For traders as well as many individuals who have basic knowledge about the economy, there is one constant: the impact the economy has on our standard of living as well as how much we make. Since the beginning of time, the world as it is has been plagued with natural disasters from time to time, leaving us in a worse position than before.
Natural disasters and the economy that results are destructive events that include volcanic eruptions, mudslides, wildfires, and earthquakes. They also include weather-related conditions such as tsunami, lightning strikes, tornadoes, hurricanes, heatwaves, floods, blizzards, and droughts. These natural disasters cost insurance companies and homeowners a lot of money; they make the cost of living higher each time, and they inevitably take lives. In the year 2018 alone, natural disasters and the economy cost the world about $160 billion, making it the fourth-costliest year for natural disasters. The year 2017 was worse, costing the US economy alone a record $307 billion, something which took the country a long time to recover from.
On a long-term basis, the impact of these natural disasters and the economy can slow economic growth for many years, as many of the infrastructures that were impacted by these disasters need to be put back in place.
Our level of development in terms of technological advancements and science today, compared to many decades back, gives us an edge when it comes to detecting these natural disasters and the economy as well as the time of impact, but as we all know, there is little we can do about it.
- It’s not possible to halt a tornado in its tracks
- It’s not possible to tell the flood what time of the month it should hit
- It’s not possible to tell lightning strikes your city is off-limits
- It’s not possible to stop an earthquake when it starts
Simply put, natural disasters and the economy affect us in so many ways, especially our economy and way of life. To further enlighten you on some of the ways these natural disasters and the economy affect us, we will take a look at some of the most destructive natural disasters of all time to hit the planet.
Hurricane Katrina 2005 Natural Disaster and the Economy Cost: $250 billion
Hurricane Katrina, according to the National Hurricane Center, caused damage of about $125 billion and an insured loss of about $80 billion, which, when adjusted for inflation, would double to about $160 billion. The flooding in New Orleans accounted for half of the losses, which meant that the total impact on the economy was about $250 billion; a lot to take in.
Global Warming and Tsunami in Japan 2011 – Cost to Economy: $360 billion
The Japanese economy suffered an overwhelming fall when a 9-magnitude tsunami and earthquake hit it on 31st March 2011. This took a lot out of the country as about 29,000 people were confirmed dead, many others were injured, and about 600,000 people were displaced from their homes. This was not easy to recover from as it cost China about $360 billion.
The amount spent for recovery was not only because of the damage to homes and overall infrastructure of the country but also because of the damage to the Fukushima Nuclear Power Plant, which caused radiation to leak into the Pacific Ocean, raising the radiation levels to 4,000 times the normal limit. This radiation showed up in the country’s drinking water, local milk, and vegetables, which took a lot of effort and resources to clean up, something which is not kind to the economy.
Hurricane Harvey 2017 – Cost to Economy: $125 billion
The Category 4 storm, Hurricane Harvey, which hit Texas on 25th August 2017, caused total damage of about $125 billion. From Texas through to Kentucky, Louisiana, Tennessee, and Mississippi, the total damage count was about 13 million people affected, with as many as 88 people confirmed dead, and 45 missing.
Hurricane Irma 2017 – Cost to Economy: $50 billion
The most powerful Atlantic hurricane ever recorded in history was Hurricane Irma. This storm was a Category 5 storm when it hit Barbuda on 6th September 2017. With a wind speed of 185 miles per hour, the storm lasted for 37 hours, longer than any previously recorded storm. This storm hit southern Florida four days later, inflicting a total of $50 billion in damages. The damage stopped there but would have been more, with estimated damage of about $350 billion if it had continued.
Hurricane Maria 2017 – Cost to Economy: $90 billion
The Category 5 storm known as Hurricane Maria was a mean streak of a storm, which made its mark with multiple hits. On 18th September 2017 it hit Dominica, and Puerto Rico, the home of 3.5 million Americans, on 20th September. The damage to the first location was as much as the second, even though the storm was downgraded to a Category 4 storm. The overall cost of the storm was estimated at about $90 million in damage, with a death toll of around 3,000 people.
Hurricane Sandy 2012 – Cost to Economy: $65 billion
On October 29th 2012, Hurricane Sandy hit New Jersey, a hurricane which was a shock to many as it had been downgraded to a harmless tropical storm. This storm hit like a moving train, causing damage of about $65 billion. Over 650,000 homes were destroyed, and for those who still had their homes intact, there was no power. This was the first storm to close the New York Stock Exchange in 27 years. This storm had a fatality count of 159 people and many others were injured.
Hurricane Ike 2008 – Cost to Economy: $30 billion
Hurricane Ike cost about $30 billion in damage in 2008; a hurricane that also destroyed 10 offshore oil rigs and many other pipelines in the Gulf of Mexico. This affected all 22 Texas land-based oil refineries, as the oil rigs affected contribute about 24% of US crude oil production. This loss of this source caused the price of gas to spike, prompting the government to open a strategic petroleum reserve to help manage the situation.
Hurricane Charley to Hurricane Ivan
Hurricane Charley was a Category 4 storm that hit Florida in 2004, damaging property worth $16 billion.
