The Role of Government in the Recovery from Natural Disasters

Lessons from the past show that government has an important role to play in helping cities and people recover from natural disasters:

Blueprints From Cities That Rose From Their Ashes, by Anna Bernasek, NY Times: ...A major disaster, like Hurricane Katrina, acts as an involuntary experiment on the economic system. ... The results can be revealing. In the case of a disaster that levels a city, it's quite clear what the city looked like just beforehand, so we can judge its recovery by how quickly and thoroughly it returns to normal. ... the pace of recovery can vary greatly from city to city, and those differences can shed light on how to accelerate recovery from future disasters. What's more, urban disasters may provide clues to ... how to organize an economy, maximizing prosperity by getting the right mix of government and private involvement. Start with two success stories ... Galveston, Tex., and San Francisco. The hurricane that hit Galveston in 1900 killed perhaps 10,000 people ... and destroyed 8,000 buildings. By 1907, Galveston had largely recovered ... In 1906, most of San Francisco survived the initial earthquake only to be leveled in an inferno that raged unchecked. Some 28,000 buildings were destroyed... and 3,000 people were killed. But in just three years, 25,000 new buildings lined the streets, and by 1911, San Francisco had substantially recovered. So what made those two recoveries possible? In both cases, government money made up only a portion of the total losses. By far the main work of rebuilding was done by private individuals. But government at all levels - national, state and local - played a main role in re-establishing the confidence of the entrepreneurs, investors and ordinary citizens that is a prerequisite for economic growth. It achieved this in three ways.

First, government ensured public safety ... The city of Galveston, for example, decided to build a sea wall to protect residents from future storms. ... And ... the entire grade of the city was raised 1 to 15 feet above its previous level. In San Francisco, the federal and local governments worked together to secure the city against earthquake and fire. ... Second, all levels of government reacted promptly and vigorously in each case, taking decisive and tangible steps that provided an essential public reassurance to traumatized citizens. Immediate government spending provided employment to suddenly homeless and jobless citizens, priming the pump of the local economies as they fought to regain their stroke. Two days after the earthquake in San Francisco, while the fires were still smoldering, Congress took action toward rebuilding all the public buildings that had been destroyed. That provided work for many who had their lost jobs. ... Local government acted swiftly, too. ... plans for rebuilding were rejected ... in favor of even faster progress. Third, government focused on ... providing not only essential public safety but also a level playing field. In Galveston, civic leaders undertook anti-corruption reforms that became a model for cities elsewhere. ... In San Francisco, public officials pursued the goal of fairness in other ways. Leaders ... put great pressure on companies that had been refusing to pay fire insurance claims. The companies contended that the damages were due to earthquake, a risk not covered under typical fire policies. In the end, most claims were paid ... although some insurance companies went under...

Even in the most horrific circumstances, cities can come back. ... after the atomic bomb attack of 1945 ... after about 30 years, the city had in many ways recovered. It took that long because the Japanese government was overwhelmed - 66 cities had been bombed during the war - and essentially bankrupt. "The recovery of Japan's cities was almost all a private initiative," Professor Weinstein said [a specialist on Japan in the economics department at Columbia University]. "There just wasn't money around for the government to rebuild Japan." Divining the right mix of government and private activity lies at the very heart of economic policymaking. What disasters show us is the difference between arrangements that work and those that don't. San Francisco recovered in only five years. Nearly a hundred years later, shouldn't we try to do better in New Orleans?

[Galveston is described here and San Francisco here and here.]