The hidden costs of the UK floods will surpass the obvious damage

19 February 2014
Jan Kellett
Comment

With the shocking UK floods only now starting to recede, and increasing calls for an honest assessment of the choices that lie ahead, it is time to consider if we understand what the impact of disasters really means in richer countries.


At its preliminary meeting to discuss disaster risk reduction in January, the Organisation for Security and Cooperation in Europe (OSCE) focused its first discussion on exactly this: what is disaster impact and why is it important?

Disaster impact you can count is not even half the story

We might assume this is all rather obvious. Houses have their roofs lifted off by tornados, livestock die from drought, schools and homes are flooded by rivers that burst their banks. Yet this is only direct and immediate impact: what is known as ‘damage’. In one sense it is fairly easy to calculate. We see something is destroyed or damaged, so we calculate the replacement value. We already know, for example, that the costs of the devastating UK floods this winter may breach one billion pounds, most of it made up of repair and replacement. We have global databases for this, some of them helping generate evidence for investment in insurance; Munich Re estimated the economic damage from 880 disasters in 2013 to be US$125 billion, only $31 billion of which was insured.

Yet this is not everything, not by far. Next comes ‘loss’. If damage is the direct impact, loss is indirect and consequential. A road destroyed by flood has countless ‘knock-on’ impacts: a lack of access to markets could result in unsold crops rotting or the loss of employment, leading to reduced output from industry and an overall loss of economic output. This is different to damage; it requires estimation, rather than calculation. There is little standardisation here. The World Bank and United Nations use a methodology to measure loss, but only for a handful of disasters, almost exclusively the biggest and obviously delineated disasters in developing countries. Between 1991 and 2010 only 81 such assessments took place. Yet the scale of this often-uncalculated impact can be extremely significant; the Chao Phrya Thai floods of 2011 caused $20 billion of direct damage, but a further $26 billion of loss.

Then we come to costs that are almost impossible to calculate financially, because they are difficult to attribute or they simply defy easy calculation. The intangible impacts from flooding alone can include biodiversity loss, water pollution, loss of soil nutrients and soil erosion. And beyond direct death and injury, the impact on human beings can include increased disease, malnutrition and mental illnesses such as post-traumatic stress disorder. The challenge of ‘counting’ here is growing fast. We might be able to ‘cost’ something like biodiversity loss, if we could attribute it directly to disaster, but could we do the same with the impact on mental health after the loss of a loved one? And can we really calculate the cost of a loss of life? (There have been attempts to do just that, sometimes rather unpleasantly called, the value of a statistical life.)


Disaster impact: circles of cost


Much disaster impact goes uncounted altogether


No matter how challenging it may be to value impact, at least that impact is recognised. Some disasters don’t get recognised at all. The UN Office for Disaster Risk Reduction (UNISDR) estimates that 50% of disasters are largely uncounted. These are smaller, localised, affecting the poorest and most marginalised communities, where the impact is on low-income households and informal businesses outside official indexes. If this is true, then, the estimated $2 trillion in disaster damage over 20 years suddenly blooms to $3 trillion. (And we have not even considered how the costs of disasters like drought is also hidden, the very slowness of impact and challenging attribution hiding much of what we might calculate.)

And finally, disasters, like the hazards that contribute to them, cross geographic and political boundaries: it is just our counting of them that is rather static, stuck to the lines. In 2008, a breach in the Kosi embankment in Nepal sent 95% of the river on a new course through rural communities. In Nepal 54,000 people were forced from their homes; in India the number was over three million. The Indian-Ocean Tsunami in 2004 killed over 230,000 people in 15 countries, but also the nationals of a further 46 countries. The 2011 Great East Japan Earthquake led to a 20% drop in vehicle production in Thailand, whilst the 2011 floods closed 451 Japanese factories in Thailand, and others in Malaysia, North America and Japan itself.

What does this mean for richer countries?

Rich countries suffer disproportionately high levels of damage, because of the simple fact they have more assets at risk: high- and upper-middle-income countries suffer one of every 10 deaths from disasters, but $7 out of every $10 in damage. The consequence of this has tended to focus rich countries’ attention on that which can be most easily seen: the financial cost.

If you follow the narrative of disaster impact outwards from initial ‘damage’, the challenge of counting cost grows. Essentially, the more secure we are in the ‘numbers’, the less likely that impact will be represented comprehensively. This is particularly important for richer countries because mortality, which usually attracts the attention of the public and politicians, is relatively low: dedicated investment in risk reduction and general development have greatly reduced death from disaster.

Yet the knock-on effects, the losses and hidden costs are massive in richer countries. And for many of the 57 states of the OSCE, where economic growth often masks intense pockets of poverty, the hidden costs are steep as well; here, it is these poorer communities that will suffer more and harder from disasters. It is with intangible costs that OSCE states should be most wary, the untold and hard-to-discern impact of disaster being masked by layers of uncalculated cost.

So, before being able to understand their responsibility in other countries, richer ones need to first make the right choices about what they should do within their own borders. The OSCE, in its upcoming meetings on disaster risk reduction, needs to invest much more time in unmasking impact, in unpeeling layers from the costs of damage through to hidden costs – only then can those right choices be made.