The Disaster Profiteers: How Natural Disasters Make the Rich Richer and the Poor Even Poorer (17 page)

Japan's Tohoku earthquake and tsunami in 2011 has an especially terrible twist because it led to the failure at the Fukushima nuclear power plant. It is impossible for me to erase from memory the video images of the tsunami coming ashore, picking up everything in its path—thousands of cars, entire factory warehouses, buildings on fire in the water like ships burning at sea—and in slow motion relentlessly pushing everything in front farther and farther inland. It seemed like it would never stop, like it would just keep going until it covered all of Japan, penetrating even farther inland than the 2004 Indian Ocean tsunami penetrated anywhere.

Looking at the videos made from helicopters, by people in tall buildings, and even one by someone in a car floating in the water, you could imagine the corpses in the ugly mélange of churning water and shattered buildings. We never saw any bodies in those videos, but you knew they had to be there—16,000 or more of them. The earthquake and tsunami caused 127,000 buildings to collapse totally; another 749,000 were partially damaged.
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And then compounding the awfulness of the tragedy, the Fukushima Daiichi nuclear plant was seriously impacted. Although it shut down automatically, failure to maintain its cooling systems caused large-scale damage to the reactor and fears of air, marine, and soil contamination and of large explosions.

Japan is a manufacturing economy and has been in a stagnation period for around 20 years. There are apparently two issues. One, things look a lot better if you adjust for Japan's unusual demographics: The total population is shrinking, mass immigration is discouraged, and its population pyramid is inverted with few young people and many elderly—the opposite of Haiti, but similar to many developed countries. Second, Japan calculates growth in an extremely conservative way so GDP figures provided by the government understate the true economic growth. If you adjust for both of those factors, the picture turns out to be much rosier.

So what did the earthquake do to the economy? Data from the Japanese Institute for International Studies and Training offer one way to look at the economic impact.
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Using the industrial production index for the Tohoku region and for the country as a whole, the effect of the quake is striking, but so is the recovery.

Nationally, production dropped around 15 percent, but in the Tohoku region, it dropped an extraordinary 35 percent. The drag on the total economy caused by the Tohoku earthquake is strong and clear, but recovery started almost immediately. In fact, within the same year, national production had returned to its prequake level. It
took much longer for the Tohoku region to recover, and you could argue that it has yet to fully do so. But clearly the region is not so very critical to the aggregate economy of Japan.

The earthquake struck in the northern Tohoku region of Japan, well away from the major centers of manufacturing. The reason that it had any effect on the aggregate economy at all is not due to the farmlands and fishing vessels that were destroyed—they play very little part in the Japanese economy as a whole. Rather, the loss of the Fukushima Daiichi nuclear power plant, which provided power to areas well beyond the region in which it is located, affected the economy. Molly Schnell and David Weinstein, both economists at Columbia University at the time, studied the difference in recovery time for the Japanese economy after the Kobe earthquake in 1995 and the Tohoku earthquake.
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The most important difference they found is that there was no loss of power production after Kobe whereas the loss after Tohoku was substantial. The current anxiety about nuclear power generation, though understandable, has led to a transition back to fossil fuels that the authors suggest will have far greater negative health effects than nuclear power, even considering the accident. The effect on greenhouse gas emissions could be substantial too.

In 2013, about 300,000 Japanese people were still living in temporary housing.
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Their repatriation to their home area has been slow and difficult because of the vast extent of damage. Many people need to be relocated to higher ground, and new protective barrier systems must be established. The process promises to be slow and arduous, in contrast to the economic recovery. Social recovery takes much longer. As the aggregate economy has not suffered significantly, the 300,000 displaced people must have provided little productive input to the economy. From the point of view of standard economic indicators, it doesn't matter that those 300,000 people have had their lives turned upside down.

