Today’s New York Times carries an article reporting that reconstruction in Joplin is bringing in new stimulus to the economy
On the surface my response is “a- duh”. Dig a whole and then fill it in and call the filling “new activity”. Or remember the Broken Window Fallacy, that breaking windows creates work for glaziers (good, if that is where you stop looking) but wastes the shop-owner’s money (ah, there’s more to the story).
But maybe it’s more than that. An article in the New Yorker reviews how disasters in wealthy, developed societies may lead to overall economic growth. James Surowiecki writes in that article that something akin to “accelerated depreciation” may occur: disaster-stricken economies don’t simply replace broken windows, as it were; they upgrade infrastructure and technology, and shift investment away from older, less productive industries.”
This argument was advanced in this 2002 paper by Mark Skidmore of the University of Wisconsin-Whitewater and Hideki Toya of Nagoya City University in Japan. They said that some disasters can boost GDP by forcing upgrades in technology and infrastructure, and offering the opportunity for critical reappraisal of ingrained modes of economic activity, leading to a higher level of productivity and, eventually, to net gains in growth. They find that this holds for some weather-related disasters, but not for geological disasters. The argument of this paper, which is as strong as the disaster-bonus case gets, is a touchstone for a good deal of later research.
Dive into the question deeper and consensus remains that disasters are bad for you. For those of you who want to read more, Will Wilkinson has a survey and treatment of this question in the Economist.
Just as that Skidmore and Toya study finds that GDP growth rates are resilient only in wealthy, more developed countries and that in poor, less developed countries that disasters have no such positive effect, I believe the same difference can be seen in communities. Communities with wealth, social capital, strong civic structures and participation, leadership, equity, etc. will do well. Those without face a disaster plain and simple. Some people do improve their lot, too; good luck finding a Joplin contractor who has time to fix your house at this point. But as we know, people, like communities or countries, who are poor, poorly insured, and otherwise without easy access to capital fare rather badly in reconstruction.
The other problem is with the measure. GDP is simply a measure of the transfer of goods and services. It has nothing to do with general well-being. Money is being redistributed from insurance companies to home-owners, from home-owners to construction workers, and from one section of town to another.
Someone needs to do the same economic study of towns in disasters as the economists did with countries. This would go a long way to helping us understand what makes up resilience in a community.