Long-Term Economic Outcomes of Disasters

This is the second posting in a row that deals with the long-term outcomes of a disaster, in this case a set of cyclones.  While I think the title of the article is misleading — Emotional Storms Are No Response for Disasters –– it deals with a recent study that shows that government aid and World Bank projects are not enough to spur lasting recovery.

This article in the National Review notes that a new National Bureau of Economic Research paper supplies strong evidence that national economies decline compared with their pre-disaster trend and “do not recover.”

“The data reject hypotheses that disasters stimulate growth or that short-run losses disappear.” The conclusion: Cyclone-hit countries, rich or poor, experience such losses. Places where very big cyclones hit lose 3.7 years of development over the following two decades. This blow compares to a tax increase of 1 percent of gross domestic product, or a currency crisis. * * *

Economies do experience a jolt of growth when governments or private companies, not to mention international nonprofits and agencies, dump cash and rock concerts in the rush that follows tragedy. That jolt may include food, bottled water, and blankets that save lives. But economically, a jolt is just a jolt. The growth is not sustained. The true economic picture, and a negative one, comes clear over the long term, the 10- or twenty-year period. The only reason we have not noticed this ….is that “the gradual nature of these losses renders them inconspicuous to the casual observer.” Politicians think in election cycles, and so do voters, which explains why we may heretofore have found it expedient to ignore any evidence of long-term weakness that came before us.

Here is the direct URL to the 69 page paper, titled THE CAUSAL EFFECT OF ENVIRONMENTAL CATASTROPHE ON LONG-RUN ECONOMIC GROWTH: EVIDENCE FROM 6,700 CYCLONES.
_______________________________________________

The Diva would add another reason many people do not know this information and that is because too few longitudinal studies of long-term recovery have been done!

This entry was posted in Lessons Learned, Research. Bookmark the permalink.

2 Responses to Long-Term Economic Outcomes of Disasters

  1. recoverydiva says:

    Seems to me the Christchurch experience provides another example that should be examined.

  2. There is an important complicating factor I don’t think the authors have considered. If we look at NOLA after Katrina, it has not recovered to the same levels as before. HOWEVER, if you look at per capita values, you’ll find the the average citizen is better off than before in many ways. Higher median incomes, better educational performance… My argument is that NOLA has gone through a reorganization phase (in terms of socio-ecological panarchy), i.e., it isn’t the same city as before. It would be interesting to look at the same data but normalized by post-event population to see which cities actually came out ahead and which didn’t.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s