Over the weekend, I pointed out a study conducted by researchers Mark Skidmore from the University of Wisconsin and Hideki Toya from Nagoya City University in Japan on the impact of native wealth to disaster recovery. The study also follows the economic trajectory of nations after natural disasters, finding that national economies in wealthy nations tend to improve after geologic disasters but not after weather-related disasters, which was interesting but not the most applicable lesson. As Reuters reported:
But researchers who have studied similar disasters in rich countries reach a reassuring conclusion: human resilience and resourcefulness, allied to an ability to draw down accumulated wealth, enable economies to rebound quickly from what seem at first to be unbearable inflictions – be it the September 11, 2001, attacks on New York or Friday’s 8.9-magnitude earthquake, the worst in Japan’s history.
As I noted on Saturday, that’s a hopeful assessment for the people of Japan, who have one of the largest accumulations of wealth in the world. It is too soon to know what the parameters of a Japanese recovery will be, since at this point we don’t even have a clear idea of the scope of the destruction, especially with the nuclear crisis still in motion at Fukushima Daiichi. However, the study provides lessons which apply in other ways, which is the subject of my column at The Week today:
Thanks to systems that allow for private management of capital, the application of wealth to disaster works because talent exists to apply it efficiently, and the wealthy nations have political systems that promote accountability. Capitalism rewards those who use capital efficiently and successfully, while other systems reward other behaviors more. That isn’t to say corruption doesn’t occur in wealthy democracies, but it’s hardly as ubiquitous or as entrenched as in countries with less wealth, less accountability, and less freedom. In the past ten years, Americans have learned that lesson the hard way through investments in Iraq and Afghanistan, where fledgling democracies and economic systems based on private property had yet to take root.
Furthermore, as the study also notes, wealthy nations develop secondary political systems to protect their capital investments from disaster, or at least shield it the best they can. In California and in Japan, building codes allowed perhaps hundreds of thousands of people to survive what would have otherwise been a fatal earthquake in years past. Hurricane Katrina’s death toll climbed over 1,800, far below what a similar storm would have killed in a population less prepared for disaster, despite the disarray in New Orleans. The Gulf states routinely survive storms with little or no loss of life thanks to overbuilding that would create humanitarian disasters elsewhere.
We have seen disaster strike around the world with devastating results in Indonesia, Haiti, and for decades in Africa. Earthquakes, famines, floods, and other catastrophes kill hundreds of thousands in these areas, followed by massive application of capital, but it has much less effect than in nations where the systems in place protect capital and reward those who use it most efficiently. That has implications not just for disaster response, but also for aid in general.
After I wrote the column, I anticipated an argument that national wealth comes from the luck of location. America has great national wealth, some say, because we are fortunate enough to have access to the natural resources within the North American continent. However, if that was true, then Russia and China would never have had famines kill tens of millions while under communist rule. Africa is another example of a continent rich in resources yet teeming with poverty and health crises. Zimbabwe in particular is a great example, while neighboring South Africa manages to handle its own affairs and help the rest of the continent.
Should we spend money on aid to relieve unimaginable suffering through systems that mismanage or steal capital, or should we focus our efforts and our wealth (that which is used for foreign aid) on pushing for reforms in private-property rights and open political systems? We used to do so rather unabashedly, but colonial guilt and moral relativism has produced a more “humble” foreign policy from wealthy nations that inevitably will cost lives in large numbers when disaster strikes. If we build nations to value and protect their capital investments and provide rewards for those who produce rather than political cronyship or party membership, we won’t need as many sweeping interventions in the future.
Addendum: I have to share a laugh about the comments on The Week’s site for this column, at least at the time I’m writing this post. There are only two so far. The first:
Japanese stocks have lost billions this week. The Tokyo Stock Exchange is at its lowest since the crisis in 1987. Capitalism waits for government and charity to get the ball rolling, then rushes in to make a buck.
The study utterly refutes this view, but put that aside for the moment. More than five hours later, the second and last comment:
To The Editors / For a second time, I’ve had to decide not to visit this site. I appreciate the way you aggregate varying opinions, but I need more simple facts in my news and less petty controversy. Comment wars inevitably flare up here – just look at my comment above: it’s an argument waiting to start, and I’m not the only one. So many fervent Tea Partiers, calling for the exile of Obama and so forth. I don’t feel anything will get solved here, so I’ve got to go elsewhere. Best of luck to you, though (and congrats on the NYT profile!). John M
Yes, they’re both written by the same person, who warns that having a conservative columnist at The Week will start “comment wars” … and uses himself as an example, as no one else has “fired” a shot in this “war.” Seems to me the commenter solved the problem already.
