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In wake of disasters, some see economic opportunity
Rebuilding means jobs, more business
Question of the Day
For a region that has been rocked by an earthquake and slammed by a tropical storm in the space of less than a week, Mother Nature may be providing a silver lining in the form of a business stimulus package.
At Gaithersburg-based High's Chimney Service, manager Laura Chanthalath said business is up 75 percent this week. She said the company is rebuilding four to five chimneys a day from quake and storm damage, compared with the usual one chimney at this time of the year.
"We're completely booked," Ms. Chanthalath said. "This has been a big boost in our business because the summer is extremely slow, especially in the chimney business. So it's been good for us but bad for the homeowners."
Business leaders contend that natural disasters can push a depressed economy forward by encouraging companies to dip into their savings and spend on rebuilding efforts. Also, relief supplies such as food, clothes and construction materials tend to be purchased from stores near disaster zones.
Estimates put the immediate economic costs of Irene at $20 billion, not counting the lost production and work hours as businesses struggle to reopen in the hardest-hit areas. Some of the losses can never be recovered — a lost late-summer weekend for businesses in Ocean City, Md. — but economists say much of the rebuilding of roads, bridges and buildings, along with retail purchases that can be deferred, will recoup virtually all of the losses in the coming years.
With relief workers coming into the region, along with families displaced from their homes, hotels and restaurants get an immediate boost.
"I don't think that any local business owner would say that they are grateful for their community having to suffer through a disaster," said Kitty Taylor, a spokeswoman for the Business Civic Leadership Center, which heads the disaster response for the U.S. Chamber of Commerce. "They will give away goods, they will feed people for free, they will open up the parking lots for Red Cross. I don't think they consider this an economic opportunity for themselves."
But even in communities decimated by natural disasters, there is a sense of trying to move past a bad situation.
"We have opportunity in front of us," said Kirstie Smith of the Joplin Area Chamber of Commerce. The Missouri community was devastated by a May tornado estimated to have caused $3 billion in damage. "You've got to look to the future, because what's in front of you out your door is a little overwhelming some days. It's what you have to do."
Hurricane Irene passed over much of the Eastern Seaboard during the weekend, shortly after last week's 5.8-magnitude earthquake — the region's largest in more than a century. It was a double whammy that has given a boost to some local businesses, such as contractors and construction lenders as homeowners and businesses rebuild, and overtime pay and new hires at utility companies that are working to restore power.
Analysts predict that the widespread damage will have a modest net impact on an economy with an unemployment rate of more than 9 percent and a construction industry struggling to recover from the financial crisis of 2008 and 2009.
"It may take a little bit out of third-quarter [gross domestic product]," Ryan Sweet, a senior economist at Moody's Analytics in West Chester, Pa., told Reuters news agency. He predicted no more than a tenth of a percentage point increase.
"But given the cleanup and rebuilding, we will get that back in the fourth quarter and a little bit, particularly as insurance and federal money flow into the affected areas."
Businesses such as High's Chimney say they are happy for the renewed demand but do not want to be portrayed as exploiting the loss and desperation of those hurt by disaster.
Customers are paying $1,200 to $2,000 on average for chimney repair, Ms. Chanthalath said. One customer paid $16,000. "We're trying to keep the costs as low as we can," she added, explaining that the company wants to help the community during its time of need. "We're doing what we can."
In Joplin, the tornado tore apart homes, hospitals and schools, but the community has been quick to recover. About 400 of the 523 businesses destroyed have reopened or announced plans to do so.
Joplin's economy also has been invigorated by 70,000 relief workers from across the country. Their arrival to help with cleanup efforts has boosted business at hotels and restaurants. June sales tax receipts were up 5 percent from last year.
"The economic impact that we're feeling right now is all very positive," Ms. Smith said. "They're staying here. They're eating here. They're shopping in our stores.
"It's a devastating blow to the community," she added. "But really, it's an opportunity that no other community gets."
Local officials also are banking on a boost in construction in the next three to five years.
"We have 13 miles of ground that's going to be empty," Ms. Smith said. "So the construction industry will obviously receive a little bit of a boon from that."
The community also tends to support local businesses.
"Nobody in Joplin wants to see any business fail right now," she said. "There's an incredible spirit here right now. When we make a purchase, we do it here. We don't go out of town to make that purchase, or go online."
The general consensus among economists is that wealthy countries such as the United States have enough money and resources to rebuild and push the economy forward over time. Developing nations such as Haiti, however, have more difficulty recovering from disasters.
"Developed countries experience a positive effect on GDP growth in the aftermath of a disaster," Jose De Gregorian, governor of the Central Bank of Chile, wrote in a recent symposium of economists and development specialists in the magazine International Economy, "while developing countries tend to suffer reductions in economic activity."
The short-term effects, whether in Joplin, Japan or Jakarta, Indonesia, are "unambiguously contractionary," said Charles Wolf, an economist with the Rand Corp. and senior research fellow at the Hoover Institution.
"But in the medium and longer terms, and under favorable conditions, natural disasters can be stimulative," he added, citing the quick return to growth for Indonesia after the 2004 tsunami and China after the Chengdu earthquake of 2008.
But James E. Glassman, senior economist and managing director at J.P. Morgan Chase & Co., said the argument that a major natural disaster can bring lasting economic benefits is far-fetched.
"If this were so," he wrote, "governments could counteract economic downturns and spur new growth simply by destroying property."
Many development specialists see post-Katrina New Orleans as a key test case. Tourism has rebounded and the Louisiana Superdome has reopened, but large pockets of devastation remain and the overall population is far below pre-Katrina levels.
"The economy in New Orleans is doing better than it has in decades," said Michael Hecht, president and CEO of Greater New Orleans Inc. He pointed out that the disaster helped New Orleans weather the recession better than most other cities. Its unemployment rate has consistently been two to three points lower than the rest of the country.
"All of that rebuilding activity helped supply employment, while the rest of the country was going through a recession," he said.
New Orleans received billions of dollars in disaster funding and used that money to build homes, schools, hospitals and businesses that are better than those before Katrina. Many communities that have suffered disasters are innovating as they rebuild.
"It's given New Orleans brand new infrastructure in everything from flood protection to schools to roads," Mr. Hecht said. "The near-death experience of Katrina served as a cultural wake-up call for New Orleans. We have a much more innovative attitude."
The city doesn't look at the economic revival as a benefit of Katrina. Rather, it sees the turnaround as a way to recognize those who were lost in the disaster.
"You would never characterize Katrina as a 'good thing,' " Mr. Hecht said. "There's almost nobody here who didn't lose somebody to Katrina. You would never wish for this.
"What is interesting is you can somewhat honor those who suffered by rebuilding in a way that is smarter, better and more sustainable than before," he added. "And I believe that's what we're doing here."
The concern in New Orleans, and in other cities that have suffered through disasters, is that the economic boom will disappear after the relief efforts and funding are depleted.
"That is the critical question," Mr. Hecht said. "When the Katrina funds run out in three to five years, are we going to have an economy that is more robust than we had before Katrina?"
In Joplin, the healing process, both in human and economic terms, remains a work in progress.
"We're still mourning our losses," said Joplin's Ms. Smith. "But this community is not a victim at all."
© Copyright 2014 The Washington Times, LLC. Click here for reprint permission.
About the Author
Tim Devaney is a national reporter who covers business and international trade for The Washington Times. Previously, he worked for the Detroit News, Grand Rapids Press, Portland Press Herald and Bangor Daily News. Tim can be reached at email@example.com.
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