The Commodification of Disaster

A tsunami in Indonesia, earthquake in the Himalayas, a sheet of rock splitting open the middle of Haiti, the BP oil spill, and yet another quake creating Tsunami and nuclear disaster in Japan... the foundation to the risk that in legal doctrine is known as Force Majeure. It is either my imagination or force majeure is starting to hold a more coveted place in our risk management strategies when it comes to legal and asset management. Deal agreements of all kinds will and are being affected and should undergo some overhaul as we confront transactional disputes and cooperation alike moving forward. I am told the earth's axis is shifting, the planet rotates a bit faster, the day is growing, however infinitesimally, shorter. The plates on the earth's surface are growing somewhat closer together, adjusting to the changes set in motion, so to speak. Other plates are growing closer too... note the middle east uprisings. Political and social plates are sliding us to new terrain slipping tensions into new crevices and connection.

We humans are creators, mimicking the earth. Fictions unimaginable, sprout from our psyches onto a page, a structure, an institution, a piece of paper or metal printed upon, known to the world to represent a measure of worth that we all believe in, or at least, we are all suppose to believe in until that fateful moment we are overwhelmed by disaster. That fiction is money - currency - even gold, used to value a segmented series of actions, products, processes, services, commodities, resources. What happens to the value of oil when it is spilled? What happens to the value of micro-chips when the plant in which they are manufactured disappears? What happens to an entire industry, like the nuclear industry, when signs of its holocaust
are visible on the horizon? We have created markets which trace exactly what happens, which symbol -stock or other- representing that commodity rises and which one falls?

Humans need security and hence, covet stability and hate risk. Risk is not
rewarded unless of course you are able to predict it and can show such prediction by shorting the particular commodity or representation of the same. If the timeline of disasters continues, more and greater reward will bestowed on those who can predict. A new industry of seers will erupt as in the days of old. "Mad Money" is only the beginning. Religion - even newer kinds - may hold a stronger grasp on our hearts and minds. And what would become of the value of disaster itself within our current fictions? Think a little about Project Redd to undo decades of deforestation in the Amazon, or the staggered carbon pollution created by industrial revolution and its parade of development, and the new markets created in response. If India and China thought about it long enough, yet another carbon or development market specifically geared to their situation would sprout. We are valuing at least man-made disasters (even as we are making them) over a longer timeline quite highly... highly enough to form new markets of healing, kind of like the charitable markets of aids, cancer, malaria etc... in the pharmaceutical world that are double edged. The edges are helping a larger segment of humankind with the cure, and the nearer form of financial
commodification necessary to bring in the money close to the dichotomy between brand and generics. Disease is after all a form of disaster.

War is another form. Uprisings like those blanketing across the middle east present a case in point. These commodify the sale of consultancy in political arrangements, the support and identification of opposing parties, the formation of parliamentary and other democracies, the establishment of democratic constitutions. Political and violent upheaval, like the kind involved in the drug trade, assist us in commodifying arms and the black market of illegal substances, in some ways assuring the outlawed nature of both. South American and Mexican governments bandy about with American and Chinese supports, formal and informal of their politics, their illegal industries, and their corruption and illicit assets. The people in these countries cry out for stability in their currencies, government programs that might support their multitude of poor citizens. The instability created in these countries is in some cases temporary with a permanent structure that promises more freedom to the peoples being governed if not more prosperity. The prosperity for middle east people may in fact take longer as assets and resources are fought over on a higher political terrain between the strongest powers - the most useful and prized of these assets being oil not democracy. In other cases, the instability is more permanent as it sustains corruption in local governments while the stronger powers reign over the resources, distracting the locals with short term self- interest often at the expense of their own people.

In fact the commodification of disaster on the one hand belies an old tale, an old story in which disaster (in the guise of political upheaval) acts as just another distraction to enable the monopolizing of far away resources; and on the other infiltrates our risk adjustment analysis and increased need for in/reass/urance from sub-prime crisis to Japanese tsunami.