The cost of disaster: Putting a price tag on climate change

Speeding recovery, changing strategy

How can an economy recover more quickly?

“The thinking behind what you do in a disaster recovery is generally to quickly get things back to a resemblance of what you had before” he says. “It’s rare to think of the post-disaster period as something needing strategic economic development thinking--how to create economic growth at a faster pace. It’s a different form of strategic thinking of post-disaster growth.”

To change strategic thinking, it’s useful to understand that “total cost to an economy is not predicted by the initial losses,” Mutter points out. “Slow recovery rates can lead to high costs, even with low initial losses,” he notes, mainly because we have to factor in growth that likely would have occurred without the disaster. So “the growth rate in recovery must exceed the pre-disaster growth,” he says.

Cause, effect, change

For instance, in 2005, when Hurricane Katrina struck New Orleans, where levees protecting industrial canals failed, “the chain of causation goes further back,” Mutter notes. “Why were [the levees] there? Why were so many people living so close to the structures, and how did they benefit from that? Human beings put things there.”

As with parts of the infrastructure, like roads and bridges, if the disaster is seen as an opportunity to clean the slate and start over, it could even be used as a growth opportunity.

Sometimes in the developed world, as in the 2011 earthquake and subsequent tsunami in Japan, the disaster represents an opportunity to rebuild many parts of the economy—physical and social—in a better way.

New Orleans, where human beings initially located industrial canals in the levees to facilitate shipping, is another opportunity to rethink economic strategy. For instance, says Mutter, New Orleans now has the opportunity to rebuild its school system, previously one of the poorest, from the ground up; improved education can lead to a more robust economy longer term.

To get a handle on rethinking post-recovery strategy, Mutter says it’s also crucial to analyze: “What sort of growth trajectory were you on before? Where would that put you in terms of average income, when did everything get back to the same place it was before the disaster? When did the town produce at same projected level as before.”

The goal is to identify the trajectory required “to get back to where you were before the event,” he says. “The somewhat counterintuitive issue here is that if the economic growth rate was fast before the event it may need to be unrealistically fast after to regain the same growth trajectory.”

Next page: How to get better post-disaster results