Hurricane Katrina: A Nationwide Catastrophe

“Last Sunday, nature took out New Orleans almost as surely as a nuclear strike,” wrote George Friedman of think-tank Stratfor. Paralyzed by putrid flood water, insolvent infrastructure and no manpower, the Gulf Coast is months, perhaps years, away from reassuming its role at the epicenter of the American economy.

While millions have suffered directly as a result of the hurricane; Katrina’s wrath will be felt by all Americans in the coming weeks and months. Like 9/11, this hurricane will be recorded as a milestone event in American history.

The cost estimates of the damage caused by Katrina vary; yet there is little variation in the opinion that it will be the most expensive natural disaster in American history. Insurance claims could potentially top $40 billion. Many analysts expect total economic losses to exceed $100 billion.

Within days of the catastrophe, Katrina’s fury was beginning to be felt by all Americans. Most notable was the pre-Labor Day weekend hike at the gas pump. As a result of closed pipelines, gas prices in some southern states ran between $6 to $8 a gallon, while the rest of us had to contend with gas hikes of 40-70 cents a gallon. Natural gas prices also soared and will likely remain high as the U.S. heads into winter.

In spite of the headlines, soaring oil and natural gas prices aren’t the worst problems the U.S. will face over the coming weeks and months. Hurricane Katrina struck an overwhelming blow to the foundation of the national economy.

As the largest port in America by tonnage and the fifth largest in the world, the Port of South Louisiana was the choke point of the American economy. “A simple way to think about the New Orleans port complex is that it is where the bulk commodities of agriculture go out to the world and the bulk commodities of industrialism come in. The commodity chain of the global food industry starts here, as does that of American industrialism” (Stratfor, September 1). Hurricane Katrina, as one reporter put it, ripped asunder the aorta of the entire American economy.

The price of some foods is sure to increase throughout America. Forty percent of the nation’s oysters were harvested in Louisiana. Sugar, coffee, fruits and vegetables from Central and South America were imported through the Gulf States’ port systems. Further compounding the problem was the decimation of sugar cane and cotton crops in Mississippi just weeks before they were due to be harvested. Industry officials believe more than 10 percent of the state’s cotton crops were damaged.

Australian newspaper the Age further highlighted the widespread economic impact. “Signs have emerged of the havoc the storm wreaked on the companies and transportation lines that supply the nation. Union Carbide officials could not even get to their chemicals plant in Hahnville, and it will probably take weeks to resume operations there. Chiquita Brands International reported severe damage at the Gulf port facility in Mississippi where it stores a quarter of the bananas it imports from Central America.

“Yellow Roadway, one of the nation’s largest trucking companies, has 20 trucking terminals in the area affected by the storm. Some may have been destroyed ….

“The damage might even be felt at the American breakfast table. New Orleans warehouses hold about a quarter of the nation’s raw coffee …. And Department of Agriculture officials are sufficiently concerned about tight sugar supplies because of Katrina that they raised import quotas on refined sugar on Tuesday.

“Exporters of U.S. goods, especially farmers in the Midwest, may have the most to lose if New Orleans area ports are out of service for a prolonged period. The harvest is just beginning—the time when grain and other major commodities for export are carried by barge down the Mississippi River, then deposited in cargo ships to be carried overseas. …

“Moving the crops by train might cost up to five times as much and, even then, alternative ports often lack the specialized warehouses and equipment needed to handle the crops. If it takes more than a few weeks to fix the ports, a glut of grain and widespread spoilage could yield a disastrous season for farmers” (September 2).

Many analysts believe that Katrina will stop America’s recent economic growth and further exacerbate the nation’s deepening financial problems, such as the nation’s unprecedented trade deficit. Virtually every facet of the American economy has been impacted. Agriculture, imports, exports, transport, oil and gas, the stock market, manufacturing and the thriving housing market will all be impacted.

The cost of lumber and construction materials is already moving up and will continue to rise as large portions of Alabama, Louisiana and Mississippi are reconstructed. This will drive up the cost of building new homes across the nation, perhaps putting a chill on the nation’s “hot” housing market, which is presently the motor of the American economy.

It is difficult to comprehend the true extent of the economic impact that Hurriance Katrina will have on America. With interest rates on the rise and gas prices reaching new heights, this was the last thing the U.S. economy needed.

While the economic impact of Katrina will be absorbed by all Americans over the coming weeks and months, the brunt of the hurricane’s blow will continue to be felt by the states of Alabama, Louisiana and Mississippi. Of particular concern will be the government’s ability to rebuild and repair New Orleans and the surrounding infrastructure.

Discussing this concern, Dr. Friedman stated, “[I]t is not the population that is trapped in New Orleans that is of geopolitical significance: It is the population that has left and has nowhere to return to. The oil fields, pipelines and ports required a skilled workforce in order to operate. That workforce requires homes. They require stores to buy food and other supplies. Hospitals and doctors. Schools for their children. In other words, in order to operate the facilities critical to the United States, you need a workforce to do it—and that workforce is gone” (Stratfor, op. cit.; emphasis mine throughout). New Orleans and its surrounding infrastructure are essential to the American economy and must be rebuilt, at least to a certain extent.

But who is going to rebuild the area and remain there upon its completion?

The critical facilities of the Gulf Coast will surely be reconstructed, but at what cost? It’s likely that the federal and state governments will have to spend millions enticing contractors and construction companies into reconstructing the infrastructure of America’s key gateway. Prior to the reconstruction, however, the govermment will have to spend hundreds of millions of dollars cleaning up the mess and establishing facilities to service the contractors and companies. The soil and water in and around New Orleans has been contaminated with oil, chemicals and human feces; it will have to be detoxified.

As the federal and state governments allocate billions of dollars to reconstructing the Gulf Coast infrastructure, watch for foreign companies to seek a piece of the pie. China, for example, could seek involvement in rebuilding port facilities. While support from foreign nations will be appreciated, this catastrophe might well provide an avenue by which China and other nations can gain an influential foothold at the epicenter of America’s key industries.

Even after the complete reconstruction of critical infrastructure, Louisiana and Mississippi will have to undertake an extensive and expensive public relations program in order to entice a labor force back to the region. Hundreds of thousands of trained people will be required. Will they be available?

Thousands of evacuees have stated that they will not return. It’s likely that hundreds of thousands will take their insurance pay-out and relocate to another state. This trend could be potentially fatal for Louisiana and Mississippi—and a wound for the entire United States.

It will take considerable investment from outside sources to rebuild the city that was at the epicenter of the American economy.

And even then, the city and its environs will remain susceptible to another such catastrophe.

“[S]cientists who study such storms and the way society reacts to them say that more dangerous storms could be on the way, and that they are likely to come more often than many people expect,” said the August 30 issue of Forbes. “‘We haven’t seen the worst-case scenario by any stretch of the imagination,’ says Roger Pielke Jr., director of the Center for Science, Technology and Policy Research at the University of Colarado.”

Even now, there is the distinct possibility that another hurricane could strike the southern states this year.