Global Report on Human Settlements 2007 - PoA-ISS

Vulnerability, risk and resilience: Towards a conceptual framework
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ity and energy prices) without daily attention to global
markets and the behaviours of major players such as China,
the European Union (EU), the Organization of the Petroleum
Exporting Countries (OPEC), Japan and the US. The importance
of decisions in distant locations is reflected in the
24-hour operations of global and national institutions and
their increased surveillance of the behaviour of overseas
markets. No longer are these developments monitored only
by ministries of finance, central banks and major financial
institutions on Wall Street, the City in London or the stock
market in Tokyo, but they are actively included in national
and local public and private economic decisions on a daily
basis.
<strong>Global</strong> information flows do not necessarily bring
increased stability. <strong>Global</strong> markets have carefully followed
developments in individual national economies and
produced significant shared reactions, such as capital flight,
or alternatively, in-pouring of funds in search of quick
profits following the Asian financial crisis of 1997 and later
in Brazil, Russia and Argentina. These effects are considerable
and are reflected in dramatic changes in country risk
ratings. Finance ministers may seek to protect their
economies from such processes; but this ability to manage
risks and uncertainty is limited in an increasingly interdependent
world.
An important aspect of this contagion is increased
volatility. There is now a clear recognition that the volatility
of the global economy creates additional uncertainties and
insecurities for national and local economic actors. 12 This
volatility does not just have impacts on financial markets, but
can also have specific impacts on, for example, whether
private water companies will invest in extending water
supply services to underserved neighbourhoods on the
peripheries of cities. 13 Increases of 0.25 per cent in world
interest rates can upset investment plans at the city level.
This fact becomes particularly salient when considered in
light of the additional 2 billion expected urban residents by
2030.
If national and local shortages of finance for urban
shelter and infrastructure were serious problems before the
globalization of financial markets, 14 these shortages will be
increasingly exacerbated by the interdependence and volatility
of these markets. There is great sensitivity of urban
investment decisions to changes in interest rates. When a
decision to invest in housing or shelter in Guadalajara or
Istanbul is connected to whether interest rates increase as a
result of decisions by Chinese monetary authorities to
reduce inflation in China, new degrees of uncertainty have
begun to affect local markets and the quality of urban shelter
and infrastructure.
<strong>Global</strong> finance is already affecting the cost and availability
of capital for investment and job creation in urban
areas. These pressures have direct impacts on many aspects
of the national and urban economy. For example, changes in
the cost of capital can affect public investment programmes
from urban infrastructure to crime prevention, in both cases
affecting the safety and security of urban residents, as well
as prospects for employment and incomes, particularly for
the poor whose incomes are closely tied to the demand for
unskilled labour. Changes in interest rates also directly
provoke changes in the prices of housing and land, and thus
affect the circumstances of security of tenure for the poor.
Positive and negative changes in urban inequality and
economic opportunity, in turn, provoke new forms of crime
and violence. A study of macro-economic changes and urban
poverty in Latin America in the late 1990s showed that while
the incomes of middle- and upper-income groups are sensitive
to upturns in macro-economic performance, those of
the urban poor drop disproportionately lower in times of
recession and improve at a much slower rate than do those
of middle- and upper-income groups. 15
A study on these patterns at the national level in the
US in 1999 showed how cumulative causation operates
through marginal changes in interest rates, translated into
housing prices and rent levels, local finance, school expenditures
and the social conditions of neighbourhoods. 16 When
global forces are added to the mix, they will be increasingly
present at local levels. 17
■ The global environment
Another global force that directly affects local safety and
security is the global environment. Scientific evidence of
global warming and climate change is helping to explain the
increased frequency of extreme weather events and changes
in the normal patterns of regional and national weather (see
Figure 2.1). These events, such as hurricanes, violent
storms, increased rainfall in some locations and decreased
rainfall in others, all serve to upset historical patterns of
cultivation and economic activity, as well as place new physical
strains on infrastructure. These have been well
illustrated by the effects of El Niño in Latin America, which
has brought drought in some areas and intensive rainfall in
others. In both cases, agricultural output has been damaged
in Argentina and the Andean countries. The distinctions
between so-called category 3 and 4 hurricanes in the Gulf of
Mexico that were previously largely meteorological notions
with technical implications for engineering standards for
levees have now become household words as the public
learns more about what happened in New Orleans and what
will happen with subsequent hurricane seasons.
Scientific and public debate on climate change has
intensified during the last several years as scientific evidence
of climate change has been confirmed in many forms, as a
recent observation states:
Multiple lines of evidence indicate that the
Earth’s climate is nearing, but has not passed a
tipping point, beyond which it will be impossible
to avoid climate change with far-ranging
undesirable consequences. 18
The increased frequency of severe weather events, however,
is only part of the global environment threat to safety and
urban security. <strong>Global</strong> warming contributes to the melting of
ice caps and glaciers and results in rising sea levels. These
phenomena have recently been described in the following
terms:
The volatility of the
global economy
creates additional
uncertainties and
insecurities for
national and local
economic actors
Scientific evidence
of global warming
and climate change
is helping to explain
the increased
frequency of
extreme weather
events and changes