As the last TV news trucks pull out from Houston, Miami, and all the places devastated by Hurricanes Harvey, Irma, Jose and Maria, the city planners and construction crews will pull in. And eventually, these cities will largely spring back to life—perhaps even looking better than before.
The apparent rebuild supports economists’ long belief that disasters boost economies because of the influx in infrastructure investments. This, however, is all an illusion that misses the hidden costs that ripple throughout our national economy. In fact, my colleague Solomon Hsiang and I have found that storms like Harvey and Irma can lower the long-run growth of the United States, effectively rewinding our economy and leaving its imprints for up to two decades. That’s because, if these hurricanes had not made landfall, the billions of local, state and federal taxpayer dollars that will now rightly go towards the recovery efforts in the form of federal emergency aid and other public services would have gone elsewhere to grow our economy.
So, the people of Houston and Miami may not be the only ones affected by the storms – we all could be affected. But, it doesn’t have to be this way. There is time to prevent these storms from having a bigger and broader economic toll on our national landscape. To do so, we need rebuilding and recovery plans to focus on generating incomes, not just erecting more hardened infrastructure; plans focused on increasing preparedness and fixing how we insure against these risks, not just relying on aid to fill the many gaps that more efficient policies could correct.
In the aftermath of a storm, people are focused on the physical re-build—restoring the flooded home or local diner to look as it did before the storm. That’s where much of the federal disaster aid comes in. However, we lose sight of people like the small business worker who can’t return to work because there’s simply not enough business to keep everyone employed….