Globalized economic development

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Globalized economic development has resulted in increased polarization between the rich and poor on a global scale. This has increased vulnerability to natural disasters in some cases, whilst increasing exposure to hazards in others as more (and often more valuable) assets are developed in hazard-prone areas.

Despite currently increasing the exposure of assets in hazard prone areas, globalized economic development provides an opportunity to build resilience if properly managed. By participating in risk-sensitive development strategies such as investing in protective infrastructure, environmental management, and upgrading informal settlements, risk can be reduced.

As the new global economy facilitated the dominance of certain regions, cities, and groups in the world economy, it also fostered the marginalization of others (Gencer, 2013). The poverty and inequality created by this polarized new world order and economy is expected to have changed or increased vulnerability from natural disasters (Gencer, 2013). At the same time, dominance and increase of wealth in certain regions and cities are expected to have increased hazard exposure (Gencer, 2013). More assets and more expensive assets may be built in hazard prone areas. As competition increases, large flows of investment may continue to stream into hazard-exposed areas, leading to further increases in intensive risk (UNISDR, 2015a).


Low-income households forced to settle in high risk areas: Brazil

Rocinha, Rio de Janeiro, one of the largest favelas in Brazil. © Igor Fernando CC BY-NC 2.0


Low-income households in Brazil are often forced to settle in areas with limited basic infrastructure and services due to prime urban land held by landowners for future profit.


The Hyogo Framework for Action (HFA) has generally been implemented from the perspective that disasters are external and unforeseen shocks acting on a normally functioning system (UNISDR, 2015a). The approach has therefore been to try to manage disasters by building resilience to these exogenous disasters . However, the losses and impacts that characterize disasters usually have as much to do with the exposure and vulnerability of capital stock or endogenous risk as with the severity of the hazard event (UNISDR, 2013). Many national risk-financing strategies still reflect a vision of disasters as exogenous shocks rather than of risk as an endogenous characteristic of investment flows (UNISDR, 2013).

Although the momentum in selected countries to change to addressing risk as an endogenous phenomenon is encouraging, the global debate still reflects a vision of disasters as exogenous shocks (G20/OECD, 2012).

Disasters are not the outcome of a natural hazard event occurring. They are caused by an amalgamation of the natural hazard event, combined with highly vulnerable assets exposed to the hazard. Disasters are therefore manifestations of unresolved development problems, rather than external, unforeseen events acting on a society. In order to reduce the impact of these potential disasters, strategies need to be aimed at building resilience in development, addressing the underlying risk factors.

In the private sector, risk considerations are often limited to financial risk and internal rates of return on investment. In the best of cases disaster risk is considered an externality rather than reflecting complex relationships between development and society (Lavell et al, 2013). Development gains are privatized and disaster losses socialised or usually subsidized by the public sector or treasury as residual risk (Lavell et al, 2013).

There is evidence of rising economic loss risk from business investments in hazard-exposed regions (UNISDR, 2013).

Land use zoning, building codes and environmental regulations are all regularly distorted by implicit and explicit corruption as the implacable logic of privatizing short-term gains and socializing the resultant risks to other sectors through space and time takes precedence over considerations of sustainability (Lavell et al, 2013).


Economic development and poor regulation: increased disaster risk in Dhaka

Khaleda Begum, survivor of the Rana Plaza building collapse in Dhaka. © ILO/Muntasir Mamun CC BY NC-ND 2.0


Dhaka's industry and service sectors have grown, leading to a boom in real estate. However, regulation is limited and has increased the disaster risks.


Risks are produced though large numbers of individual public and private investment decisions (including the decision not to act) taken over long periods - making it difficult to attribute responsibility, ownership or liability (UNISDR, 2013). While real estate development and infrastructure projects may generate new disaster risks, these are then transferred from developers to the ultimate users of urban development, reducing accountability (UNISDR, 2013).

The cost of risk financing is likely to grow except in countries that are making major investments in risk reduction (UNISDR, 2013).

Opportunities for resilience

Economic growth is an opportunity for building resilience, but current patterns of economic development are driving the exposure of assets in hazard prone areas (UNISDR, 2015a).

Globalized economic development provides an opportunity to build resilience, despite currently increasing the exposure of assets in hazard prone areas (UNISDR, 2015a). Investing in risk reduction measures to protect a floodplain against a 1-in-20 year flood may have encouraged additional development on the floodplain in a way that actually increases the risks associated with a 1-in-200 year flood (UNISDR, 2015a). Although exposure and intensive risk have increased over time, many cities and countries reduce their extensive risk through, for example, investments in protective infrastructure, environmental management and upgrading of informal settlements (UNISDR, 2013).

Indicators suggest that climate change is likely to increase the frequency and magnitude of some natural hazard events; at the same time, the underlying risk factors are increasing globally (UNISDR, 2015). To be able to address these issues in the coming future, strategies must adapt a different approach to disaster risk management, before disaster risk exceeds the resources and capacities of future generations to adapt and recover. Rather than trying to build resilience to disasters, the focus must shift to building resilience in the development sector.

We need to recognize the links between privatized economic benefits, on the one hand, and socialized risks, including disaster risk, on the other hand, and the different channels through which risks are accumulated, shared and transferred, between sectors, in space and time (Lavell et al, 2013). Disaster risk, as with other types of risk is constructed as much from the development and increase in resources and assets, as from the natural hazard occurrence (Lavell et al, 2013). Understanding this would also help to address how one sector's adaptation or risk management, could be another sector's heightened risk (Lavell et al, 2013).


Colombia: National and local priority with a strong institutional basis for DRR

In Medellín, Colombia, the city government is investing in disaster risk reduction systems. © Marcelo Druck CC BY-NC-ND 2.0


Colombia has integrated disaster risk management within its national development plan, including disaster risk reduction funds in their national budget.


Even in today's globalised economy, national governments and local administrations remain one of the most important mediators and regulators of private investment and, therefore, disaster risk management. Governments will have to expand their approach to risk governance to include the creation of incentives for risk sensitive investment alongside their existing promotion of economic growth (UNISDR, 2013). This is particularly pertinent owing to evidence of rising economic loss risk from business investments in hazard-exposed regions (UNISDR, 2013). Policy-makers in national government institutions and international organisations, although beginning to recognise changes in the nature of risks and risk management requirements, are still limited in their capacity to comprehensively assess and address identified risks and future uncertainty (World Bank, 2012a; Kent, 2013 in UNISDR, 2013).


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