Media Briefings

Counting The Cost Of The Haitian Earthquake – And Its Implications For Reconstruction

  • Published Date: August 2010

No natural disaster in recent world history has claimed the lives of so large a share of a single country’s population as the earthquake in Haiti earlier this year. And according to research published in the August 2010 Economic Journal, for a death toll of 250,000, Haiti’s economic damage to fixed assets, extractable natural resources and raw materials is in the order of $8.1 billion – more than $1 billion greater than Haiti’s annual GDP.

The study – by economists Eduardo Cavallo, Andrew Powell and Oscar Becerra – concludes that in these circumstances, rebuilding Haiti will require resources far beyond what can reasonably be expected from any one country or international agency. They call for a single international agency created for the undertaking, transparent in its operations and accountable to the Haitian government and people.

Months after Haiti’s catastrophic earthquake, the scale of that country’s loss is still being debated. The heart-rending images – grim as they have been – fail to convey the extent of death and destruction.

One thing is already clear, however: the cost of rebuilding will exceed what any one agency or country can reasonably contribute – least of all Haiti itself, which before the tragedy was already the poorest country in the western hemisphere.

Begin with the loss to human life: the latest estimates indicate that the earthquake and its aftermath killed between 200,000 and 250,000 people, and perhaps more. If the latter figure is correct, it exceeds the human toll of any other natural disaster worldwide in recent decades, including the Indian Ocean tsunami of 2004.

But Haiti is a small country, with fewer than 10 million inhabitants. The quake thus wiped out between 2 and 3% of the entire population – a staggering blow to any nation. Indeed, no natural disaster in recent world history has claimed the lives of so large a share of a single country’s population (see Table 1).

What of the damage to property – to homes, to public buildings and infrastructure, to the business capital from which Haitians drew their livelihood? This is much harder to measure.

Because the quake struck so close to the capital, the buildings housing many of the nation’s key institutions, from the presidential palace down, were destroyed or rendered unusable. Much of the country’s productive infrastructure was also located in Port-au-Prince and is assumed to be in similar condition. Another 10% of the population – a million souls – remains homeless.

The Economic Journal study presents a first approximation of Haiti’s economic losses based on the statistical relationship between the human loss from a natural disaster and the economic loss. Using data from a large sample of natural disasters since 1970, and controlling statistically for other factors that affect a country’s vulnerability to such disasters (such as GDP per capita), the researchers estimate the economic damage at $8.1 billion.

They conclude:

‘Rebuilding Haiti will require resources far beyond what can reasonably be expected from any one country or international agency.

‘And if, as some have proposed, the effort should go beyond reconstruction and instead turn the disaster into an opportunity to remake Haiti’s economic and social structure from the ground up, the sums required will be even greater.

‘In either case, the risk of there being too many helping hands is slim.’

All of this assistance will require effective coordination, both of the reconstruction itself and of its funding.  Work could be apportioned along thematic lines, with one donor focused on rebuilding homes, another on public infrastructure, another on social needs, and so on. But these efforts, too, will have to be coordinated.

The researchers say:

‘A single international agency created for the undertaking, transparent in its operations and accountable to the Haitian government and people, may be the best solution.

‘In all likelihood, donors will have to relinquish the control and conditionality they typically demand of their projects.’

And what about the longer term? Even if aid flows to Haiti are generous and used optimally, they can present problems: inevitable bottlenecks in the supply of donated goods can raise local prices, and the appreciation of the local currency caused by the huge injection of purchasing power could price Haiti’s exports out of their markets.

Of course, the researchers point out, these are not arguments against aid:

‘Without aid, Haiti’s prospects are unfathomable given the magnitude of its losses. Instead, the argument should be for more and better aid with a far more distant horizon than donors are accustomed to.’

ENDS

Notes for editors: ‘Estimating the Direct Economic Damages of the Earthquake in Haiti’ by Eduardo Cavallo, Andrew Powell and Oscar Becerra is published in the August 2010 issue of the Economic Journal.

The authors are at the Inter-American Development Bank.

For further information: contact Eduardo Cavallo via email: CAVALLOE@iadb.org; or Romesh Vaitilingam on +44-7768-661095 (email: romesh@vaitilingam.com).