CB_2018-02-08

Thursday, February 8, 2018 17
GLOBAL
Extreme climate events such as hurricane
Maria have drawn global attention
Study:
Cyclones
Unleash
Long-Term
Economic
Stagnation
World Economic Forum
in Davos, Switzerland
Rejects notion
that natural
disasters
stimulate
economic growth
BY AGUSTÍN CRIOLLO OQUERO
a.criollo@cb.pr
While many sectors
in the United States
still deny the reality
of climate change
further hastened by the human footprint
on the planet, the truth is that
there are some groups, economists
from around the world, for example,
already pondering the economic implications,
in the long run, relative
to the effects of such atmospheric
phenomena as Puerto Rico’s recent
punch from Hurricane Maria.
According to the study, “The Causal
Effect of Environmental Catastrophe
on Long-Run Economic Growth,” by
economists Solomon M. Hsiang, professor
at the School of Public Policy
at University of California at Berkley,
and Amir S. Jina, professor at the
School of Public Policy at Chicago
University, who reviewed evidence
from 6,700 cyclones that occurred
over a period of six decades, and
their effect on different economies. A
catastrophe, such as the one Puerto
Rico experienced, has permanent effects
on any country.
Likewise, the information gleaned
from the study categorically rejects
the hypothesis that natural disasters
stimulate economic growth or
that in the short term, losses disappear
following emigration and
wealth transfers.
In an article published by the
New York Times (NYT), just nine
days after the hurricane, and titled
“Don’t Let Puerto Rico Fall Into an
Economic Abyss,” Hsiang argues
that unfortunately the greater cost
of the disaster is yet to be seen because
the study unequivocally reveals
that hurricanes have a strong
impact on the economic growth of
a country, even decades after the
event.
According to Hsiang, historically,
one out of 10 cyclone events slows
the per capita income of the affected
country until it is some 7% poorer
than two decades before the storm.
This, he states, equals the losses due
to an average financial or banking
crisis, and he expressed the impact
from Hurricane Maria could be
worse than has been estimated.
“To determine how much it worsens,
we used an econometric model
of the costs of cyclones in the past
60 years and applied it to the characteristics
of Hurricane Maria and
the economic conditions prior to the
storm in Puerto Rico. We calculated
that Maria could reduce incomes
in Puerto Rico by 21% during the
next 15 years, totaling $180 billion in
losses in economic production,” said
Hsiang in the NYT article.
“Supposing that Puerto Rico would
have been on its way to maintain its
per capita annual growth of 0.8%
between 2009 and 2015, then we
would expect Maria to undo all
those gains and more. Now, it could
take 26 years for the next generation
to return to where we are today,
assuming the per capita growth rate
would have continued [as it had],”
he added.
According to the study by Hsiang
and his colleague Jina, the goods of
the United States are much more
given to being destroyed by a cyclone
of such magnitude, than the goods of
other countries or jurisdictions that
are well-off, such as Japan, Hong
Kong and Australia. This is due in
part to the fragility of the infrastructure,
which more closely resembles
We calculated
that Maria could
reduce incomes in
Puerto Rico by 21%
during the next
15 years, totaling
$180 billion in
losses in economic
production.
— Solomon M. Hsiang, professor
at the School of Public Policy at
University of California at Berkley
that of a less prosperous country.
“That definitely was the case with
the electricity system in Puerto
Rico, administered by a public corporation
that filed for bankruptcy
last summer. The island’s entire
electrical infrastructure was destroyed
by the storm. We are not
ready and that will cost us a high
price,” the economist predicted.
Hsiang’s ominous prediction becomes
more visible after the World
Economic Forum (WEF), held in Davos,
Switzerland, at the beginning of
the year, and that had as a title “Creating
a Shared Future in a Fractured
World,” listed extreme climate events
as one of the latent global risks, along
with arms of massive destruction, according
to the community of experts
associated with WEF.
The opinion of these experts was
collected through an internal survey
among business specialists, government
representatives, nonprofit organizations
and other international
institutions. The questionnaire asked
the respondents to list, from one
to five, the bigger risks they visualized
could build the biggest impact.
However, although every region of
the planet had representation in the
questionnaire, 65% of those surveyed
came from countries in Europe and
North America.