In a year plagued by economic uncertainty, natural disasters also made their mark on global markets in 2011. Shattering the previous record of $262 billion worth of economic costs in 2005, disasters of 2011 in Japan, Thailand, China, New Zealand, Australia, and the U.S. cost the economy $378 billion. The deluge in Thailand alone, which cost the country $40 billion, J.P. Morgan estimates set back global industrial production by 2.5%. Looking towards the future, risks are continuing to rise as the world’s population and economic output continue to migrate towards global centers located in vulnerable areas, such as Shanghai or Kolkata.

In spite of natural disasters disrupting the global supply chain, history has shown the resiliency of markets when responding to the devastation of disasters. In many cases, the immediate shock of an event like a disaster is followed by an immediate surge of economic activity in the reconstruction process. As seen in the aftermath of Hurricane Hugo, a storm that cost the residents of South Carolina and the Caribbean billions in 1989, several sectors of their local economies experienced surges in income and employment. The businesses of New Orleans have also reflected this resilience, despite the havoc wreaked by Hurricane Katrina in 2005. In a city where 220,000 jobs were lost, 81,000 businesses severely affected, and 310,938 unemployment claims filed, local businesses and entrepreneurs have waded through the rubble to reclaim 79% of the pre-Katrina labor force, as well as nearly 84% of sales tax revenues, indicating strong investments from residents and visitors.

The source of this economic stimulus, some economists argue, reflects the notion that widespread destruction also creates an immense amount of economic possibilities. Aside from the short-term boost caused by attracting resources in the rebuilding process, disasters also provide the opportunity to build new and efficient infrastructures, evidently creating a more productive and promising economic future. For these reasons, studies show that countries which experience numerous hurricanes and storms tend to see high rates of economic growth. Therefore, it’s not surprising that the labor force of developing economies, the fuel for the global supply chain, are embarking on the great migration to cities where job opportunities continue to grow, despite the risk of living in a disaster-prone environment.

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