The Scale and Economic Impact of the Haiti Disaster

The scale of death and destruction in Haiti as a result of the earthquake on January 12 (and its aftershocks) is difficult to imagine, even with constant news coverage and video. Part of my job is to estimate economic damages that result from natural disasters, and my research on Haiti and past earthquakes suggests that this disaster is on an unprecedented scale.

The 2004 Indian Ocean tsunami killed over 200,000 people across 15 countries. This scale of human loss is expected in Haiti with a population of 8.8 million—about as many people in the Chicago area.  This is absolutely staggering!

Most death toll estimates from disasters are expressed in terms of the number of deaths per 10,000 in the population, or per 1,000 in population as in the case of big events like the 2004 tsunami. In Haiti’s case, it can be expressed relative to 100 people in the population. We estimate the Haitian death toll between 173,000 and 207,000, or around 2 deaths per every 100 persons.

There is a unique fact about human and economic losses from natural disasters. If a disaster occurs in an economically developed country, one can expect high economic losses, but few deaths. The opposite is generally true when a disaster hits less economically developed countries—fewer economic losses and many more deaths.

Here are a few examples:

• Hurricane Katrina (2005) is the most costly natural disaster in the history of the United States, at a reported $125 billion, but only 1,800 people died as a result.
• The 1994 Northridge earthquake in California cost around $30 billion, yet only 60 people are reported to have died.
• Consider the 2004 Indian Ocean tsunami costs and death tolls for the 3 most affected countries:
  • Indonesia: $4.4 billion in costs, 166,000 deaths
  • Sri Lanka: $1.3 billion in costs, 35,000 deaths
  • India: $1 billion in costs, 16,000 deaths

This pattern is largely because developed countries have more expensive physical infrastructure –often in harm’s way—as well as more advanced protective measures. Haiti’s poorly constructed buildings are likely the primary reason for such a high rate of death.

Haiti’s economic losses could exceed the total value of its annual production, around $7 billion. Our initial estimates of $6 to 9 billion for property losses is a projection of the reconstructed property costs, which will far surpass the value of the destroyed property. The international community will likely help Haiti rebuild to modern building standards. IEM’s $2 to 3 billion estimate in business interruption losses is for the first year only. Economic recovery will be a multi-year process that will depend in part on how fast basic infrastructure is restored and lives are brought back to a sense of normalcy.