Investors to cash in on $114 billion 'disaster economy' in 2020

06 February 2020 Consultancy.uk

Can natural disasters promote economic growth? The very question might seem distasteful, however according to a new report on the matter, the global “disaster economy” is already exploding, to the tune of $114 billion.

Disaster capitalism is by no means a new idea – as an economic system which creates a bust for every boom, and amid that chaos vulture-like traders often make a fortune. The potential for the ‘disaster economy’ includes much more than the potential to bet on stocks and shares, however. Predatory private interests have previously succeeded in cashing in on the need to rebuild Kabul caused by NATO’s occupation of Afghanistan, earthquakes and hurricanes in Haiti, and taking advantage of economic collapse in Greece to snap up newly privatised lucrative public services.

Indeed, capitalism is so wedded to monetising destruction that a new report from the freshly rebranded Kearney has suggested the disaster economy could soon be a leading global market. The willingness of businesses to treat catastrophes as ‘opportunities’ might throw up some interesting moral questions, but economically it is already generating huge volumes of wealth for those willing to adopt such a mentality.

Kearney contends that as record-breaking bush-fires ravage Australia, rising sea levels and volatile weather create the first generation of climate refugees across a host of island nations, and drought continues to fan the flames of conflict in nations like Syria, the global disaster economy will exceed a value of $114 billion in 2020. As the initial impacts of climate change ramp up, so will the level of interest from investors looking to position themselves as ‘service providers’ to afflicted populations – charging governments, NGOs, or even private individuals for the privilege.

A third of the world’s population is facing water scarcity

The report estimates that the number of people displaced by extreme weather will grow by 50% within the coming 10 years. As these phenomena become more frequent and more devastating, effective post-disaster aid is more crucial than ever – something which capital will move to take advantage of.

This is exemplified by the rise of water crises. Global decision-makers have ranked water crises among the top-five global risks for eight consecutive years, and more than 40 countries representing a third of the global population are dealing with water scarcity. This is not due to a lack of rain, or due to national wealth either. Countries such as Malawi, Iran, and Nepal have also faced deadly floods in 2019, while in the US more than a quarter of people drink water from systems that fail to meet safety standards.

Due to the free-market model championed by leading global economies, planned economic interventions in the realm of water management have lagged behind the rapidly deteriorating situation. Now, with a number of eye-catching crises on the horizon, private interests are able to weaponise that history of neglect to present solutions to the problems at hand – at a price.

Sweden’s Altered and San Francisco-based Orb are two examples Kearney points to of start-ups creating inventions to combat water scarcity and uncleanliness, such as high-efficiency faucets and handheld water-quality scanners. Such products will proliferate as consumers become more cognisant of their water consumption, although they will not actually solve global water challenges in 2020.

Konstantinos Apostolatos, a Partner at Kearney, said of the report, “Governments and international aid organisations are relying more and more on the private sector to support those affected by natural disasters. Companies using AI and other emerging technologies are generating new relief products and services, and the attention on and investment in these products will spur on additional technological advances. As these products become more widespread and well-known within the public sector, as well as consumers and investors, disaster economy start-ups will grow, and fast.”


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