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Economic Consequences of Floods in Developed Areas

Economic Consequences of Floods in Developed Areas. Daniel J. Alesch, Ph.D. Emeritus Professor University of Wisconsin-Green Bay From Sandbags to Sanity April 20, 2009 Madison, Wisconsin.

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Economic Consequences of Floods in Developed Areas

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  1. Economic Consequences of Floods in Developed Areas Daniel J. Alesch, Ph.D. Emeritus Professor University of Wisconsin-Green Bay From Sandbags to Sanity April 20, 2009 Madison, Wisconsin

  2. Everything I’m going to say today is about what I’ve learned from studying more than two dozen community disasters in a dozen states over the past 15 years.

  3. Many thanks to those who funded our research • The National Science Foundation • The Public Entity Risk Institute • The Business Civic Leadership Center of the National Chamber of Commerce • And to my colleagues in this work • Lucy A. Arendt • James N. Holly

  4. I’ve got 15 minutes, so I have to focus on only a very few things. • First, I’ll describe how the consequences of extreme events unfold. • Second, we’ll look at the costs in terms of businesses and jobs. • Third, I’ll talk about how we can best avoid those adverse consequences. • Unfortunately, there isn’t enough time to talk about long term community and economic recovery.

  5. So, let’s look at how consequences of extreme events unfold.

  6. INJURIES DEATHS STRUCTURAL DAMAGE INFRASTRUCTURE LOSSES Event Immediate Losses MAGNITUDE INTENSITY DURATION EXTENSIVENESS EXPOSURE VULNERABILITY TRACKING THE ADVERSE CONSEQUENCES OF AN EXTREME EVENT

  7. EMPLOYMENT ECONOMIC BASE POPULATION Event PRE-EXISTING CONDITIONS TIGHT COUPLING AND SLACK WHAT SUFFERS IMMEDIATE LOSS AND HOW BADLY IT SUFFERS Immediate Losses Systemic Community Consequences TRACKING THE ADVERSE CONSEQUENCES OF AN EXTREME EVENT

  8. External Ripple Effects OTHERS TAKE ADVANTAGE OF YOUR DOWN-TIME PRODUCTION MOVES EMPLOYMENT MOVES PEOPLE MOVE Event Immediate Losses Systemic Community Consequences TRACKING THE ADVERSE CONSEQUENCES OF AN EXTREME EVENT

  9. External Ripple Effects Ripple Reverberations Event Immediate Losses Systemic Community Consequences Ripple Reverberation Consequences IT COMES BACK TO BITE YOU TRACKING THE ADVERSE CONSEQUENCES OF AN EXTREME EVENT

  10. External Ripple Effects Ripple Reverberations Event Immediate Losses Systemic Community Consequences Ripple Reverberation Consequences TRACKING THE ADVERSE CONSEQUENCES OF AN EXTREME EVENT

  11. So, it isn’t the flood or other extreme event that is the problem; it’s the combination of immediate and long term consequences. • Not all the economic consequences are immediate and apparent. • They unfold, ripple, and cascade for weeks, months, and even years after any extreme event, including floods. • They are pervasive, long-lasting, and use resources we need for other priorities.

  12. How does this affect job and business losses?

  13. No One Really Knows How Much Any Given Disaster Costs • Losses continue to occur over time. • In floods, particularly, only a small proportion of losses are covered by insurance; most are uninsured losses borne by owners. • The cost of rebuilding or replacing is highly variable depending on when the work is done and the circumstances under which it is done.

  14. I’ve heard, and I believe, disasters cost us about a billion dollars a week in this country.

  15. Frequent effects on “export” businesses • Damaged facilities, inventory, and infrastructure • Interrupted production, transportation • Shortage of workers because of housing losses • Loss of market share • Decisions about relocating or changing business plan

  16. Frequent effects on “local” businesses • Damaged facilities, inventory, and infrastructure • Usually inadequately insured. • Customers move away or demographics change. • Customer priorities change. • Shortage of workers because of housing losses. • Lose out on recovery purchases to bigger, outside businesses. • Lost income and business failure follows over a period of a few weeks to as many as seven years.

  17. We’ve seen it happen over and over in two dozen communities across the country. • No time to elaborate today, but go to www.riskinstitute.orgto read more about business losses in our publications on this subject.

  18. The next part is about the most cost-effective way to reduce losses and to facilitate recovery.

  19. One of our fundamental conclusions is that most of the adverse cascading consequences can be prevented by reducing immediate losses from natural hazard events. • Thus, mitigation becomes the critical focus for reducing losses and helping to ensure recovery. • Not exactly rocket science.

  20. The surest path to reducing costs and ensuring recovery is prevention -- reducing our exposure to flooding and to reducing our vulnerability to damage should flooding, despite our precautions, result in adverse consequences.

  21. There is no substitute for personal responsibility and accountability • But, having said that, • both state and local government have critical roles in helping people make the right choices -- • choices about protecting lives and private and public assets by reducing their exposure and their vulnerability to natural hazard events.

  22. REDUCING THE COSTS OF FLOODING BY REDUCING EXPOSURE • Preserve and enhance wetlands, wooded hillsides, and other natural means of flood reduction. • Take vulnerable areas out of the market • Whitnall in Milwaukee in 1923 • MMSD today • Federal buy-outs • DNR’s flood plain protection programs • Make those who ”must” build in vulnerable areas bear the full cost of doing so.

  23. I’d forget about trying to hold the water back. • It is almost impossible to keep rivers from flooding or storm surges from forming. • Levees are almost never the answer. • There are only two kinds of levees: • those that have failed and those that are about to. • Ask New Orleans, Fargo, and Cedar Rapids

  24. REDUCING THE VULNERABILITY OF STRUCTURES IN VULNERABLE AREAS • Statewide building code provisions • Infrastructure review and assistance • Full participation in the National Flood Insurance program • Insurance against losses and • Regulations as a condition of construction • Little or no aid if your community doesn’t

  25. That’s all I have time for.

  26. For more information . . . • Visit riskinstitute.org and search the library and under “Alesch” • Google “Business Civic Leadership Center” and look for “Top Ten State Policies . . .” • Order Managing for Long-Term Community Recovery in the Aftermath of Disasterby Alesch, Arendt, and Holly from PERI • Or simply email me at dalesch@new.rr.com

  27. Thank you for your kind attention

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