And the losses were fairly easily overcome as well. Fishing in Sri Lanka is conducted by hundreds of small-scale fishermen in very small boats. Dozens of nongovernmental organizations (NGOs) saw the opportunity to assist here. To do so, they donated and/or repaired boats to get the fishermen working again. It worked—almost too well. So many boats were made available that it led to overfishing in some areas. In some places, near-shore fisheries, where the small boats could go, became so depleted that fishermen opted to work on large foreign fishing vessels that operate on the high seas.
Tourism is important to Sri Lanka’s economy. Fifty-three large hotels and 248 small hotels were damaged or destroyed in the tsunami, as well as around 200 small businesses that relied on tourism. But by the end of 2005, just a year later, 41 of the 53 large hotels were in operation again. Tourism revenues dropped sharply in 2005 but have risen slowly since.7 Recovery of tourism relies mostly on companies that own the tourist hotels, which will rebuild or repair them, and on the government, which reestablishes transportation and other infrastructure. The challenge is to convince tourists to return.
But tsunamis are such rare events that few people imagine that an area already struck by one will experience another one soon after. And in a first-order way, they are basically right. Tsunamis are rare events. And repeat rare events in the same place are even rarer. People living on the eastern coast of Sri Lanka should not think that they live in a region prone to tsunamis. It is prudent to have a warning system, because such systems do save lives, but it makes little sense to declare the coast of Sri Lanka off limits for development indefinitely.
Immediately after the disaster, the government declared a no-build zone 100 meters inland from the high-tide mark. This meant land had to be found for many thousands of people who had to move. Land is scarce in the region, and it is generally privately owned. Many of the largest and best hotels, which produced considerable tax revenues, were located well within 100 meters of the waves, and relocation would have been very difficult. Many were not so badly damaged that repairing them was too costly to consider.
One hundred meters is a fairly arbitrary no-build zone. The tsunami reached much farther inland in many places; in others, due to the nature of coastal topography, it did not come ashore at all. Would an undamaged house 50 meters from the shore have to be destroyed due to the government declaration? More than a year after the tsunami, the no-build zone was dropped, sensible as it might have seemed in the immediate aftermath of the tsunami.
By November 2006, 46,531 partially or fully damaged houses had been rehabilitated by the government or NGOs, amounting to an “85 per cent completion rate.”8 In some places more houses were built than had been destroyed, a remarkable achievement. In chapter 6 we will discuss the effects of Hurricane Katrina on New Orleans. In parts of that city, in the world’s largest economy, the rehabilitation rate has been precisely zero.
Did Schumpeter’s gale of creative destruction blow in anyone’s favor after the Sri Lankan tsunami? Maybe. Many people say their new homes are better than the ones they had before. Yet almost everyone who was relocated is farther from schools and clinics than they were before.9
Furthermore, the disaster came during a less-than-stellar time in Sri Lanka’s economic life. Growth as measured by GDP was slow, there were fears of inflation, deficits in current account balances were growing, and the currency was on a downward slide. Since the amount of money donated for recovery seemed at the time to be quite a bit more than was needed to restore what had been destroyed, some of the money—the surplus, if you will—was used to put right some macroeconomic problems the country had been facing. In addition, the very typical boom in construction that accompanies rebuilding gave a short but strong surge to the economy. In fact, GDP growth went from very small figures to 6.2 percent in 2005 and 2006.10
Is that Schumpeter’s gale at work? The World Bank said Sri Lanka’s economy is “well above its regional peers.” It has also done extremely well at poverty reduction since 2003, meeting the Millennium Development Goal of reducing extreme poverty by half. The World Bank is almost giddy in its praise of Sri Lanka. Prosperity has been “broadly shared,” and the Gini coefficient has dropped from 0.41 to 0.36.11 The World Bank does warn that the effects of climate change may erase all this because Sri Lanka has a variable climate, with areas of high and low rainfall, both of which could become more extreme. But overall, the World Bank is bullish on Sri Lanka.
The problem with ascribing any of this growth to the tsunami is that we do not, and never do, have access to the counterfactual—what would have happened had there not been a tsunami. We don’t know what would have happened had the tsunami not occurred and the vast influx of aid money not been received. In my view, the influx of aid money was important in the overall economic progress of the country. There is little doubt that it had a stabilizing effect on the macroeconomy, one that may have allowed other forces to lift the economy.
The one place where there is fairly clear evidence for creative destruction from the December 2004 tsunami is in the hardest-hit areas of Indonesia in Aceh. First, the long insurgency by the Free Aceh Movement ended in late 2005 with a peace agreement that is widely said to be the direct result of the tsunami. The same did not happen in Sri Lanka where, after a brief truce, fighting by the Tamils continued—if anything, more aggressively.
And there is no doubt that what has been rebuilt in Aceh is universally better than what was destroyed. Everything from the new roads to schools to hospitals is now far better than it was before. Recovery was not hurried; instead, it was very deliberate, and donor funds were used effectively to make improvements to almost every facet of life for the people of the region.
