Drought produces a complex web of impacts that not only ripple through many sectors of the economy but may be experienced well outside the affected region, extending even to the global scale. This complexity is largely caused by the dependence of so many sectors on water for producing goods and providing services. Agricultural production in the Great Plains is of critical importance to food production in the United States. Substantial drought-related production losses not only affect food supplies and prices in this country but also have serious implications for the many nations that depend on U.S. grain exports to offset domestic supply shortfalls.
Impacts from drought are commonly classified as direct or indirect. Reduced crop, rangeland, and forest productivity; increased fire hazard; reduced water levels; increased livestock and wildlife mortality rates; and damage to wildlife and fish habitat are a few examples of direct impacts. The consequences of these impacts illustrate indirect impacts. For example, a reduction in crop, rangeland, and forest productivity may result in reduced income for farmers and agribusiness, increased prices for food and timber, unemployment, reduced government tax revenues because of decreased expenditures, increased crime, foreclosures on bank loans to farmers and businesses, migration, and disaster relief programs. Direct or primary impacts are usually of a biophysical nature. Conceptually speaking, the more removed the impact from the cause, the more complex the link to the cause.
Because of the number of affected groups and sectors associated with drought, the geographic size of the area affected, and the difficulties in quantifying environmental damages and personal hardships, the precise determination of the financial costs of drought is a formidable challenge. The economic costs and losses associated with drought are highly variable from year to year. These costs and losses are also quite variable from one drought year to another in the same place, depending on timing, intensity, and spatial extent of the droughts.
The impacts of drought are commonly classified as economic, environmental, and social. Table 1 presents a comprehensive list of the impacts associated with drought. This list represents the experiences of the Great Plains and many other drought-prone areas of the world. Although drought produces impacts that are regionally distinct, there are many similarities in the types of impacts experienced from one region to another. Many economic impacts occur in broad agricultural and agriculturally related sectors, including forestry and fisheries, because of the reliance of these sectors on surface and subsurface water supplies. In addition to obvious losses in yields in both crop and livestock production, drought is associated with increases in insect infestations, plant disease, and wind erosion. Droughts also bring increased problems with insects and diseases to forests and reduce growth. The incidence of forest and range fires increases substantially during extended droughts, which in turn places both human and wildlife populations at higher levels of risk.
Income loss is another indicator used in assessing the impacts of drought because so many sectors are affected. Reduced income for farmers has a ripple effect, as their ability to purchase goods and services is limited. Thus, many retailers experience
TABLE 1 Classification of Drought-Related Impacts (Costs and Losses)
Problem Sectors Impacts
Annual and prerennial crop losses; damage to crop quality Reduced productivity of cropland (wind erosion, etc.) Insect infestation Plant disease Wildlife damage to crops Loss from dairy and livestock production Reduced productivity of rangeland Forced reduction of foundation stock Closure/limitation of public lands to grazing High cost/unavailability of water for livestock High cost/unavailability of feed for livestock High livestock mortality rates Increased prédation Range fires Loss from timber production Forest fires Tree disease Inset infestation
Impaired productivity of forest land Loss from fishery production Damage to fish habitat Loss of young fish due to decreased flows Loss of national economic growth, retardation of economic development Income loss for farmers and others directly affected Loss of fanners through bankruptcy Loss to recreational and tourism industry Loss to manufacturers and sellers of recreational equipment fncreased energy demand and reduced supply because of drought-related power curtailments Costs to energy industry and consumers associated with substituting more expensive fuels (oil) for hydroelectric power Loss to industries directly dependent on agricultural production (e.g., machinery and fertilizer manufacturers, food processors, etc.) Decline in food production/disrupted food supply Increase in food prices Increased importation of food (higher costs) Disruption of water supplies
Unemployment from drought-related production declines Strain on financial institutions (foreclosures, greater credit risk, capital shortfalls, etc.)
