The Disaster Profiteers: How Natural Disasters Make the Rich Richer and the Poor Even Poorer

by John C. Mutter

  But the driving force was business interests and the demands of commerce. Business owners had no interest in waiting while elaborate plans were drawn up and debated and rebuilding was executed according to plan. They wanted their businesses back and running as soon as possible, and that meant more or less re-erecting what they had before, perhaps with some minor improvements. They had no interest in a Haussmann-like Tokyo; that might take too long. And they prevailed. Tokyo was rebuilt quickly and with few improvements.

  After the Tokyo disaster in 1923, there was no chance for Schumpeter’s gale to bring creative destruction, and this is the norm rather than the exception. Even when new materials and technologies are available, there is a very strong impulse to get things back on track quickly.

  Makeover planning was also contemplated for San Francisco after the 1906 earthquake. In the nineteenth century, fires in Boston and New York had damaged large tracts of land in both cities and had been viewed as, and had effectively become, opportunities for renewal, for expansion, and, of course, for profit. Kevin Rozario, in Culture of Calamity: Disasters and the Making of Modern America, describes how property values rose steeply in New York after the fire of 1835.4 In some instances, the values rose almost tenfold, and property owners who may have been of the middle class before the fire were suddenly propelled into the wealthy class. The wealthy became even more so.

  San Francisco had a Haussmann-like plan too—the Burnham Plan—on the table before the earthquake, but it had stalled for many of the same reasons the Kanto renewal plan would not get enacted. The 1906 earthquake achieved the first part of the plan, which was the razing of large parts of the city. Like those who backed plans for renewal in Tokyo, those who backed the Burnham Plan tried to use the opportunity the disaster presented to make improvements. But as would happen in Tokyo, businessmen in San Francisco wanted their businesses to come back quickly so they used financing, largely from outside the city and the state, to start rebuilding quickly. San Francisco’s strategic location and central port/trading facilities were too important to regions outside the city to let them die. Non-San Franciscans “needed” San Francisco, and it was largely rebuilt with money that came from elsewhere in the United States.

  The external private capital for rebuilding acted then much like foreign aid for disaster relief does today. The affected area was relieved of the need to fully fund the reconstruction. It was similar in that way to the rebuilding of Lisbon after the earthquake of 1755. The city and port of Lisbon were critical for trade at that time, and much of the financing for reconstruction came from Portugal’s trading partners.

  As in New York, property values in San Francisco increased quickly, and businesses boomed. In his book, Rozario includes a photo of the San Francisco business district taken in 1906 and one from the same location in 1909. The first shows utter destruction, while in the second you cannot tell that the destruction had ever happened.

  When everything had quieted down in New Orleans after Katrina, there were plenty of people itching to use the opportunity presented by the razing of the city to give New Orleans a makeover. A makeover plan that was included in a report from the Committee for a Better New Orleans became a starting point. For most of the planners, a New Orleans makeover meant changing the demographics as much as the architecture and city layout. That is, in fact, what has happened.

  One person who anticipated demographic change was John Logan, a professor of sociology at Brown University. He used the assessment of damage categories by the Federal Emergency Management Agency (FEMA) in New Orleans to correlate the extent of damage with socioeconomic indicators, asking, in effect, who suffered the most.5 Logan’s conclusions: “The storm’s impact was disproportionately borne by the region’s African American community, by people who rented their homes, and by the poor and unemployed.” In many instances, the most affected people fell into all four categories simultaneously. The greatest single disparity was by race. Logan’s analysis showed that the populations of the most damaged areas “were 45.8 percent black, compared to 26.4 percent in undamaged areas.” In other words, being African American made it almost twice as likely that your dwelling would be seriously damaged.

  Less than a year after the storm, in May 2006, Logan speculated about what the “new” New Orleans might look like. He reasoned that if repopulation was not permitted in regions that were heavily damaged (something that was being talked about at the time and advocated by many of my colleagues in the natural sciences), the city would lose 50 percent of its white residents and more than 80 percent of its black population. The final sentence of his paper reads: “This is why the continuing question about the hurricane is this: whose city will be rebuilt?”