Japan’s Tohoku earthquake and tsunami in 2011 has an especially terrible twist because it led to the failure at the Fukushima nuclear power plant. It is impossible for me to erase from memory the video images of the tsunami coming ashore, picking up everything in its path—thousands of cars, entire factory warehouses, buildings on fire in the water like ships burning at sea—and in slow motion relentlessly pushing everything in front farther and farther inland. It seemed like it would never stop, like it would just keep going until it covered all of Japan, penetrating even farther inland than the 2004 Indian Ocean tsunami penetrated anywhere.
Looking at the videos made from helicopters, by people in tall buildings, and even one by someone in a car floating in the water, you could imagine the corpses in the ugly mélange of churning water and shattered buildings. We never saw any bodies in those videos, but you knew they had to be there—16,000 or more of them. The earthquake and tsunami caused 127,000 buildings to collapse totally; another 749,000 were partially damaged.12 And then compounding the awfulness of the tragedy, the Fukushima Daiichi nuclear plant was seriously impacted. Although it shut down automatically, failure to maintain its cooling systems caused large-scale damage to the reactor and fears of air, marine, and soil contamination and of large explosions.
Japan is a manufacturing economy and has been in a stagnation period for around 20 years. There are apparently two issues. One, things look a lot better if you adjust for Japan’s unusual demographics: The total population is shrinking, mass immigration is discouraged, and its population pyramid is inverted with few young people and many elderly—the opposite of Haiti, but similar to many developed countries. Second, Japan calculates growth in an extremely conservative way so GDP figures provided by the government understate the true economic growth. If you adjust for both of those factors, the picture turns out to be much rosier.
So what did the earthquake do to the economy? Data from the Japanese Institute for International Studies and Training offer one way to look at the economic impact.13 Using the industrial production index for the Tohoku region and for the country as a whole, the effect of the quake is striking, but so is the recovery.
Nationally, production dropped around 15 percent, but
in the Tohoku region, it dropped an extraordinary 35 percent. The drag on the total economy caused by the Tohoku earthquake is strong and clear, but recovery started almost immediately. In fact, within the same year, national production had returned to its prequake level. It took much longer for the Tohoku region to recover, and you could argue that it has yet to fully do so. But clearly the region is not so very critical to the aggregate economy of Japan.
The earthquake struck in the northern Tohoku region of Japan, well away from the major centers of manufacturing. The reason that it had any effect on the aggregate economy at all is not due to the farmlands and fishing vessels that were destroyed—they play very little part in the Japanese economy as a whole. Rather, the loss of the Fukushima Daiichi nuclear power plant, which provided power to areas well beyond the region in which it is located, affected the economy. Molly Schnell and David Weinstein, both economists at Columbia University at the time, studied the difference in recovery time for the Japanese economy after the Kobe earthquake in 1995 and the Tohoku earthquake.14 The most important difference they found is that there was no loss of power production after Kobe whereas the loss after Tohoku was substantial. The current anxiety about nuclear power generation, though understandable, has led to a transition back to fossil fuels that the authors suggest will have far greater negative health effects than nuclear power, even considering the accident. The effect on greenhouse gas emissions could be substantial too.
In 2013, about 300,000 Japanese people were still living in temporary housing.15 Their repatriation to their home area has been slow and difficult because of the vast extent of damage. Many people need to be relocated to higher ground, and new protective barrier systems must be established. The process promises to be slow and arduous, in contrast to the economic recovery. Social recovery takes much longer. As the aggregate economy has not suffered significantly, the 300,000 displaced people must have provided little productive input to the economy. From the point of view of standard economic indicators, it doesn’t matter that those 300,000 people have had their lives turned upside down.
Had the power plant not been affected, there likely would not be much discussion of the Tohoku earthquake beyond geophysical circles. At magnitude 9.0, the quake was much larger than many scientists thought possible on the fault system that ruptured. Few previous earthquakes in the region have been larger than magnitude 7.5. In fact, the Tohoku was almost a “double earthquake,” rupturing first in a westward direction down deep into the Earth and then to the east and toward the ocean floor. That is extremely unusual behavior, and it seems that the reason was fault gouge—the thin layer of material within the fault produced by the grinding up of rocks as the fault moves. The fault surface turns out to be extremely slippery, permitting the fault to slip by a large amount.16 That motion disturbed the ocean floor, pushing the entire water column upward and creating the massive tsunami.
Slipperiness is not known from direct measurement of gouge properties but by the amount of heat released when a fault moves. Although slippery, there is still friction between the fault surfaces, and the motion generates heat, just as when you rub your hands together or use sandpaper vigorously. The amount of heat radiated from a fault when it moves is a very good, though indirect, measure of the fault strength. After the earthquake, a Japanese scientific drill ship, the Chichyu, not unlike a commercial oil drilling vessel but set up for scientific research, drilled through the fault that moved in the Tohoku earthquake and set in the region instruments that can measure heat flow. And there wasn’t much.