Had the power plant not been affected, there likely would not be much discussion of the Tohoku earthquake beyond geophysical circles. At magnitude 9.0, the quake was much larger than many scientists thought possible on the fault system that ruptured. Few previous earthquakes in the region have been larger than magnitude 7.5. In fact, the Tohoku was almost a “double earthquake,” rupturing first in a westward direction down deep into the Earth and then to the east and toward the ocean floor. That is extremely unusual behavior, and it seems that the reason was fault gouge—the thin layer of material within the fault produced by the grinding up of rocks as the fault moves. The fault surface turns out to be extremely slippery, permitting the fault to slip by a large amount.
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That motion disturbed the ocean floor, pushing the entire water column upward and creating the massive tsunami.

Slipperiness is not known from direct measurement of gouge properties but by the amount of heat released when a fault moves. Although slippery, there is still friction between the fault surfaces, and the motion generates heat, just as when you rub your hands together or use sandpaper vigorously. The amount of heat radiated from a fault when it moves is a very good, though indirect, measure of the fault strength. After the earthquake, a Japanese scientific drill ship, the
Chichyu,
not unlike a commercial oil drilling vessel but set up for scientific research, drilled through the fault that moved in the Tohoku earthquake and set in the region instruments that can measure heat flow. And there wasn't much.

But what do these scientific data mean for the people of Japan? Because all the previous estimates of the likely earthquake magnitude in the region came in around 7.5, the seawalls constructed along the local coast were designed for a tsunami generated from an earthquake of about that size. Like levees and seawalls everywhere, their design height was based on what was imaginable, not the unimaginable. In
fact, by looking back to the year 869 and using geological markers that indicate how far inland a tsunami wave traveled, we can find evidence of a similar earthquake and tsunami.
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The observation period scientists had used to assess the maximum likely earthquake magnitude was long but not long enough to capture this ancient monster. Now we know such large events are possible. To be completely safe, the new seawalls would need to be built much, much higher, and existing walls would need to be made taller. The Japanese people would have to live in the shadow of giant structures stretching for hundreds of miles along the coast.

Will the Japanese government undertake such a project? It doesn't appear so. They will probably build the walls a little higher, maybe a lot higher around nuclear power plants and other critical systems, and keep improving earthquake building codes and construction materials and sponsoring research into earthquake science.

But there is a conundrum at the very center of almost all natural disasters, and the two tsunamis discussed exemplify it well. It's a vicious cycle that goes like this:

1. It's only the very big ones that really matter.
   
2. The big ones happen very infrequently.
   
3. The big ones present the most difficult prediction problems.
   
4. It's relatively easy to protect societies from small- to medium-size events.
   
5. It's extremely difficult to protect against the monsters.
   
6. Return to point 1.
   

And there is another, more important dilemma that compounds and amplifies the first point on the list. The huge numbers of deaths that sometimes accompany the largest of disasters prompt the largest donations of aid from the UN, individuals, and agencies. We saw this
in the response to the Haitian earthquake. But the aid is not needed for the deceased; it is needed for the living. Most often, death tolls are high when countries are poor and are poorly governed, with the weakest institutions and the highest levels of corruption. Some outspoken economists, such as Dambisa Moyo and Bill Easterly, have claimed that these countries should not be provided any aid, even in good times, because it creates a dependency sometimes referred to as the Samaritan's dilemma.
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The rebuilding in Sri Lanka relied heavily on external funding, but the Japanese rebuilding less so. Sri Lanka was in no position economically to take on the huge task. It would be quite wrong to suggest that Sri Lanka should be denied aid for fear of the Samaritan's dilemma. Or for fear that donor funds might be misappropriated. That fear, perhaps quite understandable, exists whenever disasters occur in poor countries and makes all attempts to recover even more difficult. Donors first pledge, then withhold, looking for evidence that money is being spent well.

This sets up a dynamic in which the most well-to-do are certain to be the winners in the race to recover from a disaster regardless of the losses they take in the disaster itself, and the least fortunate are most often the losers.