Revenue losses to federal, state, and local governments (from reduced tax base)
Deters capital investment, expansion Dislocation of businesses
752 DROUGHT IN THE U.S. GREAT PLAINS TABLE 1 (continued)
Revenues to water supply firms Revenue shortfalls Windfall profits Loss from impaired navigability of streams, rivers and canals Cost of water transport or transfer Cost of new or supplemental water resource development Environmental Damage to animal species
Reduction and degradation of fish and wildlife habitat
Lack of feed and drinking water
Increased vulnerability to prédation (e.g., from species concentration near water) Loss of biodiversity Wind and water erosion of soils Reservoir and lake drawdown Damage to plant species
Water quality effects (e.g., salt concentration, increased water temperature, pH, dissolved oxygen) Air quality effects (dust, pollutants) Visual and landscape quality (dust, vegetative cover, etc.) Increased fire hazard
Estuarine impacts; changes in salinity levels, reduced flushing Social Increased groundwater depletion (mining), land subsidence
Loss of wetlands Loss of cultural sites Insect infestation
Food shortages (decreased nutritional level, malnutrition, famine)
Loss of human life (e.g., food shortages, heat)
Public safety from forest and range fires
Conflicts between water users, public policy conflicts
Health-related low flow problems (e.g., diminished sewage flows, increased pollutant concentrations, etc.) Recognition of institutional constraints on water use Inequality in the distribution of drought impacts/relief Decreased quality of life in rural areas Increased poverty
Reduced quality of life, changes in life-style Social unrest, civil strife Population migration (rural to urban areas) Réévaluation of social values
Increased data/information needs, coordination of dissemination activities Loss of confidence in government officials Recreational impacts
"Input from working groups was used to modify a table from Wilhite (1992).
significant reductions in sales. This leads to unemployment, increased credit risk for financial institutions, capital shortfalls, and loss of tax revenue for local, state, and federal government. The recreation and tourism industries are also affected because of less discretionary income. Prices for food, energy, and other products increase as supplies are reduced. In some cases, local supply shortfalls for certain goods will result in the importation of these goods from outside the stricken region. Reduced water supply impairs the navigability of rivers and results in increased transportation costs because products must be transported by rail or truck. Hydropower production is also significantly reduced. For example, hydropower generation was 25 to 40% below average for large sections of the country in 1988, resulting in serious revenue losses for the industry (Wilhite, 1993a).
Environmental losses are the result of damages to plant and animal species, wildlife habitat, and air and water quality; forest and range fires; degradation of landscape quality; loss of biodiversity; and soil erosion. Some of the effects are short term and conditions quickly return to normal following the end of the drought. Other environmental effects linger for some time or may even become permanent. Wildlife habitat, for example, may be degraded through the loss of wetlands, lakes, and vegetation. However, many species will eventually recover from this temporary aberration. The degradation of landscape quality, including increased soil erosion, may lead to a more permanent loss of biological productivity of the landscape. Although environmental losses are difficult to quantify, growing public awareness and concern for environmental quality has forced public officials to focus greater attention and resources on these effects.
Social impacts mainly involve public safety, health, conflicts between water users, reduced quality of life, and inequities in the distribution of impacts and disaster relief. Many of the impacts specified as economic and environmental have social components as well. Population out-migration was a significant problem in the Great Plains in response to the 1930s drought and continues to be a major problem in many countries.
As with all natural hazards, the economic impacts of drought are highly variable within and between economic sectors and geographic regions, producing a complex assortment of winners and losers with the occurrence of each disaster. For example, decreases in agricultural production result in enormous negative financial impacts on farmers in drought-affected areas, at times leading to foreclosure. This decreased production also leads to higher grain, vegetable, and fruit prices. These price increases have a negative impact on all consumers as food prices increase. However, farmers outside the drought-affected area with normal or above-normal production or those with significant grain in storage reap the benefits of these higher prices. Similar examples of winners and losers could be given for other economic sectors as well.
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