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Disaster risk: Conditions, trends and impacts179ImpactHazard typeFlood Wind Wave/tsunami Earthquake Volcano Fire Drought HumanmadeDirect: loss of housing ✗ ✗ ✗ ✗ ✗ ✗Direct: damage to infrastructure ✗ ✗ ✗ ✗ ✗ ✗Systemic: short-term migration ✗ ✗ ✗Systemic: loss of business production ✗ ✗ ✗ ✗ ✗ ✗ ✗Systemic: loss of industrial production ✗ ✗ ✗ ✗ ✗ ✗ ✗Systemic: disruption of transport ✗ ✗ ✗ ✗Systemic: disruption of communication ✗ ✗ ✗ ✗ ✗Table 7.7Economic impacts ofdisasters by hazardtypeSource: adapted fromUNDRCO, 1991losses worth US$5 billion. 30 Economic losses are regionallydifferentiated, with the Americas and Asia incurring highestlosses from natural disasters 31 and Europe experiencinggreatest loss from human-made disasters.Various hazards have differentiated effects on urbaneconomic systems (see Table 7.7). The scale of economicimpact varies according to the spread, intensity and form ofthe energy released by each hazard type. For example,natural disasters that tend to produce spatially concentratedimpacts, such as flows of hot ash and rock fragments fromvolcanoes, will not usually overwhelm urban transportsystems, compared to the more widespread impacts of earthquakes,hurricanes or catastrophic flooding. Drought is morelikely to undermine economic activity indirectly rather thanlead to property damage and therefore may cause a loss ofindustrial productivity, but with little impact on productiveinfrastructure. Human-made disasters tend to have systemicimpacts on cities through damage to, or isolation of, criticalinfrastructure such as transport and communicationsystems, but are less destructive of housing.Powerful players can move indirect economic lossesaround the urban economy. This was the case in Kobe(Japan) following the 1995 earthquake. Here, majorproducers, such as Toyota Motor Corporation and KawasakiHeavy Industries Ltd, used a ‘just-in-time’ stocking approach.Following the earthquake, damage to subcontractors threatenedto hold back production. The major producers wereable to protect themselves by shifting to new subcontractorswithin a few days. This strategy passed risk on from themajor producers to the subcontractors who had to cope witha double burden of disaster impacts and lost contracts. Manyfaced bankruptcy as a result. 32Larger developed urban/national economies withsizeable foreign currency reserves, high proportions ofinsured assets, comprehensive social services and diversifiedproduction are more likely to absorb and spread theeconomic burden of disaster impacts. An example of largeeconomic losses in an urban region that were containedcomes from the 1999 Marmara earthquake in Turkey. Directlosses were estimated at US$2 billion for industrial facilities,US$5 billion for buildings and US$1.4 billion for infrastructure,including a similar figure for losses generated throughlost production during the many months required for factoriesand industrial facilities to return to their pre-disasterproduction levels. 33 However, only seven months after thedisaster, a downturn in the rate of inflation and declininginterest rates for government borrowing indicated that theTurkish economy had made a fast recovery. 34There is also growing potential for cities connected toregional or global financial systems (e.g. Mexico City, Rio deJaneiro, Johannesburg, Bangkok, Manila, Seoul andSingapore) to spread the negative consequences of disasteracross the global economy, with huge systemic loss effects.Evidence for what has become known as the ‘contagioneffect’ can be seen from the losses incurred following theKobe earthquake in 1995. While world stock markets wereunaffected, the Japanese stock market lost over 10 per centof its value in the medium term. The duration of negativeeffects on stock markets depends upon wider consumerconfidence. Munich Re considers human-made disasters tobe worse than natural disasters for the international market.More catastrophic might be a disaster (or series of disasters)that damages the global trading infrastructure. It is for thisreason that financial institutions and businesses investheavily in back-up systems. 35For urban residents, systemic economic effects maynot be felt for some time as businesses restructure, althoughin the short term, unemployment or livelihood disruption isto be expected and may be prolonged. Shelter and labourpower are the two most important assets for low-incomeurban households. When either is damaged or destroyed indisaster, households are forced to expend savings or borrowto survive and re-establish livelihoods. Relief aid itself candistort local livelihoods and markets as goods and servicesthat can be provided locally are undercut and replaced byexternally sourced aid. The result is that local livelihoods andthe local economy can be eroded. For households withstrong familial or social ties, access to remittances or borrowingmoney without interest payments is a possibility.Increasingly, access to remittances from overseas is a keyindicator of resilience to economic shocks caused by naturaland human-made disasters in urban Latin America.■ Urban land marketsDisaster impacts, risk of disaster impacts and actions takento protect areas from disaster risk all have an impact onurban land values. As in any urban regeneration or upgradingscheme, urban planning and engineering projects aiming tomitigate disaster exposure can lead to changes in the socialgeography of communities or city regions.Investing in mitigation to protect those at risk canresult in increases in the value of land and housing, which, inturn, can lead to lower-income households selling to higherincomehouseholds. This cycle is a major challenge to thepoverty reduction potential of investments in structuralmitigation. Informal, illegal and formal/legal land andLarger developedurban/nationaleconomies … aremore likely toabsorb and spreadthe economicburden of disasterimpactsDisaster impacts,risk of disasterimpacts and actionstaken to protectareas from disasterrisk … have animpact on urbanland values