On Saturday, another devastating earthquake hit, in Chile, and that gives us another chance to look at some of the numbers associated with earthquakes and rebuilding.

The Richter scale, used to measure the magnitude of earthquakes, is a logarithmic scale of ground motion. Hence, an 8.8 quake is almost ten times as strong as a 7.9 quake and 100,000 times as strong as the 3.8 earthquake that hit north-central Illinois on February 10. (It’s also a measure that is falling out of favor with seismologists because it is less descriptive than other ways of looking at earthquakes, but it’s simple, so it sticks.)

The next big number is the death rate. That is only loosely correlated to the magnitude of the quake itself. That’s because ground motion doesn’t kill people, falling buildings do. If an earthquake prone area is affluent and has strong building codes, the death rate is likely to be low. The Loma Prieta quake that interrupted the 1989 World Series in San Francisco had a Richter magnitude of 6.9 and killed 63 people, mostly because sections of the Bay Bridge and Nimitz Freeway collapsed. A 6.8 earthquake struck Kobe, Japan in 1995 and killed about 6,500 people. Most of the dead lived in the old section of the city, in wood-frame houses with heavy tile roofs that collapsed and crushed the occupants. A second problem was poor emergency response by the local and national governments which meant that some people were not rescued and others who survived the quake with injuries died from the lack of care.

Japan and the U.S. are pretty much the two richest countries in the world, so both can afford good construction and good emergency response. In 2008, China’s Sichuan province was hit by an 8.0 quake that killed about 69,000 people, many of whom were children trapped when their schoolhouses collapsed. China is not a rich country, although it is getting richer by the day; the earthquake’s epicenter was in one of China’s poorer sections.

Wealth affects earthquake survival, obviously, and several different numbers can be used to compare relative and absolute levels of wealth. The first is gross domestic product on a per-capita basis. That’s everything that a country produces divided by the number of people in the country. In Haiti, it’s a mere $1300 per year. Chile is more than ten times richer, with GDP per capita of $14,000. Chile is not as rich as the U.S. (per-capita GDP of $46,000) or Japan ($32,600), but it’s hardly poor. Keep in mind that the nation that keeps Americans up at night, China, has a GDP per capita of just $6500. That’s why more people died in the Sichuan earthquake than will have died in Chile when all is said and done.

We like to think that you don’t need money to get stuff: you don’t need money to get a good education, people say, even though I’ve noticed that the people in Chicago’s richest suburbs are willing to pay exorbitant property taxes to support their outstanding public schools. Likewise, you shouldn’t have to be rich to get decent construction, but without money, you will get neither good materials nor skilled work.
However, you’ll have a better time getting decent construction if there are relatively few poor people. With about 80% of its population living below the poverty level, the people of Haiti had no chance to move in to well-constructed but old and run-down buildings, for example, the way that the poor in Oakland can. The poverty rate in the United States is about 12%, and it’s 18.2%. (Japan claims to have no poverty, although I have a hard time believing that the people sleeping in cardboard boxes in Tokyo’s Shinjuku Station are middle class. China’s official poverty rate is 2%, but I suspect the actual poverty rate is a bit higher.)

Wealth and poverty are real issues. The fundamental problem in the world is that our stuff is not distributed equally. We have infinite wants and finite resources, and some people have a lot more of those finite resources than others. Is that fair? I don’t know. None of us chose to be born where we were, and those born in Haiti suffered worse from a lesser earthquake than those born in Chile.

About the Author

Ann Logue

Ann Logue is a freelance writer and consulting analyst who is fascinated by business and technology. She has a particular interest in regulatory issues and corporate governance. She is the author of "Emerging Markets for Dummies" (Wiley 2011), “Socially Responsible Investing for Dummies” (Wiley 2009), “Day Trading for Dummies” (Wiley 2007), and “Hedge Funds for Dummies” (Wiley 2006), and has written for Barron’s, Institutional Investor, and Newsweek Japan, among other publications. As an editor and ghostwriter, she worked on a book published by the International Monetary Fund and another by a Wall Street currency strategiest. She is a lecturer in finance at the University of Illinois at Chicago. Her current career follows 12 years of experience as an investment analyst. She holds a B.A. from Northwestern University, an M.B.A. from the University of Chicago, and the Chartered Financial Analyst designation. How's that for deathly dull?

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