The Economic Issues Behind Disaster Capitalism
The devastating wildfires that destroyed 80 percent of Lahaina, Maui, in August also ignited a debate over local water rights. When the West Maui Land Company asked to suspend Lahaina’s water rights in order to fill the company’s reservoirs with water to fight the fire — a request that was granted by Hawaii Governor Josh Green — Native Hawaiians were outraged. “To take that away from them is just like colonization repeating itself all over again,” seventh-generation Native Hawaiian farmer Hokuao Pellegrino told CNN. “It’s disaster capitalism at its finest.”
The term “disaster capitalism” was coined by Naomi Klein in her book The Shock Doctrine to describe the exploitation of disasters for profit and political gain through privatization and deregulation in the wake of disasters such as war and extreme weather events. “I call these orchestrated raids on the public sphere in the wake of catastrophic events, combined with the treatment of disasters as exciting market opportunities, “disaster capitalism.”” Klein cites examples such as the auctioning off of the New Orleans public school system to privately run charter schools after Hurricane Katrina and the handover of beautiful privately owned coastline in Sri Lanka to resort developers after the 2004 tsunami.
This phenomenon raises significant economic concerns, as it involves the transfer of government-owned resources to private ownership, reduced government oversight, and the erosion of social safety nets when these crises are leveraged for economic gain.
The Exploitation of Natural Disasters
Natural disasters are often the catalysts for government or private entities to seize the opportunity to profit from recovery efforts. This exploitation can take several forms, such as when large companies use catastrophes as an opportunity to buy up valuable properties for going-out-of-business prices. For example, developers may use the destruction caused by hurricanes to push for the construction of luxury resorts or high-end properties in the affected area. Another example is the weakening of labor protections, when labor laws and regulations are relaxed to expedite recovery efforts. This can lead to the exploitation of workers, who may be subjected to poor working conditions and low wages. This happened following Hurricane Katrina, when President Bush’s suspension of the Davis-Bacon Act resulted in the removal of the mandate for federal construction contractors to provide locally prevailing wages to all workers on projects exceeding $2,000. This adjustment in wage standards led to a disconnect with local laborers who were accustomed to higher pay rates but drew in migrant workers accustomed to earning less than the newly reduced wages. In addition, the Department of Labor issued guidance allowing employers to temporarily exempt certain employees from overtime regulations, allowing workers to put in longer hours to respond to the crisis without incurring additional costs for employers. Emergency responders, such as police officers, firefighters, and medical personnel, often had their work hours extended significantly beyond what would be considered normal under labor laws.
Deregulation
Disaster capitalism often goes hand in hand with deregulation. Some contend that reducing government intervention and regulation can promote economic growth and efficiency. However, this approach can have severe economic consequences. Deregulation can lead to reduced oversight and accountability, making it easier for corporations to cut corners and prioritize profits over safety and environmental concerns. Weakened environmental regulations often lead to increased pollution and degradation of natural resources. In the worst-case scenario, deregulation can lead to the rise of armed groups that operate outside the government. “That is hardly a surprise,” according to Klein. “When countries are rebuilt by people who don’t believe in governments, the states they build are invariably weak, creating a market for alternative forces, whether Hezbollah, Blackwater, the Mahdi Army or the gang down the street in New Orleans.” Another unwelcome consequence is the erosion of public services. The privatization of public services, such as health care and education, can result in reduced access and increased costs for the public. Private entities may take over public infrastructure, leading to toll roads, water privatization, or other services becoming less accessible to the average citizen. Following Hurricane María in Puerto Rico, Governor Ricardo Rossello announced that the island’s electrical grid would be privatized, opening the market to profit-oriented private energy companies. Ultimately, disaster capitalism can exacerbate income inequality, as disaster relief and aid are often distributed unequally, with marginalized communities receiving fewer resources and support. This unequal access to assistance can perpetuate existing income disparities.
Economic Impact on Vulnerable Communities
The economic issues behind disaster capitalism are particularly detrimental to vulnerable communities, who suffer disproportionately from the economic exploitation that follows disasters. Gentrification and the construction of luxury properties can lead to the displacement of long-time residents, pushing them out of their communities and exacerbating housing shortages. The United Nations Guiding Principles on International Displacement state that “Every human being shall have the right to be protected against being arbitrarily displaced from his or her home or place of habitual residence.” Nevertheless, following the 2004 Indian Ocean earthquake and tsunamis, ActionAid, a respected NGO, reported that “land ownership claims have survived only so long as there were no competing claims — for tourism, industrial and port development, oil exploration, environmental conservation/management. In India, for example, in almost every case where new claims have been made on the coastal lands, it is the fishing communities which have been ‘resettled’. In other words, the issue of customary rights is a grey area whose continued relevance owes more to default than to official sanction.” In the Maldives, the government declared that anyone who wanted state assistance with tsunami recovery would have to move to a “safe island,” freeing up land for hotel development. On Maui, local residents are concerned that “rebuilt homes in their Maui town could slip into the hands of affluent outsiders seeking a tropical haven rather than homegrown residents who give the Hawaiian island its spirit and identity,” according to the Associated Press. This may lead to a loss of cultural heritage. Indigenous cultures often bear the brunt of economic exploitation, as their ancestral lands and cultural heritage are frequently disregarded in the pursuit of profit. “Most people who survive a devastating disaster want the opposite of a clean slate: they want to salvage whatever they can and begin repairing what was not destroyed,” writes Klein. “They want to reaffirm their relatedness to the places that formed them.” The economic volatility associated with disaster capitalism can also lead to job insecurity, financial stress, and reduced access to essential services for vulnerable communities. The City of New Orleans — having lost its tax base — fired three thousand workers in the months following Katrina, including thousands of teachers.
Disaster capitalism raises significant economic issues that deserve careful consideration. While some argue that privatization and deregulation can spur economic growth, it often comes at the expense of public welfare, social equity, and environmental sustainability. It is crucial to strike a balance between economic development and the protection of communities, the environment, and essential public services. Hopefully, the recent environmental crises in Lahaina, Morocco, and Libya, to name just a few, will be met with advocacy efforts to protect vulnerable communities and implement environmental and social measures that improve the quality of life for locals.
Sources:
Homestead Land & Adequate Housing in the post-tsunami context
Klein, Naomi. The Shock Doctrine: The Rise of Disaster Capitalism. New York: Metropolitan Books, 2007.
https://www.wnyc.org/story/hawaii-puerto-rico-and-disaster-capitalism/
https://consortiumnews.com/2023/08/15/disaster-capitalism-fears-in-hawaii/
https://www.publicbooks.org/disaster-capitalism-strikes-puerto-rico/
