Natural Disasters and Economics

Some time back in india(i don't know if it is is still prevalent) certain shack buildings that were housing labourers and other peasents mostly those below the poverty line were destroyed by fire or any other calamity. The obvious response by the government and other agencies would be to compensate those affected families with certain sums of money as relief funds.

It is allegedly believed that those calamities most commonly caused by fire were caused deliberately by the peasents themselves in order to receive the relief funds. Thus thereby
leading to an economic growth in their financial status.

Now if the same could be said of huge disasters either man made or natural disasters like floods and earthquakes Causing destruction of a huger magnitude, then obviously the market goes down and economy falls is'nt it.

NOT NECESSARILY.

In fact the reverse is true to a large extent. In lieu of the recent earthquake that hit japan on Friday the 11th of march 2011, several hundereds of people have suffered fatalities or injuries.
Up to 300 bodies were found in the coastal city of Sendai. Some 3,000 residents living near a nuclear plant in Fukushima prefecture, north of Tokyo, were told to evacuate but the government said no radiation was leaking. It said the evacuation was a precaution after a reactor cooling malfunction.

The quake, the most powerful since Japan started keeping records 140 years ago, sparked at least 80 fires in cities and towns along the coast.

Under such circumstances can an economy rise? if so has it happened before? Yes to both questions.

In fact As the death toll from the earthquake in Japan rises sharply, Mayor Michael Bloomberg has set up a fund to help with the relief efforts. now how does this help the economy?

Consider a different scenario. An earthquake that struck Sichuan Province in May 2008 was equally disastrous and damage was close to apocalyptic levels where mountaintops sheared off into valleys, cities reduced to rubble and dust, cracked dams, collapsed bridges and at least 80,000 dead.

At this juncture i quote what the chinese government has said. A few weeks after the quake a state research center of the chinese government announced a masive rebuilding effort. It is estimated that the billions of dollars that it receives as relief has far outweighed its economic damage caused by the quake. hence they say that there would be a rise of 0.3 % increase in their economy a small but significant growth.

Some analysts argue that due to the destruction of old factories or airports they get rebuilded and upgraded better and productively they contribute more( was'nt it the hiroshima disaster that set about japan's economic development in the first place). as a result they get short term increases out of the result of resources being sent there.

The same can be said of california and alaska as they have also benefitted by natural disasters though not in terms of social welfare but economically they have witnessed it.

Can the same be said for japan now or can the same be said for the tsunami that affected indian states especially the coastal waters of andaman and tamilnadu some time back. did we benefit economically by that?

Such studies have not been conducted by anybody to my knowledge recently. However in the U.S it has.

Let us go back a few 50-60 yrs back where RAND corp (Reasearch and development) had ananlysts who hypothetically calculated an impact of nuclear attack on american soil and how it would affect economy.
Herman kahn a military strategist and systems theorist who was employed at RAND corp wrote in his book "On Thermonuclear war" even if a nuclear attack destroyed all of the country's major metropolitan areas and killed one-third of its population, it would not seem to be a total economic catastrophe and that It may simply set the nation's productive capacity back a decade or two plus destroying many 'luxuries.

In 1969, Douglas Dacy and Howard Kunreuther, two young analysts at the Institute for Defense Analyses, published a book called "The Economics of Natural Disasters," one of the first attempts to quantify the economic impact of catastrophes.

Keeping all this in mind can disaster affected economies rise. Have these kind of studys and measures been implemented in india when the tsunami took its toll i am yet to find answers regarding this. but i am actively researching the topic. because for one thing it is indeed godsend as we know the power of economies from the recent market crash in the U.S. a few years back.

I invite one and all to discuss this side of the story. Also i would like to send my condolences to the affected families in japan caused by the quake and hope their situation gets sorted right
sooner. if any one felt i have hurt their sentiments by what i have expressed in this article i apologise to them.