By: Joe Mazzarella, SVP and Chief Legal Officer, Mutualink, Inc.
March 17, 2011
As Japan urgently struggles to combat the predations of a massive earthquake and tsunami, the forces of chaos have offered up another sober warning that societies are fragile. The everyday certainty and reliability experienced by citizens and leaders of modernized nations obscures the inherent vulnerabilities attendant to complex economies and societies functioning in a deeply interconnected and interdependent manner. The paradox that the Japan earthquake lays bare is that the very thing that creates a highly efficient and successful economy may well be the same thing that exposes us to catastrophic ruin.
As the world has witnessed, Japan is suffering enormous devastation from a series of compounding events spawned from an initial large scale natural disaster. These secondary and tertiary events have cascaded like a series of invisible dominos spanning outwards in many directions from a single push of a finger. Japan’s emergency response and support infrastructure is being stressed beyond its capability to respond to all needs. From debris fields blocking search and rescue teams, heavy equipment and relief supplies being cut off from communities, to stranded people, trains and impassable roads, limited electricity from rolling blackouts, radiation clouds and evacuations, gas rationing, empty food shelves, insufficient numbers of body bags and decaying corpses due to a lack of refrigeration, and snow and cold freezing adding to the plight of millions of displaced people, the effects of mother nature’s wrath seems to know no bounds. As this is being written, the specter of a mass evacuation of Tokyo is not beyond the realm of the thinkable should Japan’s nuclear emergencies continue to worsen and become unchecked. The impact of evacuating 18 million people and the ensuing panic it will ignite, couple with overwhelming devastation from the earthquake could result in major collapses in critical sectors of their civil society.
Fortunately, Japan has an intangible advantage that may very well be the key to their short and medium term survival, the inherently cooperative, caring and self-restrained nature of the Japanese society. It is the culturally engrained resilience of the average Japanese citizen that will provide a vast network of local human support infrastructure that will enable them to prevail. The simple act of sharing a bottle of drinking water with a neighbor, sharing heat or shelter and food, instead of hoarding resources and closing out those in need may be essential difference between mass suffering occasioned by death and illnesses and great discomfort but survival. And, the reports of this type of behavior are not few or far between.
On the other side of the equation, one can readily observe how the more sophisticated and complex societies become the more fragile they are in terms of their exposure to large scale disasters. As societies become more modernized, economic sectors becomes more specialized along verticals and more concentrated, becoming ever more efficient in production and streamlined in the delivery of services and products. Economies of scale are achieved through great volumes, and this has the practical effect of driving consolidation, cost reduction and lower prices and higher profit margins. Communications and digital information networks drive financial transactions and exchanges set prices and delivery of critical commodities. Electrical and hydrocarbon based energy systems power our communications and information networks as well as our factories, transportation, and nearly every appliance in our households. Food production sources are no longer local, and they crucially depend on transportation and refrigeration. Water and sewage treatment systems depend on power. Medical systems depend on specialized medications and equipment manufactured by a small number of facilities and delivered by transportation systems. Shipping requires fuel and functioning transportation systems and ports, and payment settlement systems. This litany of interlocking dependencies could be continued virtually ad infinitum with increasing granularity, but let the above suffice for sake of argument.
Where the old watch maker may have made his own parts or bought materials from locally produced resources, the new global watch company assembles much, makes little and consumes even less locally, preferring to depend and upon vast supply chains, special parts makers, and sophisticated just in time transportation networks to receive goods and ship them back out to the market. And so it is for a thousand, thousand other niches which make up our vast and complex economy. The same holds true for the individual, where once most households were highly self-sustaining entities, virtually nothing is produced in the household. We are dependent on the delivery of food, electricity, water, and heat to our homes. Whereas at one time nearly all food was produced and sold locally yet a pair of French silk stockings was a rare imported extravagance, today it is just the opposite. One would be more likely to find French made stockings in a grocery store than to find locally produced berries. Modern households are fragile and are deeply dependent on far reaching, often global, supply chains to perform.
Simply put, a vast web of highly dependent connections produces the marvel that is our increasingly productive, specialized and hyper-efficient world. But when one thread frays and breaks, as in the case of a large scale power outage, the fabric can quickly unravel especially when pulled upon and stressed even by the smallest of forces.
Perhaps one of the most astute initiatives of the Department of Homeland Security in regards to emergency preparedness is focusing on strengthening the resilience of communities. The introduction and promotion of this concept is essential to our security. Yet, its true implications may far exceed its intended import. It is one thing to have an all hazards coordinated public safety and emergency response structure that can scale and work with a unified purpose in times of disaster, but it is quite another to achieve a resilient society. In the first instance, much work is being done to plan for and be able to respond and recover from disasters through a better coordinated public emergency response agency structure and this will pay dividends. In the latter case, true community level resilience simply may be at odds with the forces of economic globalization.
