ultimately, survival of the fittest rules. As Maslow determined in his Hierarchy of Needs, the first need for a human being is a physiological one. People are not concerned with morality or ‘Love thy friend like thyself’ if they do not have enough food to survive another day.

Psychologically, people are affected both in the short and long run. Such devastation impacts citizens’ morale. They can easily suffer from depression, for they have just lost everything. It is an eye opening experience to have everything you cherish suddenly be torn away from you. Life as you know it has changed forever.  How should you go about starting over?

Cranes and construction will be ubiquitous soon, as rebuilding is an inevitable consequence of such a natural disaster

Cranes and construction will soon be ubiquitous in the Philippines, as rebuilding is an inevitable consequence of such a natural disaster.

People’s psyche after this type of freak occurrence impacts the long term economic effects. Individuals wallow in a state of depression, and remain lethargic. However, that would entail living in abject poverty, with no food, resources, or shelter, which is not conducive to the growth of a society. Or, they can be creative and foster their entrepreneurial side. It is an unavoidable reality that, in an area of ruins, rebuilding is necessary. With this type of development, there is a great deal of room for job growth. After Sandy, for example, contractors were in high demand. This rejuvenating spirit is contagious and rejuvenates other job sectors. People building new homes need new furniture, clothing, and light fixtures. Suddenly, a freak occurrence that appeared to stifle any form of progress serves as an impetus for economic growth.

Most people, unlike countries, do not have obvious ulterior motives when helping a country in need; their sympathetic instincts serve as a main motive. Of course, I said main. If you are strapped for cash, but suffering children pull at your heartstrings, here is a piece of advice for you: give anyway. Donating to charity is tax deductible in most cases. Thus, you can relieve your guilty conscious while also relieving some of the burden of your taxes that Uncle Sam seeks every April 15th.

Those currently in the Philippines desperately need your help. I am notoriously frugal, and even I donated half a paycheck. I know a worthy humanitarian cause when I see one. My conclusion from analyzing this situation as a student was that Philippine citizens will be in a difficult situation economically for a long while; however, as a human with emotions, I know that I can potentially ameliorate their suffering.

Published in: on November 18, 2013 at 5:09 pm Comments (0)
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