September 4, 2005

CATASTROPHE DIVIDEND:

Roadblocks to Rebuilding: Because of the housing boom, reconstruction in the areas hit by Hurricane Katrina is likely to be hampered by a lack of materials and skilled labor (Annette Haddad, September 4, 2005, LA Times)

The massive Hurricane Katrina rebuilding effort — expected to be among the biggest and costliest ever — will be even more expensive thanks to the nation's housing boom.

The rebuilding will create new demands for building materials and construction workers, already in short supply because of strong home-building activity around the country.

That could result in even higher costs for those goods and workers, which in turn could further boost prices for new homes in California and elsewhere.

The recovery effort "will make it more difficult for anybody operating in construction elsewhere," said Greg Gieber, a financial analyst with A.G. Edwards & Sons in St. Louis. He foresees shortages that will reduce the pace at which new homes are completed across the country.

Expectations of building material shortages caused by post-Katrina reconstruction already are rippling around the nation.

Concerns about the dearth of cement could prompt the Bush administration to yield in a long-running trade dispute. On Wednesday, the Commerce Department preliminarily agreed to ease tariffs on cement imported by Mexico's top producer, Cemex. A final decision is expected in December.

Katrina also sparked a jump in prices of lumber on futures markets; those prices had been declining before the storm. Since Aug. 25, prices have climbed 12%.

Of course, things could change in the several months before construction can begin in storm-battered areas. Time will be needed to drain flooded areas, clean up wreckage and sort out insurance claims. Also, repairing the public infrastructure — things such as levees, highways and port facilities — is likely to take precedence.

It could take at least six months before significant new construction begins, said Ed Sullivan, chief economist for the Portland Cement Assn., a trade group for U.S. cement producers.

"It doesn't happen overnight," Sullivan said.

Total reconstruction costs could run as high as $100 billion, based on the latest estimates, making the Katrina rebuilding effort the costliest in U.S. history.


Contrary to the broken window fallacy, rebuilding from hurricanes is one of the drivers of Florida's long economic boom and the complete destruction of New Orleans affords an opportunity for it to leap from the 19th Century into the 21st, but one wonders if such a corrupt city and state are capable of pulling off their own versions of the German and Japanese "miracles."


MORE:
A NEW New Orleans: Forget crawfish étouffée -- look to ugly Houston for a vibrant economic model. (Joel Kotkin, September 4, 2005, LA Times)

BECAUSE THE OLD New Orleans is no more, it could resurrect itself as the great new American city of the 21st century. Or as an impoverished tourist trap.

Founded by the French in 1718, site of the first U.S. mint in the Western United States, this one-time pride of the South, this one-time queen of the Gulf Coast, had been declining for decades, slowly becoming an antiquated museum.

Now New Orleans must decide how to be reborn. Its choices could foretell the future of urbanism.

The sheer human tragedy — and the fact that the Gulf Coast is critical to the nation' s economy as well as the Republican Party's base — guarantee that there will be money to start the project. Private corporations, churches and nonprofits will pitch in with the government.

But what kind of city will the builders create on the sodden ruins?

The wrong approach would be to preserve a chimera of the past, producing a touristic faux New Orleans, a Cajun Disneyland.


New Orleans's Future: What determines if a city recovers from disaster? (JOEL KOTKIN, September 4, 2005, Opinion Journal)
Although the 1994 [Los Angeles] earthquake caused $16 billion in damage, the city, under the leadership of Mayor Richard Riordan, managed the temblor with remarkable efficiency. Perhaps most remarkable, the very city that suffered the worst urban rioting in American history two years earlier managed the postearthquake chaos with little lawlessness and political discord. As a result, the great natural calamity--many in the east proclaimed this to be the last nail in the long-anticipated L.A. coffin--became, instead, a cause for civic revitalization. The funds poured into the city for rebuilding also helped jumpstart the city's economy, then reeling from the decline of the aerospace industry.

This constitutes one part of the opportunity for New Orleans. Rebuilding will bring in billions of dollars, a surge in relatively high-paying construction jobs and perhaps funding to improve the city's devastated infrastructure, including its levee system.

Will New Orleans meet this challenge? The key may lie not so much in calculating the amount of money sent from Washington, but whether the events of this week will transform attitudes toward growth, economic diversification and commitment to the overall public good. On the surface, there is reason to be skeptical. Once the premier city of the south and commercial center of the Gulf, New Orleans has been losing ground for the better part of a century. It has surrendered its primacy to other, newer cities--Miami and Houston--which have fed off the "animal spirits" of entrepreneurs and had the foresight to invest in basic infrastructure.

