Facing the storm after the storm in Vanuatu

by Solomon Hsiang and Amir Jina
Thursday, 19 March 2015 15:48 GMT

Workers repair the roof of a holiday resort days after Cyclone Pam in Port Vila, capital city of the Pacific island nation of Vanuatu March 19, 2015. REUTERS/Edgar Su

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Long after disaster relief ends, the economic devastation of cyclones lingers, sometimes for decades

With the devastation caused by Tropical Cyclone Pam, progress in developing the small island state of Vanuatu has been wiped out. Focus is now rightly being placed on getting immediate relief to people suffering, and on rebuilding. But once the headlines disappear and the aid workers board their last plane home, then what?

Our research shows that tropical cyclones, like the one that hit Vanuatu, change the way investments are made, slow development, and leave an imprint on the economy for decades.

That means that while the progress made by negotiators at this week’s U.N. disaster risk reduction conference in Sendai which aims to reduce immediate risks and impacts of disasters is crucial and necessary, policies should also focus on long-term development. Otherwise, children born today could still be paying the cost 20 years from now.

Economists have long believed that disasters boost an economy because of the influx in investments. Our research shows the opposite: a country’s income declines after a cyclone strikes and does not recover even after two decades.

This may be because funds are used for humanitarian aid and rebuilding, whereas those funds could have been used for new infrastructure, public services, or other productive investments. Even inflows of humanitarian aid from other countries do not appear to fully compensate for these deferred investments.

Such countries continue to grow, but are knocked onto a different, slightly lower growth track – sometimes hiding the losses in plain sight.

To get these results, we looked at 60 years of cyclone and economic data – a total of 6,700 cyclone cases. That data revealed that disasters appear to permanently alter the long-run growth of an economy, effectively sending the economy backwards in time. 

So the type of cyclone that comes along every 10 years reduces a person’s income two decades later by 7.4 percent. Or, to put it another way, this is the same as rewinding an economy by 3.7 years. Furthermore, we only hear about the most dramatic storms, but there are around 100 cyclones each year, many of which go unreported, but all of which have economic impacts.

Countries that get hit over and over again, like the small island states in the Vanuatu region, have to grow their economies fast just to stay in place. For these countries, growing an economy is like building a sandcastle at the beach. You add to it bit by bit, but if your castle is hit by a wave, you can lose a lot in a flash. You keep building, but each wave sets you back.

Unfortunately, climate change only worsens this situation. Looking at projected changes to storm intensity until the end of the century, the additional cost of cyclones to future generations could total $9.7 trillion. That amount will only grow with projected sea level rise. And countries in the northwest Pacific basin stand to lose the most, with 8 of the 10 biggest losers in that region.

As leaders prepare to craft a climate deal in Paris in December, they should keep long-term growth challenges in mind when writing climate change adaptation and disaster risk reduction measures. Governments could also invest more in adaptive, protective technologies to minimise economic and other disruptions caused by cyclones. Successfully accounting for these long-term impacts would allow countries to avoid extra development spending in 10 or 20 years’ time.

Providing immediate relief to the people of Vanuatu is critical. But the devastation there serves as yet another reminder that our disaster response policies are stuck in the past. If leaders don’t start including long-term impacts in the planning that’s happening today, vulnerable developing countries will also be stuck in the past for decades to come.

Solomon Hsiang is an assistant professor of public policy at the University of California, Berkeley. Amir Jina is a postdoctoral scholar at the Energy Policy Institute at the University of Chicago.