A violent earthquake (magnitude 7.1) struck the city of Christchurch, New Zealand on Saturday morning at 4:31am local time. According to the NZ Herald, there is extensive damage throughout the city. Here are the main stats:
90+ CBD buildings damaged;
Estimated cost of damage: NZ$2 billion (US$1.5b);
245 Residents housed in welfare centers;
15 per cent of Christchurch homes still without water;
3,500 homes still without power;
300,000 liters of water transported to Christchurch by rail yesterday;
Distance of epicenter from Christchurch central: 40km.
Some people have been injured but, to my knowledge, no one died directly because of the earthquake. Specialists say that more aftershocks are to be expected and some may be violent. There are still risks: buildings could collapse on people in the coming days. But overall, the tragedy in Christchurch is mostly material. Human life was, by and large, protected. Compare this to the loss of life in Haiti last January.
Problems in Haiti came from bad building construction, but also and mostly from what happened before and after the earthquake. As Pete Boettke has mentioned many times in this blog, John Stuart Mill pointed out that countries can bounce back quickly from natural disasters provided the free flow of people and capital is permitted. A corollary to this statement is that countries can be well prepared against natural disasters provided trade, accumulation of capital, and insurance contracts are free, and property rights are well defined and enforced.
Clearly the impact of earthquakes is mostly an economic issue. What happened in Kobe many years ago or in Christchurch last weekend doesn’t compare with what happened in Haiti. And the difference is economics. NZ has a building code and by and large buildings are built according to the code in place—it is enforced. But it is not the building code that ultimately saved people's lives; it is capitalism. Indeed, compare this to Haiti. Haiti probably had a poorly enforced building code. But it is not because building inspectors in Haiti are corrupt that buildings are poorly built. Rather it is because of the lack of surplus in the economy. It is the surplus created in a free economy that enables people to dedicate more resources to earthquake protection thereby making code enforcement easy. As long as Haitians will be poor, building codes will not be enforced because people have more urgent things to do with the small amount of resources they have.
It will be interesting to see the response of government officials in Christchurch. Official policy response can either slowdown recovery (as it happened in New Orleans in 2005) or it can foster it. Cases of fast recoveries abound in the past: Chicago after the great fire in 1871 is one of the most studied cases. The rebuilding of the city was mostly done by the private sector with a bit of help from the Federal government. Within three years, Chicago was back in business. The general point is that the government should do what it does in normal times: enforce the law. The government can provide emergency relief, shelter, and things like that, but it shouldn’t do much beyond this. While governments can be good at specific rescue operations (as Steve Horwitz argues here), they are not good at large-scale coordination of resources and should leave this to those who have the incentives to do so.
Those who live in Christchurch were saved by capitalism and the accumulation of capital it has enabled over the years. Natural disasters are economic phenomena. Governments, including in the West, often ignore this truth to the detriment of the victims who suffer twice—once from the earthquake itself, and a second time from the consequences of poor government policies.
Addendum: For a rigorous treatment of the subject, Chris Coyne just wrote a paper on the constitutional political economy of responses to crisis. This is for the conference on James Buchanan's contributions to political economy at GMU next week.