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Macmillan Childrens Publishing Group

Extreme Economies

What Life at the World's Margins Can Teach Us About Our Own Future

Richard Davies

Farrar, Straus and Giroux




An enemy lays waste a country by fire and sword, and destroys or carries away nearly all the moveable wealth existing in it: all the inhabitants are ruined, and yet in a few years after, everything is much as it was before.

John Stuart Mill,

Principles of Political Economy, 1848



‘The earthquake did not feel that bad,’ says Yusnidar, ‘but then my son Yudi went down to the sea. He said there were fish all over the beach and there was a wave coming.’ The shoreline is just 500 metres from where Yusnidar and her family lived in the centre of Lhokgna, a tiny village on the far north-west coast of the province of Aceh, Indonesia, so they knew they needed to move fast. They were fortunate, Yusnidar, now in her late sixties, says: as headteacher of the local primary school she had a decent income and the family, well off by local standards, all had motorbikes. Her son, Yudi, sped off to pick up his sister from a nearby house while his mother, unaware of how bad things were about to get, took the time to grab a few treasured possessions including a small bag that held room keys to the guest house the family owned. With her bag in hand, she jumped on to the back of her husband Darlian’s bike, and they tore off in search of higher ground.

Those motorbikes saved their lives, Yusnidar reflects. Without them the tsunami wave that destroyed Lhokgna on the morning of 26 December 2004 would have caught the family, as it did so many of their neighbours. Now retired, Yusnidar is still comfortably middle class. She wears a crisp shirt, her dark hair is held back by a thin white band, and she plays with a thick gold bangle that rests halfway up her left forearm as she recounts the tsunami and its impact. Many years of dealing with tourists has given her good English: ‘We were the first in the village to set up a homestay,’ she says, explaining how the couple took in their first guests – initially providing accommodation free of charge to surf explorers – in 1981. They soon turned it into a business, which gradually expanded as the couple added extra buildings when times were good. The additional income from the guest house allowed them to pay for high school and university educations for their kids.

The terrain rises quickly here as you move inland, soon becoming dense jungle. The track they fled up that day still exists: retracing their route, it is possible to get a few hundred feet above sea level after just a couple of minutes. This meant Yusnidar and Darlian were safe, as were their three children. But you cannot see the beach or the village from the hillside, which is covered in dense jungle, and after sheltering there for a few hours the parents decided to walk back down and assess the damage. ‘I picked up my bag of keys to go and check on my home and the guest house,’ she recalls. But Yudi, then 22, had already ventured down the hill to the edge of the village, and he stopped her. ‘He shouted at me: “No, Mumma!”’ She pauses, sighing. ‘He said there was nothing. No house, no buildings, no homestay. All gone.’

Under-estimating the severity of the situation in the village would have been easy to do. This was no normal disaster – the forces unleashed that morning had rocked the earth on its axis, destroyed five million homes and claimed almost 230,000 lives. The people of Lhokgna, its twin village of Lampuuk and the town of Banda Aceh were the first and hardest hit. What happened in these places that morning was terrifying. What has happened since is a story of stubborn survival, resilience and rebuilding that illuminates the basic building blocks of economics.

As she finishes her account of the disaster, Yusnidar makes a lobbing motion with her hands, as if she is throwing something away. Her treasured bag of keys, the years of work and investment it embodied, had become a relic of a life, a village and an economy that had been wiped away. She threw the bag into the jungle and walked down to Lhokgna to start again.


Tectonic plates usually move extremely slowly, shifting at most 8 cm in a year. (Glaciers, which can move over 15 km in a year, are thousands of times faster.) But just after 8 a.m. that day, things sped up as, around 50 km off the western coast of Aceh, the Indian Plate fell 30 metres in a few seconds, driven down by the opposing Burma Plate. From this epicentre a long thin rupture started to appear and, like a giant zipper being closed across the ocean floor, it drew the plates together quickly. Starting off the coast of Aceh it stretched 400 km to the north, moving at nearly 10,000 km per hour, or nine times the speed of sound.

The vibrations created an earthquake known as a ‘megathrust’. It had a magnitude of 9.1, releasing 40 zettajoules of energy, enough to sustain global energy consumption for 80 years, and equivalent to 500 million Hiroshima atomic bombs. The shock that started just 50 km from the coast of Aceh was so big that the earth wobbled on its axis and even changed shape (our planet is now a more perfect sphere and spins faster, so we have slightly shorter days). It was the kind of thing that happens perhaps every 500 years.

