The Destruction
Rarely do I really sit down and watch “the news”, preferring, instead to find my news online and research topics I find of interest. However, when I do watch television, I prefer to watch Fox News for apolitical news stories. Today, though, in the aftermath of the 8.8 magnitude earthquake in Chile, many of the pundits are pointing to stricter building codes leading to death tolls in Chile that are orders of magnitude less than an earthquake in Haiti, which itself was rated 500x less than the Chilean earthquake today. Oddly though, that there is almost no mention of property rights and economic freedom, the true cause of better buildings and lower death tolls.
Four weeks ago, I had the privilege of sitting in a lecture by Mark Thorton where he proposed the idea of property rights as a prediction of destruction caused by a natural disaster. The idea being that the systematic destruction of property rights discourages investment in infrastructure and building quality. When describing the sheer lack of property rights, he told this story:
A farmer in Haiti, wanting to provide a source of income for his family in the future, planted a coconut seed in the hopes of nuturing it to bear fruit (a task that takes 7 years to complete). He planted the seed on his land and before he could rise the next morning, someone had dug up the coconut and eaten it.
If that story doesn’t provide enough visualization, according to The Heritage Foundation Property Rights Index, Haiti’s score is an abysmal 10 (right on par with Cuba). Haiti also scored very low for government corruption and investment freedom, particularly for the restriction of investment in infrastructure and overall financial freedom.
Putting the pieces together, we see an all too vivid painting of disaster waiting to happen. The systematic destruction of property rights (aka socialism) and the tough investment atmosphere discourages entrepreneurial endevers to bring the infrastructure up to par, add the pronounced government corruption on top and the picture starts becoming sharper. With this in mind, lets look at the earthquake that happened today, in Chile, keeping in mind that the Chilean earthquake was 500x stronger than its counterpart in Haiti.
The statistics are shocking: A projected death toll of ~240 and destruction that doesn’t even come close to the death toll of 230,000 and the absolute destruction of nearly all standing building in the Haitian earthquake.
The critics will be quick to point to building codes as providing a minimal standard for which contractors will work by, although, as seen in a few places around the internet, and as common sense should dictate, building codes are not always followed or enforced. Rather, it is wealth, or more specifically, the investment of wealth, that inherently leads to better safety features being incorporated into building design. If people are unable to invest in a structure without the townspeople destroying it, there will be no investment at all, as seen with Haiti. Stricter building codes in Hait will only lead to a higher cost of entry for entrepreneurs, discouraging what little investment exists to the point of extinction.
Free Market Alternative
To see what the free market can come up with without government imposed building codes, we should look no further than Dubai, where there is no unified building code. Despite this, we see buildings being created that implement safety features beyond the norm. Why is this? The ability to reliably invest in ones own property without fear of its destruction allows the construction of building with safety features that pay off only in the long run. Logically, if a building will only have a life of 1 year or less before rebels destroy it, earthquake proofing and fire safety become less of an issue than speed and low cost.
Critics will claim that the push for an extra buck will drive down quality, though, they give no credit to intelligent consumers who have the ability to choose buildings which are safer, over those that are not. When building codes are in place, a successfully built building has an untold promise: “I have been certified safe by the government”. When there are no governmental codes, the market becomes uncannily efficient at its own methods of “certification”, a case in point would be Underwriters Laboratories, a private firm that tests and certifies a myriad of things to meet their specification of safety.
Mark Thornton comments on the UL in his piece “What Keeps Us Safe”:
The Lab was the first to set standards for certifying the safety of pilots and planes before the government intervened. It set the standards for building materials, fire-fighting equipment, air conditioners, and household chemicals. It employs safecrackers and pyrotechnicians to test safes, and a variety of unique machines and devices to test thousands of other products each year. It has been testing multicolored Christmas lights since 1905, and entered the building-code business right after the San Francisco earthquake of 1906.
Its effectiveness in determining safety standards (even for brand-new products) and maintaining them over time has generated an interesting result. Many government regulations, especially at the state level, merely mimic the building codes and insurance requirements of the Lab.
There are already private companies that stringently test and develop their own building codes. Governmental bureaucracy only adds additional cost to the the construction of a building and discourages 3rd-party certification, stifling new and innovative methods for testing and certifying safety.
Impressed at Chile’s resilience to a 8.8 magnitude earthquake? So am I. Yet, their resilience is no poster-child for government superiority in construction. It is their superior enforcement of property rights that leads to greater investment in ones own property, and as a side effect of greater investment, greater safety. This assumption can be taken one step further by suggesting that the best action for Haiti relief would be aid with a stipulation for stricter protection of property rights and deregulation of investment, which in turn, would put Haiti on the road to long term wealth. To quote Thornton: “[T]he market discovers new and effective solutions to the problems of everyday life, reduces the risks all around us, and does so without resorting to the coercion and inefficiency of government.”
The thoughts and prayers of The Austrian go out to the families and victims of the Chile earthquake. It is our hope that education about the perversion of property rights and their effects on the magnitude of destruction caused by natural disasters will gain a footing in todays society and shape it, for the better, for tomorrows future.
Update: I should have known that the first released numbers were governmental propaganda. The “dust-settled” death toll in Chile is ~720. The same points, though, are still very applicable.