Hurricane Harvey will likely be the most costly natural disaster in U.S. history. And I say this knowing there is no accurate way to measure to measure the true loss. You can get a rough estimate of damage to homes and other construction and even to personal property. But it’s impossible to estimate the lost man hours and productivity that will plague the Houston area for months (if not years).
Estimates vary, but AccuWeather put the total price tag at $190 million. That’s enough to knock more than 1% off of U.S. GDP. Really stop and think about that for a minute.
But how does this compare to other famous disasters?
Let’s play with the numbers.
Hurricane Katrina, which flooded large swaths of New Orleans in 2005, did an estimated $160 billion in damages in today’s dollars. (This is the highest estimate I could find; some estimates put the damage closer to $120 billion.) And Hurricane Allison, which hit much of the same area as Houston in 1991, did an estimated $12 billion in damages in today’s dollars.
Hurricane Sandy, which ravaged the east coast in 2012, did an estimated $81 billion in today’s dollars. And the Deepwater Horizon Gulf of Mexico oil spill in 2010 (not a “natural disaster,” but I’ll include it for reference) did an estimated $33 billion to $112 billion in damage, though these numbers are little more subjective and include “social costs” of environmental degradation.
What about some of the great disasters from history?
The Great Galveston Hurricane of 1900 utterly obliterated Galveston, Texas, and the city never really recovered. An estimated 6,000 – 12,000 people died and tens of thousands were left homeless. Galveston was a wealthy port city and one of the most important cities in Texas at the turn of the last century. After the storm, it was relegated to a backwater, and Houston became the dominate coastal city. But even adjusting for over a century’s worth of inflation, the total damages to Galveston were estimated at less than $120 billion in today’s dollars. (These figures also include population and wealth normalization, which likely inflate the numbers.)
The 1906 earthquake and fire, which destroyed virtually the entire city of San Francisco, did something in the ballpark of $10 billion in damage.
So, even being very generous to past events and allowing for a wide margin of error, Harvey is likely to be the most expensive natural disaster on U.S. soil in history.
Looking overseas, the great 2004 tsunami, which killed an estimated 250,000 people primarily in South and Southeast Asia, “only” did about $20 billion in damage. While the death toll was vastly higher, the economic damages were small by comparison because the replacement costs of the buildings was much lower.
The 2011 earthquake and tsunami in Japan, which included the meltdown of the Fukushima nuclear plant, did an estimated $260 billion in damages.
So, again, allowing for a wide margin of error, Harvey is the second-most expensive natural disaster in world history.
Houston will rebuild. And perversely, all of this damage will eventually show up as growth in GDP a couple quarters from now (the way GDP is collected, the economy “grows” if you do nothing but smash windows with one hand and replace the glass with the other).
But it’s interesting and sobering to think that our friends, family and colleagues in Houston just lived through the greatest natural disaster in U.S. history and the second-greatest in world history.
Charles Lewis Sizemore, CFA, is chief investment officer of the investment firm Sizemore Capital Management and the author of the Sizemore Insights blog.
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