May 25, 2011

Economics of Disaster: From Joplin Tornado to Japan Quake, Crisis at a Cost—Slideshow

Billions of dollars spent on cleanup, emergency crews, disrupted commerce, crop damage

Natural disasters here and abroad have taken their toll this year on families, homes and communities. They also have ravaged local economies everywhere they've hit, imperiling budgets and businesses from Japan to the Mississippi River Delta to the U.S. Midwest. For example, Joplin, Mo.’s cataclysmic tornado (left), which resulted in an estimated 116 deaths, destroyed hundreds of homes and vehicles, as well as a high school, a hospital and an entire commercial neighborhood.

(Photo: The Associated Press)

The economics of disaster encompass cleanup costs, emergency crew services, disrupted travel and commerce, increased insurance coverage, crop and livestock damage and even—in the case of the crippled Fukushima Dai-ichi nuclear plant due to the earthquake and tsunami in Japan (left)—containment of radiation leakage. In addition, disruptions to Japan’s supply chains have led to negative consequences for global manufacturers.

(Photo: The Associated Press)

When disaster strikes, market watchers scramble to keep up with changes in commodities prices and earnings losses in industrial sectors ranging from Consumer Staples to Technology to Financials. Meanwhile, property-casualty insurers are kept busy sending claims adjusters to stricken sites. Insurers such as The Travelers Cos. and The Hartford Financial Services Group have visited Minnesota, Alabama (left) and many states in between this year, which is already the second deadliest tornado season on record, with 425 fatalities as of Monday, according to the Insurance Information Institute. President Barack Obama has requested $6.79 billion for the Federal Emergency Management Agency (FEMA) this year, and a House committee voted Tuesday to send an added $1 billion to help emergency crews clean up all the tornado and flood damage.

(Photo: The Associated Press)

Also in the United States, the Mississippi River showed its terrible might with floods all along its banks this spring, from Illinois to Mississippi (left) to Louisiana. Waterway commerce has been disrupted, and delayed barge traffic has forced overland trucking of some cargo. So far, according to the Army Corps of Engineers, an estimated 2.2 million acres of farmland have been flooded in the Mississippi Delta, about 1% of all U.S. cropland.

(Photo: The Associated Press)

More crop damage as well as livestock losses have been reported in drought-stricken Texas (left), according to economists with the Texas AgriLife Extension Service. Preliminary estimates of drought losses have already reached $1.2 billion and are expected to surge higher in 2011. “Each day without rainfall is one in which crop and livestock losses mount,” said Dr. David Anderson, AgriLife Extension livestock economist. “Even with the severity of the current drought, estimation of economic losses is difficult given that we are still early in the growing season.”

(Photo: The Associated Press)

Disrupted manufacturing, agriculture and distribution costs get passed on to consumers at the gas pump and in the grocery store. Retail gasoline prices have remained stubbornly at two-year highs this spring, even though the cost of crude oil has been comparatively volatile as prices have dipped and risen, and gas prices often rise in regions suffering the effects of natural disaster due to supply disruptions. The Institute for Supply Management said its service sector index rose at the slowest pace in eight months in April, as many companies expressed concerns about higher food and gas prices, The Associated Press reported on May 4.

(Photo: The Associated Press)

Many natural disasters can be planned for to some degree—snowstorms that have covered New England and the Midwest, for instance, are quickly tackled by experienced cleanup crews (left). Nevertheless, the blizzard that swept through the Northeast in late December delayed $1 billion in retail spending, according to research firm ShopperTrak.

(Photo: The Associated Press)

Finally, as surely as summer follows spring, the hurricane season follows behind floods. The 2011 Atlantic hurricane season officially starts on June 1, and meteorologists expect well above-average activity this year. Weather Services International forecasts 15 named storms, eight hurricanes and four intense hurricanes in 2011, with “a much more impactful season along the U.S. coastline,” according to WSI Chief Meteorologist Todd Crawford.

(Photo: The Associated Press)

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