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 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. 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 Sichuan earthquake in China was partly due to poor compliance with building codes, and ensuring safety standards was the key focus of recovery. If this is not done in a way that matches the availability of local capabilities, however, recovery will falter. Even this is hugely difficult for poor countries that are depleted of human capital when large disasters strike.
The earthquake in Haiti in robbed the country of skills and ingenuities needed to absorb sophisticated reconstruction. 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 recovery 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. 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. This article is published in collaboration with VoxEU. Publication does not imply endorsement of views by the World Economic Forum. To keep up with Agenda subscribe to our weekly newsletter.
The views expressed in this article are those of the author alone and not the World Economic Forum. Working together we can speed up the process of finding solutions to intractable problems by contributing our unique value, not protecting it.
According to the Global Competitiveness Report Special Edition , for economic transformation: growth and productivity alone are not enough. I accept. Take action on UpLink. Forum in focus. Read more about this project. Explore context. Explore the latest strategic trends, research and analysis. Natural disasters and corporate productivity: 1 Creative destruction A channel through which natural disasters may enhance corporate productivity is the improvement in the productivity of firms that survive the disasters, which is due to the update of their capital stock and the adoption of new technologies.
Natural disasters and corporate productivity: 2 Firm selection Aside from the channel through survived firms, there is another potentially important channel through which natural disasters may affect the corporate sector: the selection, or exit, of firms due to the disasters.
Empirical approach on firm bankruptcy after the Tohoku Earthquake In Uchida et al a we use a sample of firms located in the Tohoku area of Japan that we obtain from the database of Teikoku Databank ltd.
Evidence for natural selection Table 1. Source : Uchida et al a Figure 1. License and Republishing. Written by. More on Competitiveness Framework View all. How collaboration can help us tackle our biggest challenges Working together we can speed up the process of finding solutions to intractable problems by contributing our unique value, not protecting it.
Carmine Di Sibio 20 Jan This is how countries can rebuild competitive economies for people and planet According to the Global Competitiveness Report Special Edition , for economic transformation: growth and productivity alone are not enough. Saadia Zahidi 16 Dec Which countries are making the most progress in digital competitiveness? The economy would then start to recover and growth would return to its original level, but the GDP per capita itself would be permanently negatively impacted.
The new trajectory would be parallel, but below the baseline trend. The area between the two lines represents the size of the long-term productivity loss due to the natural disaster. We can think of this scenario in a way as moving the country back in time undoing the growth that happened during some period of time. An even more pessimistic hypothesis suggests that not only the level of GDP per capita would be reduced in the long-run, but also the growth rate of GDP per capita.
While there will always be some recovery, the country might be so much negatively affected that the growth rate will stabilize at a lower level than before. This is the worst case scenario. But there are also other theories.
According to neoclassical economic growth theory, the country would experience a temporary drop in GDP per capita due to the destruction of productive capital such as damaged roads or destroyed buildings. But the lower capital levels would also allow for higher productivity gains and the disaster would therefore be followed by higher growth rates than what the country experienced previously.
This would continue until the country reaches its original baseline trend. In this scenario there would be no long-run impacts of the natural disaster on GDP per capita nor its growth rate. Nevertheless, there would have still been temporary productivity losses, which can again be visualized by the area between the baseline trend and the return-to-trend trajectory. The smaller this area is, the better is the recovery process of the country. Shortly after a disaster strikes, destroyed capital will be replaced and reconstruction will begin to rebuild the destroyed infrastructure.
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