Chapter 5

Malevolence by Neglect in Myanmar

As in Haiti, there are really just two groups of people in Myanmar. The elite world of the paranoid, xenophobic military junta that rules by cruelty and oppression, along with their political and business cronies who reap the benefits of that rule, makes up one group. Just about everyone else makes up the other group. There are a few people high up in economic status and many more low down and to the bottom, in a poverty trap with no way out. There are plenty of small businesses in Myanmar and Haiti, run by people who make enough to stay just out of the most extreme poverty. In Myanmar, the government provides jobs, especially if you would like to be a soldier, but there is not much of a middle class at all.

The military government in Myanmar is predominantly from one ethnic group, the Buddhist Burmans, who make up 68 percent of the population
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and speak the dominant language. There are believed to be more than 130 other ethnic groups in Myanmar and a similar number of languages or dialects.
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Many of these smaller groups, especially the Shan (less than 10 percent),
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have been engaged in ongoing armed conflicts or insurgencies against the government ever
since the military gained power in 1962 after a chaotic period of weak postcolonial governance, only 14 years after the country gained independence from Britain.

Myanmar's history is one of repeated battles for power: both internally—between different ethnic groups and others who would periodically hold power over the country, then be overthrown—and externally—notably the British during their colonial period and the Japanese during World War II.
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The generals who took power in 1962 have compared themselves to warrior kings and liberators of the past and erected statues depicting themselves in just that way. Overthrow of the government by force is the norm in Myanmar. When they took power, the generals saw themselves as following an established historic tradition of violently contested leadership.

Myanmar's history in the mid-twentieth century followed the path of so many other postcolonial countries, but with its own unique meanders: from independence to initial optimism for self-governed prosperity, to troubled corrupt governance, to ethnic conflict, to violent overthrow and dictatorship. In the last case, dictatorship by a military junta.

As in Haiti, it is very difficult to know the state of economic and social welfare in Myanmar. It is, for example, one of a handful of countries that the World Bank typically doesn't include in listings of wealth measured in gross domestic product (GDP). Figures are available in the CIA's
World Fact Book,
but many of them are acknowledged to be rough estimates.
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It is virtually impossible to get the information needed to accurately calculate GDP or any other indicator, like the Human Development Index. No figures provided by the government are believable. Even total population size is not known accurately. Had it attempted a census, the junta would never have included the Rohingya or other Muslims who have experienced a long history of persecution.

Myanmar (then called Burma) had one of East Asia's strongest economies during the colonial period and was the largest producer/exporter of rice, cultivated mainly in the Irrawaddy Delta. Well before 2008's Cyclone Nargis devastated the rice-producing areas of the delta, home to a mixture of the Burman majority and the Karen minority, rice production had dropped to the very lowest in the region. Almost nothing was being exported.

Although the Karen people are just one of the ethnic minority groups that have been in conflict with the central military government, they are perhaps the most persistent and dedicated to ethnic independence. They have sought a Karen state through armed conflict since 1949. In fact, Myanmar holds the dubious distinction of being host to the world's longest-running civil war. The Karen people sided with the British in World War II in hope of obtaining an independent state, while the Burmese government originally collaborated with the Japanese in hope of gaining independence from Britain. Both groups saw the war as an opportunity to move their cause for independence forward, and both lost. The history of internal and external conflicts in Myanmar is decades old. The southwest region of the Irrawaddy Delta is today and has long been a region where Karen insurgents operate and foment resistance to the government.

In 2008, the military government in Myanmar was by no means an exact mirror of the government of Haiti. It was more like Haiti under the Duvaliers, who were strong, dictatorial leaders who repressed all opposition with cruelty and violence. “Papa Doc” Duvalier was originally elected to the presidency, unlike the junta in Myanmar, which seized power by force. Papa Doc then progressively centered power around himself; jailed, murdered, or exiled all opponents; faked elections (including one in which he claimed to have received 100 percent of the vote); and eventually declared himself president for life, which, he supposedly believed, was the people's
will. All power was centralized around Papa Doc and Port-au-Prince, the capital city.

