As we continue to watch the death toll from the South East Asian Tsunami rise, I can’t help but notice the different effects disasters have in third world countries when compared to similar occurrences in the developed world. One year to the day before the tsunami, an earthquake measuring 6.3 on the Richter scale hit Iran. The Red Cross reported 43,000 people were killed. In October 1989 a more powerful quake, measuring 6.9 on the Richter scale hit San Francisco. Only 60 people were killed. A single cyclone in 1991 killed over 130,000 people in Bangladesh, yet the four hurricanes that made landfall in Florida in 2004 resulted in less than 100 deaths. When Mt. Saint Helens erupted in 1980, 57 people were killed. Five years later the Ruiz Volcano in Columbia erupted killing 21,000. Why then do similar disasters cause such greater loss of life in the poorer nations of the world, and more importantly how do we reduce the tremendous number of casualties?
Part of it is obvious: developed countries have more resources to spend on hard sciences, especially hard sciences that have economic value like disaster prediction. Developed countries also have and enforce legal restrictions such as proper land use, surveying, and building codes. The changes made in the wake of Hurricane Andrew are one of the major reasons that newer homes were not destroyed by all the hurricanes in 2004.
So having established an inverse relationship between economic development and loss of life from a natural disaster, the common sense approach to disaster mitigation would be to increase the level of economic development. The question then becomes how best to do this.
In his ground breaking book The Mystery of Capital, Hernando DeSoto tries to discover why capitalism works in the western world, yet fails almost everywhere else. He discovered that the people in the developing world have significant assets. They own their homes, operate small businesses, and have a decent amount of savings in the bank. But their countries lack the framework of Property Law that the developed nations have. Here in the US, I can take a piece of paper that says I own a specific plot of land to a bank and that bank will give me cash. The bank can do this because that piece of paper is signed by my county’s court. Through the diligence of the court and thanks to established laws and precedents, the bank has reduced its risk from loaning me money to the point where I am charged less than eight percent interest. Finally, the bank and I have confidence that no one else has a piece of paper that says they own that same plot of land.
I can then take the money from that loan and use it to start a business that will employ many other people, who will eventually be able to buy their own plots of land. In this one regard it could be said that reasonable government helped make America great.
Contrast this experience with a country like Egypt. To legally acquire and register a plot of land requires dealing with 77 bureaucratic procedures at 31 agencies. In the US it is the buyer, the seller, and the county court. That, in a nutshell, is why DeSoto says Western Countries became the economic powerhouses of the world, while the rest of the world languishes. The developing world needs fair government that establishes an efficient, uniform system of property rights and property rights protection for all its citizens.
Caring individuals across the world should step forward immediately to provide disaster relief. None of these reforms will help the people who die from disease and lack of food and clean water. But as the world transitions from disaster relief to reconstruction aid, we must demand the fundamental political, judicial and economic changes necessary to mitigate this much damage from ever happening again.
