April 29, 2006

Putting a Price Tag on War, Quake

San Ramon, Calif.: As someone visiting this country I find aspects of life, an NRI here might dismiss as mundane, so fascinating to be worth writing home about. For instance, the Americans' penchant for putting a price tag on things. Read somewhere they spend $ 200 million a day on Iraq; have spent $ 320 bn till now on the war there; and that the war costs have doubled since the fall of Saddam. The projected combined bill on hostilities in Iraq and Afghanistan is put at $811 bn. And they still have to account for Osama.

I am sure they have a point in keeping count, but it can't have anything to do with strategy to contain war costs or put an end to the seemingly unending war. If cost consideration were a governing factor in global conflicts, no cost-conscious nation would go to war. I suspect that the US of A keeps tab on costs of imponderables such as war and earthquake, only to keep their accountants at full employment level.

My neighborhood paper, ' San Ramon Valley Times', reports that a quake in the Bay Area could set the country back by $ 135 billion to $220 billion, depending on its magnitude. A 6.9 quake would cost $ 135 billion at today's dollar rate. A calamity on 7.3 scale would mean 85 billion more, according to Don Windeler of Risk Management Solutions. He makes it sound as if we have an option, to choose between 7.3 level quake and a less expensive 6.9 quake. Putting a price tag makes sense, to my mind, only if cost is negotiable. Can't ask for a cut-rate quake, can we.

In the 1868 quake, they say, the Bay Area got away with a damage of a mere $300,000. We have Don's word that the next one would be much more costly. Wonder how these risk management guys come up with these intimidating figures, though I can see 'why' they need to do so. Risk management solutions need to factor in the cost of a calamity. Putting a price tag on a disaster makes it grimmer (and, hopefully, helps sell disaster insurance) . Quantifying a quake is the hallmark of an analyst. You and I aren't going to question analyst's figures. If risk management folks say a 6.9 quake would cost $ 135 bn, who am I to differ? And who would print me in newspapers, anyway.


Capt. Anup Murthy said...

Incredible numbers there Mr. GVK. Consider that India's foreign exchange reserve that everyone in India thinks is in a great position at around $150 Billion last heard. The US spends double that on the Iraq campaign. Check the figures that the US owes the UN and then check the fact that the UN is going to cut down food aid to Darfur refugees because of the UN having less money in their budget to feed displaced people. Why is the UN short of money? Too many countries owe it money? Corruption? Numbers are great, but if it can benefit mankind, would'nt it be better?

Vijendra Rao said...

The greed that the American lifestyle has fuelled in the name of liberalisation is engulfing the entire planet. There is a particular point I am keen to make here in the context of our collective endeavour. Preservation of Mysore, the city whose sanity we are trying to save, will be an elusive goal unless we address ourselves to the question Captain and you have raised in its larger context.

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