05 Effect of local disasters

Suppose that a natural disaster like a hurricane in the gulf coast of USA or a earthquake + tsunami + nuclear leak in a part of Japan (2011) occurs. Regardless of where such a disaster occurs, much wealth is destroyed, and the economy of the affected region is severely set back.

If the country where the disaster occurs is advanced - like Japan or USA, effect on the GDP may not even be noticeable both in the short and the long term. This is because, these countries have redundant economic units (roads/ industries) which compensate for the destruction; and they have savings or lines of credit which they can use to rebuild - such investment increases, rather than decrease the GDP.

But, if the country is poor (eg: Haiti earthquake 2010), and the affected region is economically important, redundancy is low, and the entire economy suffers as a result.