Now that the 2021 hurricane season is well underway, expect a very dumb idea to make multiple reappearances.
Whenever Mother Nature produces awesome devastation, not only via storms but in earthquakes and other disasters too, this idea pops up from every corner. Amid skyscrapers reduced to piles of rubble, freeways heaved and twisted, homes wiped out by floods or fire, dozens or hundreds of dead and injured, adults who should know better declare, “The economy will now get a boost as we get busy replacing what was lost.”
Destruction, the argument goes, requires repair and reconstruction. That means the creation of new jobs. Catastrophes stimulate economic activity, turning at least some of the pain of the devastation into a national blessing. Or so we’re told.
In the wake of the horrific earthquake that rocked Kobe, Japan in January 1995, Nicholas D. Kristof reported this in the New York Times: “Despite the devastation, some experts said that in some ways the earthquake could give a boost to an economy struggling to recover from a long recession.” The spending needed to rebuild the port of Kobe, he wrote, “may give a stimulus to Japan’s economy, the world’s largest after America’s.”
This notion that destruction is an economic stimulus is not new. After World War II, some who surveyed the wreckage of Western Europe argued that the rebuilding effort would lift the continental economy. Reflecting on those years, British Prime Minister Harold Wilson once explained the rapid rise of Germany and the stagnation of Britain in these terms: Germany had the good fortune of having its manufacturing capacity totally wiped out, whereas Britain was still using plants that had survived the war. The implication was that Britain would be better off today if only Germany had dropped far more bombs on it in the 1940s.
In 1993, then-U.S. Treasury Secretary Lloyd Bentsen openly declared that the nation’s economy would receive a healthy stimulus because of terrible floods in the Midwest.
Former economist and now full-time socialist propaganda spokesman Paul Krugman espoused the same nonsense in the wake of the 9/11 terror attacks on New York and Washington twenty years ago. “It seems almost in bad taste to talk about dollars and cents after an act of mass murder,’’ he wrote, but the attacks could “do some economic good.’’ Manhattan would “need some new office buildings’’ and “rebuilding will generate at least some increase in business spending’’ this charlatan advised us.
Can you imagine survivors of these awful events being consoled by such assurances? To my knowledge, no one—repeat, no one—has ever said, “I’m so glad my home was flattened because now I have the chance to rebuild it and stimulate the economy!”
So if nobody whose lives or valuables are ruined in disaster proclaims the event to be a blessing, then how is it that someone can add up all their misery and proclaim the result to be a good thing? Answer: They can’t because it’s not, period.
What is harmful or disastrous to an individual is also harmful or disastrous to the collection of individuals that make up a nation. No one could think that a natural disaster was an economic advantage if he thinks first of the people whose property was wiped out.
Some people are simply not using their heads to think this through. They are looking at a tree or two and ignoring the forest.
Consider a thief who goes house to house grabbing all the loot he can get his hands on, then spends it at the local shopping mall. The shop owners might appreciate his business. But that’s not the same as saying he helped the economy as a whole. Every dollar the thief spends at the mall is a dollar that cannot be spent by the people to whom the money really belongs.
If it costs the victims of catastrophe a billion dollars to rebuild, that’s a billion they won’t have for other things. Much was lost forever because it was simply irreplaceable at any price. Anyone who simply observes the increased construction activity as people spend to rebuild and concludes that a disaster is some sort of economic blessing, is blind to the big picture.
In a 2016 article titled Hurricanes Have No Silver Lining, the Foundation for Economic Education’s Dan Sanchez writes,
Sound economics, common sense, and common decency all arrive at the same conclusion: that natural disasters truly are disasters to those afflicted. And the victims deserve our unstinting sympathy and support.
That’s a truth that was plainly stated nearly two centuries ago by the French economist Frederic Bastiat and which was later restated and popularized by the 20th Century economist Henry Hazlitt as “the broken window fallacy”.
The fact that some people who should know better see blessings in destruction is an indication that we have a lot of economics educating to do!