Cleanup efforts in the wake of Superstorm Sandy are already well underway. A federal grant from the United States Department of Labor of nearly $47 million has been made available to hire unemployed workers in New York, New Jersey, Connecticut and Rhode Island to assist in cleanup and reconstruction activities. FEMA is replacing out-of-state workers with local residents in areas where recovery efforts are occurring. Construction companies in all trades are also seeing an uptick in business as reconstruction continues. Many are hiring extra workers and working overtime to keep up with demand.
Early estimates of the damage caused by Sandy are in the $30 to $50 billion range with some forecasters predicting it could top nearly $100 billion when all is said and done. The Economic Outlook Group has asserted that if $50 billion in losses are assumed, the cost to rebuild after Sandy including hiring new workers, purchasing building materials, design costs, etc. could result in $140 to $240 billion. In addition to the economic boost, efforts to rebuild after the storm will create tens of thousands of new construction jobs. In New York City alone there could be as many as 25,000 new construction related jobs created over the next two years according to City Comptroller John Liu.
The increased spending to rebuild will bolster the economy but it is too early to tell whether Sandy will have a positive or negative impact on economic growth. One of the things to take into account is the broken window fallacy put forth by Frederic Bastiat in 1850. Simply put, it states that destruction doesn’t create wealth or economic activity because the money spent to make the repairs would have been spent elsewhere. This theory doesn’t take into account things like insurance, or the fact that maybe the glazier replacing the window was currently out of work or the window was already damaged prior to it being broken. That being said, this is by no means an endorsement to create wanton destruction in order to boost the economy. Sandy was an unavoidable natural disaster that cost lives, wreaked havoc and affected over 60 million people.
Another thing Bastiat didn’t consider was the possibility that the broken window would be replaced with energy efficient, unbreakable glass. This should be a key factor in the reconstruction process in the aftermath of Sandy. Don’t just replace what previously existed; replace what previously existed with something better. This means safeguarding vital infrastructure such as hospitals, electricity and telecommunications with innovative design and stronger materials in order to protect and better mitigate damage for when the next storm strikes. Those in charge of the reconstruction need to look at building seawalls and sand dunes to protect against storm surges and flooding, burying power lines to avoid outages due to wind damage, and investing in inflatable plugs to prevent subway tunnel flooding.
By investing the resources now to rebuild better will not only be a much needed shot in the arm to the construction industry but if done correctly could mean that things won’t have to be rebuilt after the next disaster strikes.