Resilience in terms of key infrastructure and critical resources requires more than redundancy. It requires diverse modalities with functional redundancies. By these terms, I mean using many different methods and ways to achieve the same or substantially same functions. On both accounts, global economic forces drive in the opposite direction.
First, at a pure redundancy level, redundancy means necessarily having more of the same thing. By definition, this means having excess capacity. This is squarely at odds with competitive global economic forces that drive the cost of production down by eliminating excess or idle capacity. In the most efficient and productive market ideal, the productive capacity of an asset should be producing at full capacity up to the last marginal profit dollar. At anything less, it is not being used to its highest economic value. So, creating more idle capacity is at odds with market forces even if it is beneficial from a disaster perspective. Worse yet, productive capacity is often dislocated from local areas and moved to more cost efficient places, often in other parts of the world. But, the problem extends even beyond global market forces. In the case of large scale systems that present significant investments such as electrical transport grids, regulated monopolies replicate the same conditions of singular reliance without redundancy. In the United States, our electrical transport system is vulnerable to mass outages because of its spoke and hub topology and lack of real redundancy in transport. It is unlikely that rate payers will be willing to pay the cost for an abstraction called redundancy. So, in most cases the practical reality is most are unwilling to pay more to ensure resilience against a remote event whether it is indirectly through buying behavior or in the form of a direct cost.
Secondly, pure redundancy (or more of the same) is not sufficient in terms of establishing true levels of resiliency. As was demonstrated in the Japan nuclear reactor failures, redundant cooling systems constructed the same way may reduce probability of failure but all are vulnerable to the same type of failure. So, if the causation event spans each system space (i.e., it is sufficiently large to span all redundant systems), the probability of failure is not lower as predicted, it is the same as having one. An analogy can be drawn to airplane hydraulic systems. Three redundant hydraulic lines running through the same harness is not redundant if a turbine blade from an engine breaches the plane and severs all three lines. Again, in the global economy, forces are at work that are driving towards commoditization and pushing against multi-modal diversity. Across virtually all industries the same or similar parts (and underlying designs) are often used by the same vendors. Lower prices attained through scale and volume drive homogenization at the component level and this even dictate similar outcomes at systems levels. Unique approaches in mechanical, operational and even software design are driven out of the system for routine but critical functions.
So what is to be done? Certainly, the substitution of free market mechanisms with old style managed economies is unwise and proven to be a failure over the long term. But what is new is that global market forces are operating in ways that are asymmetric to sovereign interests. Once robust and competitive production assets are removed from the fabric of a nation (whether it is energy resources or raw and processed materials production, food production, core manufacturing capabilities, technological know-how), the overall resilience of that nation becomes dependent upon cooperative forces beyond its borders. Nations become subject to global supply chains and the competing interests and decisions of foreign entities and agnostic market forces. The ability to direct policies that create a robust and healthy production capability across vital domestic infrastructure segments is beyond the grasp. The ability to persuade or direct re-tooling, increased production, or the redirection or concentration of goods and supplies in response to a crisis for the good of the country is lost. Looking at the United States, a strong case can be made that it has become substantially more vulnerable over the past 30 years as its competitive industrial production and infrastructure has been dismantled and shipped overseas. Many of our critical resources, raw materials and finished materials are produced in foreign markets, and little domestic capability remains. While at advent of connected global markets have increased the diversity and supply of goods and services at lower prices under stable conditions, we may well have placed the core of our safety and security during major crisis into the hands of others in that exchange.
We must begin to investigate and understand the vulnerabilities that are being created by complex interdependencies through economic globalization. There is a compelling case to be made that consolidation and elimination of domestic industries create additional vulnerabilities to large scale disasters and hamper recovery. It further can be said, the very nature of advancing economic realities are that all sectors are interdependent with others in one way or another. Resiliency requires investment in diversified redundant capabilities with back-up capacity in key sectors of our economy. Also, restoring and protecting competitive production capabilities across key sectors within domestic markets is vital to a resilient fabric. Perhaps the forces of globalization are so strong that it is impossible to restore local and regional resilience by reestablishing domestic competitive infrastructure. But knowing this fact compels us to seriously understand and evaluate the systems and delicate dependencies that are critical to allowing basic services to continue to function in times of large scale disaster and provide a path for recovery. It may be that basic policies at local, state and federal levels must serve to foster effective surrogate diversified redundancies so that we can achieve a counterbalance to the fragile environment we have constructed.
Finally, returning to Japan, perhaps when all else fails the last line of resiliency lies in the citizenry itself. Creating a culture of individual preparedness and fostering mutual care among neighbors during times of crisis might very well be the invisible thread that holds us together.
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Our sincere prayers and condolences go out to our friends in Japan
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