Economic Recovery after Natural Disasters

Natural disasters shatter lives. I know. In 2004, the Indian Ocean tsunami shattered mine.

They also wreck communities and, sometimes, even entire countries. Sudden cataclysmic disasters such as earthquakes, tsunamis, hurricanes and floods cause devastation on impact. Slow-onset disasters such as droughts inflict persistent damage over time.

The loss of life in recent events alone is staggering. Some 250,000 were killed across several countries in the 2004 tsunami. An estimated 140,000 lives were lost in the 2010 earthquake in Haiti. In Myanmar, 120,000 perished when Cyclone Nargis hit in 2008. The Kashmir earthquake in Pakistan in 2005 and the Sichuan earthquake in China in 2008 each killed more than 85,000. The earthquake and tsunami that hit Japan in 2011 resulted in the death of 18,000 people. Extreme drought was one cause of 230,000 deaths in Somalia between 2010 and 2012. Every one of those lives was precious—individual, intricate, human. The glare of numbers sometimes blinds us to this.

The scale of these catastrophes makes it impossibly difficult to cope and recover in their aftermath. Survivors and affected communities are left reeling from the loss of lives and livelihoods. Nations and Governments confront the giant task of restoring and rebuilding destroyed assets—both economic and social.

But clarity in our understanding of the challenges of post- disaster economic development is imperative. Globally, our exposure to the perils of these events is likely to increase in the future. Climate change is predicted to intensify the severity of extreme weather events. In addition, the number of us living in hazard-prone contexts will only increase as we move to cities that have inadequate disaster prevention or to geographical areas (flood plains, steep hillsides) that are especially vulnerable to hazards.

THE ECONOMIC LOSSES FROM DISASTERS

The destructive effects of natural disasters are felt more in poorer countries than in more prosperous ones. While both rich and poor nations are subject to natural hazards, most of the 3.3 million disaster-related deaths over the last 40 years occurred in poor countries. For instance, the magnitude 7.0 earthquake in Haiti in 2010 resulted in an estimated 140,000 deaths and ruinous economic losses, while the magnitude 9.1 earthquake in Chile in the same year killed 500 people and had a relatively small negative impact on the national economy.

The economic damage caused by disasters varies. Capital assets and infrastructure such as housing, schools, factories and equipment, roads, dams and bridges are lost. Human capital is depleted due to the loss of life, the loss of skilled workers and the destruction of education infrastructure that disrupts schooling. A country’s natural resources may also be affected—hurricanes destroy forests, hurricanes and droughts decrease soil fertility. Recurrent natural disasters can result in “adaptive behaviour” by individuals and communities that brings on further economic loss. Farmers may invest less to increase productivity of their land in drought-prone areas for fear of their investment being lost.

THE POOR ARE DISPROPORTIONATELY AFFECTED

The poor are the hardest hit by natural disasters. Mortality rates are typically highest among those with the lowest incomes. They are more likely to live in hazard-prone areas or to have fragile housing. When Cyclone Nargis struck the Irrawaddy Delta in Myanmar in 2008, one in two families had their homes completely destroyed by wind and flooding. In Haiti, mortality from the earthquake of 2010 was highest among the urban poor of Port-au-Prince, who lived in poorly constructed, crowded housing.

The poor also suffer disproportionately from the loss of economic assets. Natural disasters destroy farms, livestock, workshops and equipment. Families may be forced to sell off assets to meet basic needs—rural families in drought-stricken regions often sell cattle to purchase food. Because the poor are less able to replace these income-providing assets, they may fall into long-term “poverty traps”, from which they would be unable to emerge. Evidence from around the world—from the Philippines to Ethiopia to Colombia—shows that poverty rates among disaster-affected communities often increase.

These economic shocks experienced by the poor can have harmful effects that span generations. School enrolment may fall as parents pull children out of school to help boost family income. Even if this is intended to be temporary, it can become permanent, as it did during the droughts in Central Mexico in the late 1990s. When droughts and food deficits cause malnutrition in young children, cognitive ability and potential productivity suffers in later years. In Tanzania and Zimbabwe, children malnourished during droughts have lower lifetime earnings.

HOW TO RECOVER?

