Amid the mass panic in the Southeastern United States over Hurricane Matthew, we wanted to research whether hurricane damage economies or spur growth.
An FKD Feature exclusive

Whether natural disasters like hurricane damage economies or spur growth is a matter of debate among researchers. This topic is extremely relevant to many, as hurricanes are a constant threat to many areas around the globe, and climate change has lead many scientists to conclude that their intensity may already be increasing because of warming waters.

Looking at the wide range of what researchers believe the long-term economic impact of hurricanes are in the real world, we found varying answers. In general there are two schools of thought on this topic. One side suggests that the construction boom that occurs in the aftermath of hurricanes and other natural disasters leave the affected region better off economically.  

From the New York Times article from 2008, titled “Do Natural Disasters Stimulate Economic Growth?”:

“Rebuilding efforts provide a short-term boost by attracting resources to the region, economists say. By destroying old factories and roads, airports and bridges, the disasters allow new and more efficient infrastructure to be built, forcing the transition to a sleeker, more productive economy in the long term.”

 Meanwhile, a Wall Street Journal article from 2014, titled “Hurricanes Also Wash Away Income Growth,” provides a different perspective:

“Tropical storms may pass over an area in less than a day but the economic impact on the ravaged areas can last for two decades. That’s the finding of a new study that looked at the impact on long-run income growth from a cyclone (called a typhoon in the Pacific and a hurricane in the Atlantic)…What they found is that the popular idea that disasters stimulate growth and economic losses are made up quickly isn’t true. Storms cause a long-running reduction in per capita real gross domestic product.”

Takeaway

Hurricanes are devastating events to real communities. Even if we were able to confirm that they are net-positive economically, the human toll incurred often doesn’t have a dollar figure. Beyond that, most studies concur that there’s definitely a negative impact immediately following a natural disaster, as whole economies suddenly become paralyzed while they rebuild critical infrastructure.

As a Hurricane Andrew survivor, I can tell you there’s a little bit of truth on both sides. In South Florida, I lived through the disaster and the recovery, and I agree that economists are right in the sense that the areas that can afford to rebuild emerge stronger than ever. Unfortunately, Hurricane Andrew condemned areas that were already suffering from high levels of poverty to economic stagnation.

Either way, there’s little doubt that hurricanes are traumatic events, psychologically and economically, and there’s a tangible economic cost associated with their arrival.

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Posted 10.05.2016 - 02:57 pm EDT