The junta in Myanmar was almost as intent on centralizing power and suppressing dissent. Power was not as physically centralized in Myanmar until the capital was moved from Yangon to Naypyidaw in the center of the country in 2005. The generals did allow one election in May 1990, and it was not faked. The National League for Democracy clearly won, and Aung San Suu Kyi should have taken power as president. Although the generals initially said they would honor the election results, they changed their minds, nullified the election, and then ruled by decree, much like Papa Doc Duvalier in Haiti. Apparently they were so isolated from and indifferent to the mood of average citizens that they were actually surprised not to have won the election. Papa Doc may also have believed he was genuinely popular. It is astonishing to think that the generals may have thought themselves genuinely popular, given the way they had viciously put down popular protest by students and monks in 1988.
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The government in Myanmar is also known for its bizarre and incomprehensible actions as well as its brutality. A prime example was the move of the capital from Yangon in the south to Naypyidaw, a wholly new, vast city built specifically to be the capital in the central region of the country, about halfway between Yangon and Mandalay. It is a city of opulent buildings and astonishingly wide boulevards, twice the width of the Champs-Élysées. The official reason for the move was that Yangon had become too congested, but many have speculated that it was fear of an amphibious invasion by Western powers, a repeat of British tactics in the Anglo-Burmese wars. Others believe the new location may be strategically better for dealing with the many insurgent groups trying to overpower the government, some of which occupy territory well to the north.

When I first heard of the move of the Myanmar capital, I couldn't help but recall that the capital of Australia, Canberra, where I worked for five years as a government geophysicist, was also a wholly constructed government capital (in its own territory, like Washington, DC, and called the Australian Capital Territory, or ACT). Canberra was located well inland and partway between Australia's two major cities, Sydney and Melbourne, strategically placed in a high mountain valley so that it could be more easily defended than the former capital, Melbourne, located on the southern coast. The capital of Brazil was moved inland from São Paulo to Brazília for much the same reasons.

Both the Haitian government and the generals in Myanmar led their countries to economic ruin. Haiti and Myanmar both lie within the world's economic deserts. Perhaps it is more correct to say that both countries' leaders led average citizens of their countries into economic ruin while concentrating wealth and power to themselves.

In Myanmar, the defining philosophy was known as the Burmese Way to Socialism,
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a peculiar mix of isolationism, socialism, Buddhism, and superstitions, especially about numbers. The Burmese Way actually was little more than a collection of Marxist-like slogans mixed with nationalistic ideology that doomed the country to economic failure. But there
is
money in Myanmar, and, unlike Haiti, there is very strong centralized control over that money.

When I visited Myanmar in March 2012, I stayed at a delightful small hotel called the Alamarda Inn on Golden Valley Road, a sometimes roughly paved, winding road north of the main part of
Yangon; a very pleasant and leafy place. From the inn and walking around the area I could see, behind high walls and steel gates, quite large homes with sophisticated architecture and luxurious appointments.
Someone
in Myanmar has money. New high-end cars sat in the driveways.
There were advertisements for luxury cars and swimming pools in the center of Yangon. I couldn't help but think of the area's similarity to Pétionville in Haiti. And just think of the cost of the new capital at Naypyidaw, which was built entirely with government money.

Myanmar's wealth comes from abundant natural resources: oil and gas, teak, gems (rubies mainly), and minerals. Agricultural products are no longer a significant source of export revenues. Gas exports are the main source of foreign revenue, not rice and timber, as in colonial times. Most of the resources are extracted in the ethnic states—Kachin, Shan, Kayah, Karen, and Mon—but very little benefit accrues to those states themselves. The nongovernmental organization (NGO) Arakan Oil Watch published a report on Myanmar's extractive industries under the title “Burma's Resource Curse: The Case for Revenue Transparency in the Oil and Gas Sector.”
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The second section of the report is titled “Burma's Black Hole, Where Did the Gas Money Go?” Since gas is sold on international markets, it is possible to make rough estimates of how much wealth is derived from gas. But by manipulating the exchange rate—effectively by claiming a very low official government exchange rate more than a hundred times less than the market rate—the government can hide billions in revenue.

