Thursday, January 13, 2005

"Disaster shows discretion" 

I'm delighted that the Captain's Quarters World Relief Day event was able to raise over $33,000, with $6,000 kicked in on the last day yesterday. Thanks to all of you who contributed.

I confess to being frustrated by these stories when I read them. It's hard to fathom how in a world of plenty so many can die from a tsunami. But of course there is poverty still in the world, and the point of this

India Uncut may have written the best thoughts I've found on what happens when disaster strikes. Writing from Mumbai,
All through Tamil Nadu we have seen that it is the poor who have suffered most, a fact that has been so commented upon and so amply illustrated that I won�t bother to elaborate upon it. And from this we come to the simple conclusion: a fight to minimise the impact of a future tragedy is essentially a fight against poverty. This is a battle we are supposed to have been fighting for the last 50 years, but our forays have been so half-hearted that we haven�t come close to succeeding. Poverty is a formidable enemy, and you cannot win a war if you�re wondering what�s for breakfast.

So how do we defeat poverty? I have written about this before, and my answer remains the same: free markets, open economy, more accountable government.
That is a lesson driven home in so many ways. We know that the poor tend to end up in places prone to natural disasters, because those places will be cheaper. One reason why they're cheaper is that the property rights to the land are less secure. As Michael Lipton notes,

And if you have insecure property rights, you don't invest in protection against earthquake or flood or anything else because if you invest, your landlord might chuck you out and you don't have those property rights tomorrow.

What is the upshot of this? In Dhaka, the capital of Bangladesh, in the late 1980s, one-quarter of all the urban squatters had been driven to Dhaka by floods or cyclones, by natural disaster elsewhere (Shakur 1987).

I was in Andra Pradesh in 1977 during the cyclone, and work done there later on showed what happened to mortality in the villages by the coast near Bapatla which were worst hit by the cyclone. One-quarter of all the small and marginal farmers, landless, and fisherman's households died. This was a terrible event. But among large farmers and officials, only 1 to 3 percent died - about 2 percent.

By 1981, the large farmers had recovered from the cyclone and their income was at better levels than before it. But the small and marginal farmers and the landless were still worse off four years later than they had been before the cyclone. So natural disasters discriminate against the poor in a number of ways.

Mostly in respect to all these shocks, the poor face more exposure, greater vulnerability, and a greater penalty on normal productive activity because they have to protect themselves against the risk of these shocks.
The point is that if you wish to work to protect against future tsunamis, the best thing you can do is to fight poverty. And to fight poverty, you must build structures of private property, something badly lacking in many parts of Asia. As I pointed out last week, measures of economic freedom tend to be dominated by simpler measures of the spread and security of property rights. Indonesia ranks poorly in most areas of economic freedom in the Heritage survey, and particularly in the area of property rights. India does a little better in property rights but less well elsewhere.