Devising and implementing policy and action for economic recovery in the wake of a natural disaster is messy and complicated. Destroyed assets need to be rebuilt and replaced. Lost livelihoods must be revived or new ones created. Swift and effective measures are needed, both to sustain economic growth and general welfare in disaster-struck countries, and to ease the suffering of individuals and communities directly affected by these terrible events.

There is no universal blueprint for recovery—for individuals, communities or nations. The process of economic rebuilding is unique to each country that is affected by a natural disaster. There are challenges and difficulties that are common to most countries, however, and understanding them is important if policies and actions are to reduce the human suffering that occurs when disasters strike.

THE CHALLENGES

The speed of recovery matters. This is especially true in developing countries where livelihoods are precarious even in the absence of a disaster. When post-disaster reconstruction is slow, the economic pain and deprivation of families and communities is deep and long-lasting. Studies done five years after Cyclone Nargis made landfall in Myanmar revealed that more than half of the surviving households had still not been able to replace fishing boats and livestock taken by the storm surge.

The quality of economic recovery also matters. Natural disasters are of ten seen as providing a chance to “build back better”—better housing, roads, schools and hospitals. It is important, however, to clarify what we mean by “better”. Rebuilding housing and public infrastructure to higher standards of safety that reduce disaster risk is vital. It minimizes human and economic losses in future events and helps soften the fear and trauma of survivors as they re-emerge into social and economic life. The tragically high level of fatalities among school children in the 2008 Sichuan earthquake in China was partly due to poor compliance with building codes, and ensuring safety standards was the key focus of recovery.

Building back better is sometimes seen as an opportunity for a disaster-struck country to make a “developmental leap” by creating, for instance, sophisticated infrastructure that would not have existed in the absence of the disaster. If this is not done in a way that matches the availability of local capabilities, however, recovery will falter. So “building back adequately” could be what is most needed for ravaged economies. Even this is hugely difficult for poor countries that are depleted of human capital when large disasters strike. The earthquake in Haiti in 2010 robbed the country of skills and ingenuities needed to absorb sophisticated reconstruction.

“Better rebuilding” must also be culturally consistent. The instances of new, hazard-resistant housing remaining unoccupied due to unfamiliar or unsuitable design are numerous. In Sri Lanka, I have seen entire housing projects used as storehouses for rice because the local communities thought the tsunami-resistant, circular shapes of these dwellings too strange to live in.

Who wins and who loses from post-disaster economic recovery? This is an important question to ask because the beneficiaries may not always be those with the greatest economic losses. In the aftermath of disaster, Governments and donors assess damages and losses and draw up technical proposals for reconstruction. The outcomes of these plans, however, can often diverge from their intentions. In practice, a host of other factors come into play, including the availability of funds and skills, the quality of implementing institutions, vested interests and power relations. Sometimes vulnerable groups with legally insecure land rights (women, sharecroppers, tenant farmers and urban squatters) suffer heavily from the loss of lives and incomes during a disaster, and then lose even more when resettlement plans do not recognize their customary ownership rights or when economically powerful groups engage in land grabs. So, new or altered social and economic inequalities can emerge even as economic recover y at a broader, national level takes place.

Even after post-disaster rebuilding, old patterns of vulnerability and deprivation can persist. This happens even in rich countries. Ten years after Hurricane Katrina hit New Orleans, United States, child poverty rates in the State of Louisiana remained strikingly high. Such cases highlight the need to rethink the concept of “building back better”; it must encompass not merely infrastructure but also a more inclusive trajectory of economic development.

Economic rebuilding after a disaster never completely recovers what was lost and does not return communities to a “normal” state that existed before. There is of ten a “new normal”, as societies and economies are forever altered. Effective economic reconstruction in this new normal can ease the suffering of individuals and communities and can boost economic growth and welfare in the future. But we must be alert to the difficulties and potential pitfalls of rebuilding. Policy and action by countries and donors should not exacerbate the trauma and tragedy of natural disasters.

TO CONCLUDE

As I write this I hear news of the earthquake in Ecuador that has killed hundreds, leaving a stretch of ruin in provinces that border the Pacific Coast. My family was killed in Sri Lanka in the 2004 tsunami and I am struck by the bewilderment and pain that lies ahead for the survivors of this recent quake. How to survive when we are so mercilessly hit by natural disasters is something we falteringly learn and navigate—as individuals, communities and nations.