Earthquakes often cause tsunamis, so something on this scale could be expected to cause a large wave. But scientists examining the seabed have recently discovered why things were so extreme in this case. Alongside the main faults, a series of secondary ruptures appeared, forcing huge chunks of the seabed up into space occupied by the ocean, and creating waves that were bigger and faster than any tsunami on record. The fishing villages of Aceh’s north-west coast, Lhokgna and Lampuuk, were directly in its path. As in other parts of the world, the waves rose up and slowed as the waters shallowed. Here they reached 90 feet.

The waves killed 227,898 people across 14 countries, with Aceh being hit first and hit hardest. In Lhokgna and Lampuuk, more than 90 per cent of the villagers perished – the population fell from 7,500 to just 400. The Rahmatullah mosque was the only building that survived on this stretch of coastline, as every home, hostel and restaurant was destroyed. Yet within just a few months the Acehnese were rebuilding their lives and their economy, resulting in a remarkably fast rebound. Today, stories like Suryandi’s are common in this unique place: people are back on the beach, living as they did before.

The extremes in the first part of this book are places where an economy survives and comes to thrive despite all the odds. On this definition, Aceh is a fascinating place to study. In this little-known corner of Indonesia, the people were put to unmatched stress, and many were encouraged to move away from their decimated coastline. Yet they stayed put, rebuilt quickly and soon started to thrive. I went to Aceh to meet the people to understand what drives the human urge to rebuild, how we should measure the strength of an economy, and to ask locals about the source of human resilience in the face of such a devastating shock.


Around the headland in Banda Aceh, the regional capital, the disaster was devastating. Almost 170,000 people (around 55 per cent of the population) lost their lives. Ulee Lheue is a pretty suburb with neat rows of houses enclosed by tropical trees, ferns and palms; it is also low lying, close to the sea and completely flat. After wrapping around the headland, the tsunami waves would still have been 10 metres high here, and they destroyed every home in the neighbourhood. Yet today the streets run as they did then, parallel to the plot of the local mosque and right down to the shore. The house at the very end of the road, closest to the water, is a metre above sea level at most and would have been the first here to be flattened by the wave. Its owner then, as now, is a jolly local policeman called Mohammad Iqbal.

You can see why the family likes living here – the area around the mosque is a hub of activity. Mohammad’s brother-in-law cycles up as we talk. He has built a mobile display cabinet, placed it on top of a side car and attached it to the side of his bicycle, from which he sells fruit and jewellery – freshly cut pineapple, melon and mango along with the large aqiq rings set with chunky gemstones that Acehnese men favour. His son, also Mohammad Iqbal, speaks good English and explains that he lost his mother, brother and sister in the disaster. The younger Mohammad is the first person to say something I end up hearing a lot: ‘Welcome to Aceh. Remember that the letters in our name stand for Arabic, Chinese, European and Hindu.’ The story – that this is a special place founded by traders – is strong in the minds of the Acehnese, a people who understand the history of their land and regard it as exceptional.


Aceh’s location, so devastating in 2004, has through most of its history been an economic asset. As maritime trade began to flourish in the fifteenth century, Banda Aceh became the gateway to the Malacca Strait, the channel that links the Pacific and Indian Oceans and is the primary shipping lane joining India and the west with China, Japan and the east. Cargoes from the Spice Islands – pepper, nutmeg, mace, cloves, ginger and cinnamon – were shipped up the strait and then on to ports in Sri Lanka and India as they headed west to Europe. They were light and their uses in curing meat and making medicines made them hugely valuable: nutmeg was worth more than its weight in gold in Britain, and London dockers would happily be paid in cloves. The spice ships navigating the Malacca Strait were like floating buckets of cash, and offering them safe harbour, as Banda Aceh did, was a lucrative business.

As well as controlling a strategic port, the Acehnese became powerful exporters, selling nutmeg and cloves, together with betel nuts, which can be chewed to give a caffeine-like high. But the big money here came from the global pepper boom. Pepper vines thrived when planted along Aceh’s west coast, and by the 1820s the region was producing up to 10,000 tonnes a year, half the world’s supply. Local farmers stopped cultivating rice and instead sent pepper south, trading it for lower value rice plus gold to settle the difference in value of the crops. Trade meant Aceh became richer than other parts of Sumatra, allowing it to maintain supreme maritime strength. For its control of shipping and the products of its land, the Acehnese came to understand that their end of the island was superior.

Copyright © 2019 by Richard Davies