Hold on to your hat, here come the disasters...

While at an OECD sponsored conference on Financial Literacy, I had the opportunity to present with Dr. Erwann Michel-Kerjan from the Wharton School's Risk Management and Decision Processes Center. He was presenting their newly released MANAGING LARGE‐SCALE RISKS IN A NEW ERA OF CATASTROPHES: Insuring, Mitigating and Financing Recovery from Natural Disasters in the United States. The report is a great read, especially for those interested in the financial aspects of disaster management.

While Dr. Michel-Kerjan was a bit too pessimistic in his assessment of disasters....he saw rising disaster costs as a unassailable trend, not seeing that recent hurricanes in the Gulf have also led to implementation of building codes that could, eventually, help bring disaster costs under control....he showed a great graph from his recent work looking at the politics of disasters. The graph shows disaster declarations over time, highlighting election years.





Its clear that disaster declarations are on the rise. And they are heavily influenced by our election cycle. If the trend holds, being in an election year, we should expect a higher number of declarations than recent years. Chances are that most countries have means of funneling development money to favored communities based upon assumed or hoped for electoral support. In Turkey, amnesties for illegal building are regularly handed out in exchange for political support. Here, transportation and urban renewal funding have also used in this way. I suspect we are in an era where DHS terrorism grants and, to a lesser extent, recovery funds that come with disaster declarations are a growing and preferred method of getting a bit more of the pie to one's constituents.