The 7.8-magnitude earthquake that decimated Nepal on April 25, causing grievous loss of life and destruction of national cultural treasures, also revealed deep fissures in a fragile national economy highlighted by contrasts between rich and poor. We know about the Sherpa guides who risk their own lives to squire affluent Western adventure-seekers in the mountains, but there is also the mass migration of villagers from the mountainsides to the cities, including the quake-ravaged capital of Katmandu, to pursue better economic opportunities and to escape civil unrest. The newcomers crowded into quickly built housing insufficiently structured to withstand the area’s frequent earthquakes.
An earthquake engineer told The Wall Street Journal last week that he had helped draw up a quake-resistant code more than 20 years ago. A new building code is not needed, he said; builders in the city should instead have followed the guidelines already in place.
If this is starting to sound too much like the geological equivalent of the 2008 housing crisis in the U.S., that’s not a mistake. Similarities include too much growth for the existing infrastructure to support, with too little buffer against economic adversity, and regulations in place that were ignored and/or flouted in pursuit of growth.
Far from trivializing the Nepal disaster by comparing it to the Western financial crisis in which most of the putative causal agents got out with life and limb, if not their careers, intact, Nepal presents a cautionary tale.
The biggest threat to sustainability is complacency. The last significant earthquake in Nepal occurred in 1934. While it clocked in at 8.2-magnitude, it occurred much further below the earth’s surface than this most recent quake; the disruption to the surface was far less.
Despite warnings from experts, the Nepalese government has reportedly been sanguine about the possibility of a quake of the scale of the 1934 temblor, suggesting that there was no need to worry about earthquakes anymore because a big one had already occurred and many structures had since been rebuilt. What does this sound like? We haven’t had to worry about a financial meltdown since the 1930s; we take the FDIC pill for that now.
Nepal is no stranger to rebuilding after quakes, and its culture is often characterized as resilient despite austere economic conditions. Indeed, previous rebuilding efforts involved re-use of existing materials that had lain in pieces. But the scale of this most recent disaster will take a concerted effort of properly-directed compassion, aid and reconstruction resources, as well as a heightened vigilance against profiteering.
The lesson for the Western financial world is the balance between thoughtful and necessary regulation and the propensity of the players to observe it. We don’t want Nepal to be in a position, months from now, of wondering where all the aid went because someone skimmed it off, bringing out the naysayers to say that the country is too poor and unsophisticated to defend itself against such activity. In this country, there are plenty of homeowners and individuals who want to avoid an earthquake of their own.
