The fatalities from the wide swathe of devastation from Typhoon Hainan (Yolanda) reportedly “one of the strongest tropical cyclone ever recorded[1]” keeps mounting. Earlier today, death toll estimates have reached 1,200[2], a few hours later this has swelled to an horrific 10,000[3].
How sad and depressing. My sympathies to the victims of the recent calamity
The Three Fatal Factors in the Face of a Natural Calamity
Typhoon Yolanda was reportedly the 24th tropical storm to hit the Philippines in 2013. While this has been the highest in decades, the most number of storms in record has been in 1993 which then registered 32 typhoons[4].
The tropical location of the Philippine Islands has made her vulnerable to natural calamities. The Philippines has been susceptible not only to earthquakes and volcanic activity as she sits on the Pacific Ring of Fire, but also to typhoons, floods and drought.
Cyclical atmospheric idiosyncrasy known as the Siberian Highs[5]—the massive collection of cold or very cold dry air that accumulates on the northeastern part of Eurasian terrain for the cold part of the year, roughly from September till April—has been mainly responsible for the Philippine susceptibility to severe atmospheric volatilities.
Notes the Wall Street Journal[6]:
Weather forecasters explain that tropical cyclones that form in the Pacific Ocean during the last few months of the year usually hit land because of the Siberian High, the prevailing high pressure system over Asia during the winter months. The Siberian High prevents cyclones from moving upwards, which why they make landfall in the central and southern Philippines, said Glaiza Escullar, a weather forecaster at PAG-ASA.
Ironically, days before the typhoon struck, the Philippine government trumpeted their supposed catastrophe preparedness noting of “implementing precautionary measures” with the aim for "zero casualty"[7]. At present estimates, “zero casualty” means 4 zeroes before the ‘one’, or if such assessments have been accurate then “zero casualty” seems on trajectory towards replacing the 1991 Typhoon Thelma (Uring)[8] as the deadliest Philippine typhoon in history. Coincidentally, Typhoon Uring also menaced Leyte (Ormoc City) with an estimated 5,081 to 8,165 casualties.
Yet unfortunately, despite government assurances, in the wake of Yolanda’s revolting destruction, widespread ‘organized’ looting[9] has been the immediate response as the whole government apparatus in the critically affected areas, particularly in Tacloban City, Leyte, appears to have broken down
Incidentally, Tacloban Leyte and Samar, which bore the brunt of Typhoon Yolanda’s havoc, have been part of Region VIII, the third most depressed region in the country after ARMM and Region XII.
As of 2012, Region 8 has a poverty incidence level of 37.2% compared to the nationwide level of 22.3% according to the NSCB[10]. The same areas have also been governed by entrenched political dynasties[11]. These regional plutocracies seemed to have corralled economic opportunities using the political route as “barriers to entry” at the expense of their constituents.
And such economic deprivation, which means lack of savings and or access to savings, dispossesses individuals or families or communities the wherewithal to undertake measures necessary to protect themselves from natural calamities without government assistance.
And following the regrettable tragedy, the incumbent administration seems to have resorted to a Pontius Pilate tack of hand washing; the Philippine president reportedly “stopped short of criticizing local officials in Tacloban for being unprepared for the coming of Super Typhoon”[12]
When the populace become heavily dependent on a supposedly ‘paternal’ government to look after their welfare in the face of natural calamities, then big casualty numbers would seem as the natural outcome. That’s because, not only has government’s interests been different from individual interests (politicians have mainly been focused on short-term vote-generating populist politics), importantly, government knowledge—of the uniqueness of the environment and of distinctiveness of people’s thoughts and reactions—have severely been limited as with all the rest.
Such dearth of knowledge, as well as, the follies of short term orientation which has been the predisposition of political agents, gets only revealed in the aftermath of natural disasters. And the mechanical political reaction has been to point fingers—again symptom of populist politics.
Leyte’s natural disaster tragedies (Typhoon Uring 1991, Typhoon Yolanda 2013 and 2006 Southern Leyte mudslide[13]) have hardly been random: Destitution, steep cultural dependency on political solutions and geographic vulnerabilities account for as a deadly cocktail mix when confronted with Mother Earth’s tantrums.
Typhoon Yolanda as Post Hoc Rationalizations
In the coming days, I expect mainstream experts to use the catastrophic events from Typhoon Yolanda as post hoc rationalization on the actions of domestic financial markets.
If the said markets experience downside volatility, then Yolanda will be attributed as contributing to negative fundamentals and sentiment. However, if the market goes up, then experts will likely impute on positive side of the reconstruction impact from post-Yolanda (Broken Window fallacy).
The above tables from Wikipedia.org denotes of the rankings of the deadliest (in terms of lives lost-left) and most destructive (in terms of currency damage-right) of Tropical cyclones to have hit the Philippines[14].
Post Typhoon Ondoy in 2009, I remarked that previous large destructive and fatal typhoons (like Typhoon Uring) hardly impacted the stock markets as seen in the Phisix[15]
the typhoon’s impact to the stock market has largely been immaterial over all timeframes considered and tends to reflect on the major trends from which undergirds the stock market cycle.
Four years later, my observations appear to have been validated.
The flow of stock price movements during post-Typhoon episodes largely reflected on the pre-established interim and general trend of the Phisix.
For instance, the Phisix rose by .6% a day after the Bohol intensity 7.2 earthquake of October 15, 2013[16] which claimed 222 lives. With domestic stocks on a rebound from the August lows, the Phisix ended the Bohol earthquake week sharply up (1.82% October 18th).
This means that natural disasters have mostly been a non-event, especially today when stock price movement have become highly sensitive to central bank policies.
And it would be a mistake for the mainstream to interpret reconstruction activities as positive ‘demand based’ growth. This would be a prime example of mistaking statistics and accounting identities with real human activities. Lost lives are irreplaceable. They represent human capital losses. Importantly, expenditures for replacements should not be mistaken as value added.
Also need must not be confused with demand. As the great Austrian economist and journalist Henry Hazlitt wrote[17], “Effective economic demand requires not merely need but corresponding purchasing power”. And the channeling of resources and efforts towards rebuilding means a diversion of demand and consequently a loss of purchasing power for other ventures,
Wherever business is increased in one direction, it must (except insofar as productive energies may be generally stimulated by a sense of want and urgency) be correspondingly reduced in another.
Yet the mainstream’s obsession with numbers foregoes the qualitative functions of human lives, as the late American financial historian Peter L. Bernstein warned[18]
Our lives teem with numbers, but we sometimes forget that numbers are only tools. They have no soul; they may indeed become fetishes.
Despite the aforementioned shortcomings, the innate human quest or desire for survival and man’s intrinsic social nature for cooperation[19] means after all the tears and grieving, lives of people from calamity stricken areas of Leyte, Samar, Bohol and others will learn to pick up the pieces and move on.
[6] Wall Street Journal Loc. Cit.
