Most things in Sri Lanka are a bit more expensive than they are in Kolkata. Generally they are still cheap compared to America, although for a few things prices are actually higher here than in America. I was talking to Ben, a Word Made Flesh staff member who has been here for about two months. He has the impression that before the tsunami, prices in Sri Lanka were closer to those in India. Also, prices in areas affected by the tsunami are higher than prices in other parts of Sri Lanka. I starting thinking about why that would be in terms of economics.
First of all, production was hurt by the tsunami. This lowers the supply of goods. This should be somewhat offset by the aid that is being sent in. A drop in demand because of the people killed in the tsunami will also tend to push prices lower. Overall, it is hard to say what overall effect this would have. Then I realized there was a boost to demand I hadn't considered: me! More generally I mean relief workers. There are a lot of relief workers that are coming from the west to help rebuild. I definitely think this is a good thing, and I wish that there were even more. Still, this has an effect on prices demand. Most if not all of the relief workers are used to living in luxury compared to the Sri Lanken natives. We eat more food, we want fancier, more expensive and hard to produce foods, and we have the money to pay for it. This goes beyond food, but it is an easy example to see. I am fairly confident that our team is consuming far more per person than the natives, especially if you think in terms of price (one ice cream bar = one bag of rice).
Here's the conclusion that I'm getting at: When we come into a country in large numbers and keep consuming at the same rate as we do in the west, we drive demand up. This results in higher prices within the country. While this may be good for some people that are able to make additional profits, it makes things even harder on the families that just lost everything and are trying to scrape by. I still think that it's great for so many people to be over here helping, but it would be even better if we could learn to get by as simply as the natives do.
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The "need" to rebuild is an interesting thing. In America, a disaster (like hurricanes in Florida) occurs and rebuilding is pretty much a sure thing. We are a rich country, many homes are insured, etc. Sure, it may not be as great as if it never happened, but rebuilding is pretty much a certainty. That really isn't the case here. The foreign aid isn't the difference between them having to pay or not, it is the difference between rebuilding happening or not. Right now Habitat for Humanity is actually running out of money for their rebuilding in this area. They can't afford to buy the materials that they need. If this disaster hadn't been so enormous, these people probably wouldn't have gotten much of anything. Most of the disasters (earthquakes, floods, etc.) that happen in the world tend to destroy the lives of the poor, who cannot afford to rebuild. At the same time, they hardly show up on the map for Americans.
As far as one type of food versus another, most food ends up using a lot of the same initial resources. It is a lot easier to see this with something like meat where the resources required to make meat could create many times more grain, fruit, and vegetables. This is actually a huge problem in many third world countries that produce meat for America but not enough basic foods for their own people. At a basic level there is a limited amount of land, labor, and capital for production of all goods. The more of those that are used for one good, the less there are available for other goods, and hence the price of those goods rises.
Then again, effects like that won't change overnight. I don't have a good sense for how long it takes. I guess I was just throwing some stuff out there that I thought was interesting to think about. What I do know (from talking to leaders) is that prices have been rising since the tsunami. They didn't just jump like crazy right afterwards. Even in the last month certain things (eggs are the one I'm most aware of) have had noticeable increases in price. It seems like something about the current situation in Sri Lanka is continually pushing prices as a whole up.
It occured to me that an increase in demand for chicken (a luxury good), could very easily cause an increase in the price of eggs (more of a staple good)...
What is there to stop a farmer from selling his egg chickens for meat? If a chicken makes him 200 rupees of profit each year on eggs, but can be sold as meat for 1000 rupees, I suspect some farmers will be selling their chickens.
A similar situation: I seem to remember back in 2001 that some of the factories in California found that it was more profitable to resell their electricity (bought based on a fixed contract price) than it was to manufacture anything.
I think I also wasn't quite clear about what I see going on. The foreigners are still eating lots of rice and other staples, it's just that in addition to that, we're eating a lot more luxury goods.
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