But what do these scientific data mean for the people of Japan? Because all the previous estimates of the likely earthquake magnitude in the region came in around 7.5, the seawalls constructed along the local coast were designed for a tsunami generated from an earthquake of about that size. Like levees and seawalls everywhere, their design height was based on what was imaginable, not the unimaginable. In fact, by looking back to the year 869 and using geological markers that indicate how far inland a tsunami wave traveled, we can find evidence of a similar earthquake and tsunami.17 The observation period scientists had used to assess the maximum likely earthquake magnitude was long but not long enough to capture this ancient monster. Now we know such large events are possible. To be completely safe, the new seawalls would need to be built much, much higher, and existing walls would need to be made taller. The Japanese people would have to live in the shadow of giant structures stretching for hundreds of miles along the coast.
Will the Japanese government undertake such a project? It doesn’t appear so. They will probably build the walls a little higher, maybe a lot higher around nuclear power plants and other critical systems, and keep improving earthquake building codes and construction materials and sponsoring research into earthquake science.
But there is a conundrum at the very center of almost all natural disasters, and the two tsunamis discussed exemplify it well. It’s a vicious cycle that goes like this:
It’s only the very big ones that really matter.
The big ones happen very infrequently.
The big ones present the most difficult prediction problems.
It’s relatively easy to protect societies from small- to medium-size events.
It’s extremely difficult to protect against the monsters.
Return to point 1.
And there is another, more important dilemma that compounds and amplifies the first point on the list. The huge numbers of deaths that sometimes accompany the largest of disasters prompt the largest donations of aid from the UN, individuals, and agencies. We saw this in the response to the Haitian earthquake. But the aid is not needed for the deceased; it is needed for the living. Most often, death tolls are high when countries are poor and are poorly governed, with the weakest institutions and the highest levels of corruption. Some outspoken economists, such as Dambisa Moyo and Bill Easterly, have claimed that these countries should not be provided any aid, even in good times, because it creates a dependency sometimes referred to as the Samaritan’s dilemma.18
The rebuilding in Sri Lanka relied heavily on external funding, but the Japanese rebuilding less so. Sri Lanka was in no position economically to take on the huge task. It would be quite wrong to suggest that Sri Lanka should be denied aid for fear of the Samaritan’s dilemma. Or for fear that donor funds might be misappropriated. That fear, perhaps quite understandable, exists whenever disasters occur in poor countries and makes all attempts to recover even more difficult. Donors first pledge, then withhold, looking for evidence that money is being spent well.
This sets up a dynamic in which the most well-to-do are certain to be the winners in the race to recover from a disaster regardless of the losses they take in the disaster itself, and the least fortunate are most often the losers.
Chapter 5
Malevolence by Neglect in Myanmar
As in Haiti, there are really just two groups of people in Myanmar. The elite world of the paranoid, xenophobic military junta that rules by cruelty and oppression, along with their political and business cronies who reap the benefits of that rule, makes up one group. Just about everyone else makes up the other group. There are a few people high up in economic status and many more low down and to the bottom, in a poverty trap with no way out. There are plenty of small businesses in Myanmar and Haiti, run by people who make enough to stay just out of the most extreme poverty. In Myanmar, the government provides jobs, especially if you would like to be a soldier, but there is not much of a middle class at all.
The military government in Myanmar is predominantly from one ethnic group, the Buddhist Burmans, who make up 68 percent of the population1 and speak the dominant language. There are believed to be more than 130 other ethnic groups in Myanmar and a similar number of languages or dialects.2 Many of these smaller groups, especially the Shan (less than 10 percent),3 have been engaged in ongoing armed conflicts or insurgencies agai
nst the government ever since the military gained power in 1962 after a chaotic period of weak postcolonial governance, only 14 years after the country gained independence from Britain.
Myanmar’s history is one of repeated battles for power: both internally—between different ethnic groups and others who would periodically hold power over the country, then be overthrown—and externally—notably the British during their colonial period and the Japanese during World War II.4 The generals who took power in 1962 have compared themselves to warrior kings and liberators of the past and erected statues depicting themselves in just that way. Overthrow of the government by force is the norm in Myanmar. When they took power, the generals saw themselves as following an established historic tradition of violently contested leadership.
Myanmar’s history in the mid-twentieth century followed the path of so many other postcolonial countries, but with its own unique meanders: from independence to initial optimism for self-governed prosperity, to troubled corrupt governance, to ethnic conflict, to violent overthrow and dictatorship. In the last case, dictatorship by a military junta.
As in Haiti, it is very difficult to know the state of economic and social welfare in Myanmar. It is, for example, one of a handful of countries that the World Bank typically doesn’t include in listings of wealth measured in gross domestic product (GDP). Figures are available in the CIA’s World Fact Book, but many of them are acknowledged to be rough estimates.5 It is virtually impossible to get the information needed to accurately calculate GDP or any other indicator, like the Human Development Index. No figures provided by the government are believable. Even total population size is not known accurately. Had it attempted a census, the junta would never have included the Rohingya or other Muslims who have experienced a long history of persecution.
The Disaster Profiteers: How Natural Disasters Make the Rich Richer and the Poor Even Poorer Page 13