Hurricane Irene was a Category 2 storm in North Carolina, which caused a lot of damage. As of August 26th 2011, the storm killed 25 people and left almost the whole city without power. The property damage very serious, to the tune of $13.5 billion. Due to the economic importance of North Carolina, the impact of this storm on the economy was estimated at about $45 billion.
Hurricane Matthew in 2016 was a Category 1 storm that hit the southeastern United States, causing a damage of about $10 billion.
Hurricane Andrew, a Category 5 storm, hit Florida in 1992, destroying $26.5 billion worth of property and killing many people in the process. This storm was a high one, with a height of 16.9 feet flooding Biscayne Bay.
Hurricane Wilma was also a Category 3 storm, which hit Florida in 2005 with high winds of up to 120 miles per hour, causing damage of up to $19 billion.
Hurricane Rita, a Category 3 storm, hit the city of Louisiana in 2005, damaging property to the tune of $18.5 billion.
Hurricane Ivan was a Category 2 storm that hit Alabama and Florida in 2004. It caused damages of about $9.8 billion and left five people dead.
Hurricane Ivan, a Category 3 storm, hit Alabama and Florida in 2004 and caused property damage worth about $20.5 billion. A small storm with big consequences.
Enough of hurricanes as we move on to other natural disasters that affected the economy as we know it. Let’s go.
Haiti Earthquake 2010
The Haiti earthquake was a 7.3 magnitude earthquake in January 2010, which left Tahiti struggling for survival. Between 200,000 and 250,000 people, 2% of the country’s population, were killed in this earthquake. The cost of this earthquake was estimated at $8.5 billion, which made the country’s domestic products shrink by about 5%.
Tornado Outbreak Southeast US 2011
The US experienced its largest tornado outbreak in history in April 2011. This 305-twister tornado damaged the southeast, damaging property to the value of $5 billion. It seems to have been caused by global warming, which incubates the tornadoes, increasing their capacity as they go on.
Iceland Volcano 2010
This volcanic eruption, also known to many as the Eyjafjallajökull volcanic eruption, was one which threatened a travel industry that annually contributes $1 trillion to the European Union economy. This volcanic eruption disrupted many things, including 40% of the world’s goods which are transported by air — goods like premium products, drugs, and time-sensitive high-tech imports.
This volcanic eruption in Iceland disrupted air traffic in many countries like France, Ireland, and Scotland for more than six days, costing those airlines about $250 million daily. This cost the travel industry about $10 billion weekly, as it was not insured for this sort of loss.
US Wildfires 2018 – Cost to Economy: $2.5 billion
In 2018, over 8.8 million acres of land in the US were affected by more than 58,083,000 wildfires.
The town of Paradise was wiped out by a campfire in North Carolina, killing 85 people. This fire is considered as the most destructive of fires in California history, as it destroyed 18,733 buildings on the 153,336 acres that it burned. This disaster was also very costly as it caused about $16.5 billion in damages, with the US Forest Service spending a record $3.1 billion fighting wildfires in 2018.
Compared to the wildfires in the 1970s, both the frequency and intensity of wildfires in the western US have increased. In 2017 alone, over 10 million acres of land were destroyed.
Mississippi River Flood 2011 – Cost to Economy: $2 billion
This flood was the worst in human history, with an overall repair cost of $2 billion. Compared to other floods over the past 35 years, which cost about $260 billion collectively.
According to the Federal Emergency Management Agency, the ongoing climate change will increase flooding risks as the years go by. Climatologists have predicted that by 2100, more than half of communities along the Gulf Coast and Eastern Seaboard will be frequently flooded.
The Dust Bowl 1930 – Cost to Economy: $1 billion
This is one of the oldest droughts in North American history. Happening in the 1930s, the Dust Bowl devastated the Midwest, worsening the Great Depression. This drought killed crops and raised clouds of dust that were deposited on everything, leading to unsustainable farming practices. This was one of the worst droughts ever.
Flu Pandemic 1918
This flood was the worst in human history, with an overall repair cost of $2 billion. Compared to other floods over the past 35 years, which cost about $260 billion collectively.
According to the Federal Emergency Management Agency, the ongoing climate change will increase flooding risks as the years go by. Climatologists have predicted that by 2100, more than half of communities along the Gulf Coast and Eastern Seaboard will be frequently flooded.
Bottom Line
One thing is certain is the fact that the economic backbone of any economy is affected by a crisis, some more than others. The effects of natural disasters and the economy are felt more than other kinds of disasters, including terrorism, due to the fact that we can do nothing but try to cushion the effects when they come.
Scientists have enlightened us on the fact that the severity and frequencies of these natural disasters are caused by global warming, and these temperatures are still on the rise, causing wildfires, deforestation, and droughts all around the world, leaving us wondering what the next step is.
Yes, we are talking generally on the impact of natural disasters on our economy, but we know that once the economy is affected, it does not stop there but affects every single facet of life. We hope that somewhere in the near future, scientists can come up with a breakthrough that can help reduce global warming globally, which will help us tackle the challenge of natural disasters and save our economy from the constant need to recover.