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Macro-Disasters

Otaviano Canuto's picture

Earlier this month, Japan experienced one of the worst natural disasters in its history, an earthquake and subsequent tsunami that claimed the lives of thousands of people and drastically changed the lives of countless more. Sadly, this tragedy is another in a string of natural disasters that have occurred over the past few years, such as the earthquakes in Haiti and Chile, wildfires in Russia, and floods in Pakistan, West Africa, Sri Lanka, Brazil, and Australia. Over the past 10 years more than 2.6 billion (yes, billion with a “B”) have been affected by natural catastrophes, compared with 1.6 billion in the previous decade. What’s more, the IMF estimates that the costs of damages from natural disasters are 15 times higher than they were in the middle of the twentieth century.

So why the drastic increase? Why have natural disasters escalated in both frequency and severity? A growing body of research suggests a link between climate change and the occurrence of hydro-metrological disasters—especially floods and droughts—over the past two decades. To be sure, the number of such disasters has gone from some 150 per year in the 1980s to more than 370 per year in the 2000s.

Given all of the above, we would expect countries and international aid organizations to systematically and uniformly develop plans aimed at preventing and mitigating the effects of natural disasters. Unfortunately, recent analysis by the Bank’s Independent Evaluation Group (IEG) suggests that this is not always the case. In his recent addition to the Economic Premise series, It is Time to Factor Natural Disasters into Macroeconomic Scenarios, IEG Director-General Vinod Thomas argues that there is room for improvement in disaster planning. “Macroeconomic scenarios, even in countries that are regularly hit by natural catastrophes, seldom take into account the effects of their increasing incidence, damage, and costs,” says Thomas.

Drawing on evaluative lessons from the World Bank’s experience, Thomas concludes that urgent investments need to be made in climate change mitigation, disaster preparedness, early response, and post disaster reconstruction. In order to mitigate the effects of natural disasters, relief efforts should focus on victims’ basic needs (e.g. food, water, and safety), involve realistic timeframes for recovery, provide the necessary financial resources (e.g. cash support, emergency loans, and credits), and strengthen local capacity. In short, macroeconomists can no longer treat natural disasters as “tail” events.

For an overview of best practices in managing disaster relief, be sure to check out the latest in the World Bank’s Economic Premise series today.
 

Comments

Although we have in our annual EMDAT press conferences emphasized with data, the increase in disasters and in particular floods and cyclones, the jury may still be out on their climate factors as proximate determinants. Also patterns of disaster related mortality and affected patterns are really quite different from the incidence of events. We looked at a set of floods recently and precipitation levels (very informal and admittedly cursory examination) and flooding is not always linked to above average rainfall. I think that population density and urbanization may have much more to do with flooding than unusual precipitation. We have just starting an exercise in mapping population in very high resolution scales over time in flood basins to check this out. Also human impact is badly studied and badly understood. As epidemiologists will point out, understanding risk factors is fundamental for effective prevention. It is very encouraging though to note that the Bank is giving priority to reducing of the impact of natural disasters

Submitted by F. Caurand on
Macro-disasters are indeed a new reality. Some of which, could or should have been predicted. Financial institution will have to set aside emergency funds and more emergency professionals will have to be trained. Still, over and over, the same mistakes are being made. For example, why rebuild in an area regularly flooded in Bangladesh? Infrastructures for the long term are costly, and do necessitate international funding. Yet, supervision and cooperation should remain local if not regional. Ultimately, afflicted countries must have the political will to acknowledge their failure and take lessons from it. Finally, it must be reminded that local pride and corruption are often the most serious impediments to progress.

Submitted by Olga Jonas on
The recommendation to anticipate possible impacts of macrodisasters by reflecting them in macroeconomic projections is excellent, and overdue. It would make sense to do this, in particular, for pandemic influenza, which, in a moderate case, could reduce GDP by 3% and by 4.8% in a severe case(these estimates were obtained by DEC in 2008, are available in a paper at www.worldbank.org/flu, and are similar to the results from other models). Spending on prevention of a flu pandemic - is woefully short of optimal. External financing is about $0.3b per year for control of the avian flu virus at the animal source. External financing is falling, now that media no longer find the pandemic threat newsworthy. Assuming that developing countries and their farmers spend as much again, total annual spending on pandemic prevention is about 5,000 times less than the potential global costs in a severe case. Because prevention is grossly inadequate, another influenza pandemic is inevitable. All countries would benefit from anticipating its impacts on supply and demand in their macroprojections.

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