Demographics tell much of the story. In 1920, New Orleans's population was nearly three times that of Houston and nine times Miami's. It was the primary Southern destination for European and Caribbean immigrants. Now, both the Houston and Miami areas--despite their own ample experience with disasters of the natural as well as the man-made variety--have long since surpassed New Orleans, with populations more than three times as large. During the '90s, the Miami and Houston areas grew almost six times as fast as greater New Orleans, and flourished as major destinations for immigrants, particularly from Latin America.

These newcomers have helped transform Miami and Houston into primary centers for trade, investment and services, from finance and accounting to medical care, for the entire Caribbean basin. They have started businesses, staffed factories, and become players in civic life. Houston has taken over completely as the dominant center for the energy industry, once a key high-wage employer in the New Orleans region.

Instead of serving as a major commercial and entrepreneurial center, New Orleans's dominant industry lies not in creating its future but selling its past, much of which now sits underwater. Tourism defines contemporary New Orleans' economy more than its still-large port, or its remaining industry, or its energy production. Although there is nothing wrong, per se, in being a tourist town, it is not an industry that attracts high-wage jobs; and tends to create a highly bifurcated social structure. This can be seen in New Orleans's perennially high rates of underemployment, crime and poverty. The murder rate is 10 times the national average.

Perhaps worse, there seems to be some basic hostility in New Orleans to the very idea of an economic renaissance and growth. When I published rankings of the best cities for business for Inc. Magazine last year, New Orleans's middling performance created consternation at one local daily newspaper--for not being bad enough. Such negative attitudes may pose the biggest problem as the city begins to rebuild. Rather than imagine anything better, the temptation among some may well be to take the path of least resistance, restoring or reconstructing past icons in order to salvage the tourism-based economy.


Posted by Orrin Judd at September 4, 2005 12:00 AM
Comments

The gulf coast is critical to the Republican Party's base sound a bit overblown. Mississippi/Alabama/Florida Panhandle yes but LA, except for the presidential race, was still leaning Democrat (Dem governor and NO mayor for example). This sounds like the same predictions of gloom (hope from a liberal MSM) that the GOP in Florida was going to get crushed due to anger after the hurricanes. Didn't happen because for the most part the reconstruction went well.

Posted by: AWW at September 4, 2005 10:57 AM

Also the MSM keeps telling us how bad the economy is, Bush is trashing the economy, etc. (Headline on Yahoo on Friday - unemployment rate slumps to 4.9% - why not drops?). How does this article, which implies the economy is tight and overheating, square with this other meme?

Posted by: AWW at September 4, 2005 10:59 AM

"On Wednesday, the Commerce Department preliminarily agreed to ease tariffs on cement imported by Mexico's top producer, Cemex. A final decision is expected in December."

What does this mean? Has NAFTA been rendered null and void?

AWW - Semantics is everything and the left are past masters at deploying it. Your example is perfect. "Slumps" has a negative connotation, so couple it with a positive fact the media don't want to become generally known and presto most people glancing at the headline get the impression that it's bad news about unemployment. Mission Accomplished.

Posted by: erp [TypeKey Profile Page] at September 4, 2005 11:36 AM

Louisiana's election cycle and its...uh...unique voting system and history means that before the Republicans come up on the national ballot there, Gov. Blanco and the other state and local Democrats in the southern part of Louisiana will have to run for re-election, including the non-partisan primaries.

Bobby Jindal is one of the only GOP officeholders in the southern part of the state with any sort of national profile who comes up in 2006, and since he lost the governor's race to Blanco, it's hard to see how he would get to be first in line to feel the wrath of the voters.

Posted by: John at September 4, 2005 11:47 AM

You mean they can't just transplant the "Pirates of the Caribbean" ride and the French Quarter section of Disneyland, add some conventions centers, and be done with it? From what I understand, the old New Orleans wasn't much more than that already.

Posted by: Raoul Ortega at September 4, 2005 3:50 PM

I believe it is inevitable that the rebuilt New Orleans will be based on tourism, and will likely be even more backward-looking than the pre-Kartina city. Those interested in engaging the future and competing with Houston and Miami will simply move to Houston or Miami. Those who choose to return and rebuild New Orleans will be those who prize its uniqueness and backwardness.

Posted by: sammler at September 5, 2005 9:30 AM

Why not have the port facilities and the tourist facade down by the water but pull the rest of the new city back?

Posted by: oj at September 5, 2005 9:39 AM
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