Globalized economic development

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

Image depicting economic inequality
Source: takkun/Shutterstock

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. The poverty and inequality created by this polarized new world order and economy is expected to have changed or increased vulnerability from disasters. At the same time, dominance and increase of wealth in certain regions and cities are expected to have increased hazard exposure. 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. See a related story: Drylands hit harder by poverty than richer regions.

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. 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. 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.

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.

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. See a related story: Better local climate adaptation means 'we all benefit' in connected world.

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. Development gains are privatized and disaster losses socialised or usually subsidized by the public sector or treasury as residual risk.

There is evidence of rising economic loss risk from business investments in hazard-exposed regions.

UNDRR, 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. See a related story: Himalayan hydro developers willfully ignore climate 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. 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.

The cost of risk financing is likely to grow except in countries that are making major investments in risk reduction.

UNDRR, 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.

UNDRR, 2015a

Globalized economic development provides an opportunity to build resilience, despite currently increasing the exposure of assets in hazard prone areas. 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. 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.

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. 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.

Sustainable development substantially reduces the risk of future drought impacts 

A study identifies the Mediterranean, Amazon, southern Africa, and Central America as the most impacted regions where extreme multivariate drought is projected to become two to four times more likely.

The analysis also shows that sustainable development would reduce population exposure to drought by 70% compared to fossil-fueled development. Furthermore, it halves the number of countries facing a fivefold increase in drought risk.

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. 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. Understanding this would also help to address how one sector's adaptation or risk management, could be another sector's heightened risk.

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. This is particularly pertinent owing to evidence of rising economic loss risk from business investments in hazard-exposed regions. 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.

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