Myanmar is a classic rentier state and suffers the resource curse—the “paradoxical situation in which countries with an abundance of nonrenewable resources experience stagnant growth or even economic contraction.”
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In many ways it is similar to Nigeria, which is the poster-state for the curse. Grievances with the government are many, but one of the most prominent grievances mirrors that of Nigerians in the oil-producing Niger Delta: the people see vast revenues generated locally, but with little to no return to their region.

That government of Myanmar has made utterly bizarre and catastrophic currency blunders. One morning in 1987, government
radio informed the citizens of Myanmar that as of that moment, all bank notes denominated in 25, 35, and 75 kyats would cease to have any value. They instantly became nothing more than pieces of paper with numbers and images of generals printed on them. New 45- and 90-kyat notes were issued, but people could not exchange old notes for them. The new notes had the very important attribute that their value was divisible by 9, which the ruling general at the time, General Ne Win, considered lucky. Only members of the elite who were close to the junta were prenotified of the change. They cashed in their old money for gold and jewels and were thereby protected. Everyone else took a hair-raising plunge deep into poverty.

The generals running the government earn their revenues from foreign sales, so the currency change meant almost nothing to them. While superstitious, they are not reckless, unless it comes to the lives of ordinary people. The riots that followed soon after the currency catastrophe, led by students and joined by monks, protested the junta's oppressive regime. The students' grievances were deeply rooted in the currency fiasco, which made it impossible for them to pay school fees.

Cyclone Nargis battered the people of southern Myanmar in May 2008 with winds and water, but the entire country was already badly battered by corrupt, xenophobic, and fanatically irrational leaders.

Cyclone Nargis came ashore in Myanmar's Irrawaddy Delta almost exactly where the British first established a trading post in the early 1800s. The path of the cyclone was most unusual. Even a day or so before landfall, forecasters were predicting the storm would cross the coast much farther north, as most have before. Four days earlier, the Japanese Typhoon Warning Center was expecting landfall almost 100 miles to the north and described it as an intense storm, not a cyclone. Had the storm followed its predicted path, the outcome would have been far less devastating.

No known storm had plowed a similar track across the Bay of Bengal since the British began their conquest in 1842. The cyclone's unusual track meant that people of the delta were as unaware of the risks they faced as the people of Port-au-Prince would be in 2010 or the people on the coast of Sri Lanka had been in 2008. These events are genuinely rare for those locations. No living person would have had any memory of such a storm in the Irrawaddy Delta. Local legends didn't speak of them. The surprise factor accounted for a significant part of the high death toll.

Cyclone Nargis was probably more deadly than the three Anglo-Burmese wars summed together. The cape region, where Nargis made landfall, is extremely low-lying—typical of most major river deltas—and is one of the lowest-lying areas of the country. The inevitable storm surge that accompanies almost every cyclone is driven ahead of the storm by high winds and (to a much lesser extent) by low atmospheric pressures, and it can travel very far inland if it comes ashore in a delta region. Deltas, in fact, are one of the worst places a cyclone can make landfall. Nargis's storm surge reached as far as 30 miles inland into the Irrawaddy Delta, which contributed significantly to the very high death toll.

Often cyclone storm surges do more damage and take more lives than cyclone winds. Coastal relief and seafloor topography govern the inland penetration of storm surges, just as they do with tsunami waves. After making landfall, Cyclone Nargis acted as if it intended to follow the most destructive path possible, running along the length of the delta about ten miles inland from the coast. In following this track, it also traveled across one of the most densely populated regions of Myanmar. Most cyclones significantly lose strength when they cross onto land, where they are deprived of the warm ocean water that provides their energy. But because deltas are swampy—containing more water than dry land in many places—Nargis
sustained more strength than usual. By the time it had moved almost directly over Yangon, it was still a category 1 cyclone.