Natural Disasters Give Economic Growth A Moral Dimension

Between 1990 and 2002, globally 815,077 people were killed by 4,300 natural disasters.

Since then, an earthquake in Bam, Iran in 2003 took 26,000 lives. The 2008 Sichuan earthquake killed 68,000, and the death toll from Haiti earthquake in 2010 could have reached up to 300,000.

Now Japan, where 10,000 are missing and likely dead.

These numbers are numbingly large.

But tragedy is not aggregate but individual – the personal toll of lost family members, lost livelihoods, lost homes, peaceful lives violated suddenly and destructively.

So what we know about reducing vulnerability to natural disasters is pressing.

And the academic literature is unambiguous: a richer country is a safer country.

Sure, some regions are more susceptible to natural disaster. Asia, for instance, suffers more than Africa. But rich countries are statistically as likely to be hit by nature as poor ones.

It’s just the rich countries cope much, much better.

Between 1985 and 1999, 65 per cent of deaths from natural disasters took place in nations whose per capita incomes were below $US760 – in other words, those nations in the absolute bottom ranks of economic development.

Wealth buys better technology, more money to spend protecting assets against risk, and the wider availability of medical care, supplies, and services.

One economist calculated if a nation with 100 million people as poor as, say, Laos became as less-poor as, say, Turkey, that nation would suffer around 800 fewer deaths from natural disasters a year.

Wealth is not the only factor. Governance matters too. Living in a democracy is safer than the alternatives.

Further, a study published in 2006 by two economists, Hideki Toya and Mark Skidmore, found education level, openness to technological transfer and foreign investment, a more developed and complex financial sector, and even a smaller government (in this case, a smaller public service) were closely correlated with reduced economic damage and reduced loss of life in natural disasters.

That final one – smaller government – is counter-intuitive.

Certainly, larger governments have more resources to deploy in an emergency. But size usually comes at the expense of efficiency. After the 1995 Kobe earthquake, the sluggish response of the prefectural government meant one of the first coordinated humanitarian relief efforts was conducted by the Yakuza.

(Indeed, private sector disaster relief is more important than commonly acknowledged. Hurricane Katrina also saw firms with resilient logistics and a large distribution network provide supplies and transport quicker than the grossly underperforming Federal Emergency Management Agency. The mayor of Kenner, a badly damaged New Orleans suburb, said Wal-Mart was the “only lifeline” for his town in the first few crucial days.)

Some have been quick to praise Japan’s building codes for the country’s relative resistance to earthquakes and their aftermath.

But the difference between the impact of the Haiti earthquake and the Friday’s disaster in Japan is not the strictness of the two nations’ construction regulations.

Societies can only buy stronger buildings if they can afford them.

A country with tough building codes but no money will either price everyone out of the real-estate market, or, more likely, see those codes ignored. The widespread collapse of Chinese schools during the 2008 Sichuan earthquake revealed schools in the region had been in violation of building codes for decades. Regulators were very likely complicit.

And construction firms don’t make buildings safe solely because it’s mandatory. As The New York Times pointed out on Friday, “apartment and office developments in Japan flaunt their seismic resistance as a marketing technique, a fact that has accelerated the use of the latest technologies.”

Strong building codes have a role. They may have a vital role. But to be at all effective, those codes require the wealth and strong institutions described above. Crediting tough regulation for disaster resistance gets the thread of causation exactly backwards.

As Alan Kohler pointed out in The Drum yesterday, Japan recovered from the Kobe Earthquake quickly.

Less than 15 months after devastation, Kobe’s manufacturing industry was producing at 98 per cent of its pre-earthquake capacity. All debris – all of it – had been cleared within two years. Fifteen years later the only thing which has prevented Kobe fully restoring its earlier economic achievements is the 100,000 residents who just up and left after the disaster.

Compare this to Haiti. More than a year since the earthquake and only 15 per cent of the required housing has been built. Debris is still abundant. The country is struggling through a cholera epidemic caused by inadequate water and health supplies. Much aid money remains unused.

Obviously, the developing world desperately needs to catch up to the developed world.

But the devastations of 2011 – Queensland, Christchurch, and Japan – must remind us rich countries are still extremely vulnerable.

With greater wealth we can increase our resilience to natural disasters – we can save more lives and livelihoods. After all, there’s no reason the buildings of 2111 can’t be much stronger than the buildings of 2011, if we can afford to buy them.

That gives our political focus on economic growth – casually and smugly dismissed by so many – a moral dimension which must not be ignored.