Turkey Earthquake Shows That Corruption and Crony Capitalism Kill. Is California next?

The recent Turkish earthquake, as with its modern predecessors, has shown that the witch's brew that crony capitalism produces is a leading cause of death and severe injury.

The phenomenon of "control fraud," the use of a seemingly legitimate entity by those that control it to commit fraud, exists in all three major sectors – private, public, and non-profit. Crony capitalism typically involves the interaction of public and private sector control fraud. I have written primarily about accounting control frauds, which are property crimes of mass destruction. Anti-customer, anti-public, and anti-employee control frauds can all cause mass casualties. Earthquakes and the tsunamis they produce can kill hundreds of thousands of people. Government programs have been exceptionally successful in reducing the loss of life from natural disasters. Early warnings, evacuation routes, barriers, and training can greatly reduce the losses caused by tsunamis. Seismic building codes, if properly enforced, can reduce direct deaths from earthquakes to exceptionally low levels even in severe seismic events. The saying is: earthquakes don't kill people; collapsing structures do.

The Long Beach Earthquake of 1933

On March 10, 1933, a magnitude 6.3 earthquake with its epicenter near Long Beach, California destroyed or severely damaged nearly 200 schools. Had the quake occurred during school hours, over a thousand children would likely have been killed and large numbers would have been injured. California school structures did not have to meet any seismic code. Scientists had warned of this danger to school structures prior to the Long Beach quake without producing a policy change, but the quake allowed tens of thousands of parents to see collapsed school buildings that would have obviously put their children at grave risk. They knew that a magnitude 6.3 was powerful, but that earthquakes could be dramatically more destructive.

The Field Act of 1933

Public demand for change was so intense in California – during the Great Depression, with the State and its localities in financial crisis – that the Field Act was enacted on April 10, 1933. The Field Act originally applied only to new construction. It required school buildings to be built in compliance with a seismic code designed to keep the structures from collapsing even in a severe earthquake. It also created a special periodic inspection process and professional staff designed to ensure compliance with the seismic code. The sponsor of the legislation, Mr. Field, was an extremely conservative elected official. The Field Act was enacted with bipartisan support – one month after Long Beach earthquake. In the 78 years since the enactment of the Field Act, no one has died from a seismic event in a California school covered by the Field Act. The Act has also virtually eliminated serious injuries from seismic events in California schools covered by the Field Act.

Turkey: Control Fraud and Corruption Kill

Turkey has decent seismic codes, largely modeled on California, but its enforcement of those codes is undermined by crony capitalism and poverty. Structures in seismically active regions are often more cost-effective if they meet seismic building codes because they are less likely to be damaged, and far less likely to suffer catastrophic damage, during a moderate or severe earthquake. The cost savings that code compliant buildings can achieve, however, are only likely to be demonstrated in the long-term and only in regions that suffer material earthquakes. In the short-term, it is cheaper to construct buildings that are death traps in a strong earthquake. Honest builders, therefore, find it difficult or impossible to compete with builders that falsely claim to have complied with the seismic codes. This is another example of a Gresham's dynamic in which fraud drives honest firms from the marketplace. It is essential that the regulators serve as the “cops on the beat” to detect the fraudulent builder during the construction process and to prevent their frauds and the death traps they would otherwise complete and sell to the public. The need is greatest in structures that aggregate large numbers of people, e.g., schools and apartment buildings.