  As it turned out, Logan wasn’t quite right about the percentages, but he had the right idea. What happened in New Orleans mirrors what the generals did in Myanmar because it involved, in part, being strategic about doing nothing. The first attempt to reshape New Orleans came soon after the storm. Called Bring New Orleans Back, or BNOB, it was the product of an advisory panel handpicked by Mayor Ray Nagin. The most influential person on the panel was the real estate mogul Joseph Canizaro. Like many of his colleagues high up in the New Orleans elite, he viewed the damage to the city caused by Katrina as an opportunity. He expressed it this way: “I think we have a clean sheet to start again, and with that clean sheet we have some very big opportunities.”6 Others were not as tactful. Richard H. Baker, the ten-term Republican representative from Baton Rouge, was quoted by the Wall Street Journal as saying, “We finally cleaned up public housing in New Orleans. We couldn’t do it, but God did.”7 Soon after, he posted a sort of retraction and rewording, saying that he was misquoted and what he “remembered expressing” was “we have been trying for decades to clean up New Orleans public housing to provide decent housing for residents, and now it looks like God is finally making us do it.”8

  I wonder if Joe Canizaro knew of Haussmann or the postdisaster master planners in Tokyo and San Francisco. I doubt it, but he was following in their path. The logic is, in brief, that the most damaged areas are the most likely to be damaged again (for the same reasons they were so badly damaged in the first place) so the best thing to do is strip people out of those areas. That will keep people safe. Even though they might not want to be moved out, it’s for their own good.

  In an article in Mother Jones, Mike Davis argued that the New Orleans elite had long been anxious to purge the “problem people” from the city and tells us that one French Quarter landowner, speaking to Der Spiegel, said, “The hurricane drove poor people and criminals out of the city and we hope they don’t come back.”9 You can only imagine what was said behind closed doors on New Orleans’ tony Audubon Drive. US housing secretary Alphonso Jackson predicted that the city was “not going to be as black as it was for a long time, if ever again.”10 It seemed more like a wish than a prediction.

  The Washington Post quoted then Republican House Speaker J. Dennis Hastert advocating bulldozing part of New Orleans and Republican senator Rick Santorum suggesting that people should be punished for “ignoring” pre-storm evacuation orders, as if being flushed out of their homes and into the Superdome were not punishment enough.11

  In New Orleans, race played a defining role in hurricane mortality as well, though it did not look that way at first. What stood out most strongly in the initial statistics of deaths from Katrina was that the elderly were particularly at risk. In retrospect, that hardly sounds novel, but it did catch people by surprise, mainly because the proportions were so high—about 75 percent of the deceased were over 60 and nearly half were over 75. That’s very different from the representation of that 60-plus age group in the population.

  What was more surprising from the initial impression was that black people were underrepresented in the deaths relative to their numbers in the New Orleans population overall. This seemed especially so given the racial makeup of those suffering from h
eat and hardship after fleeing to the Superdome. This fact led some commentators to gleefully suggest that race was not an issue in Katrina’s lethal blow. Freelance journalist Cathy Young even wrote an article titled “Everything You Knew about Hurricane Katrina Was Wrong.”12

  But victims of disasters and survivors of disasters are not likely to have the same demographics. In fact, you might well expect them to be different—survivors should be younger and stronger, able to swim or climb to a rooftop. Those who could not would become victims. But why were black residents underrepresented in the death toll?

  These two observations are actually linked. First, if elderly people are overrepresented among the deceased victims, you have to ask about the racial mix of the elderly. That’s what I did when I first looked at the death statistics and what Patrick Sharkey noted in the Journal of Black Studies in 2007.13 It doesn’t take long to realize that among the elderly, white people are overrepresented, particularly elderly women. In general, women outlive men, and white people outlive black people. So there simply were more elderly white people for Katrina to seek out than elderly black people. Sharkey made the adjustment for the initial population figures and found what most people suspected, that “race was deeply implicated in the tragedy of Katrina.”

  The first version of BNOB was described by Marc Morial, the New Orleans mayor who preceded Ray Nagin, as “a massive redlining exercise wrapped around a land grab.”14 Basically, it proposed that some areas not be rebuilt at all. And no prize for guessing which areas would not be rebuilt—those where the “problem people” lived. The most damaged areas would be turned into greenways, pleasant places for the on-average whiter residents to enjoy biking and other leisure activities on weekends. Joseph Canizaro was the main architect of the plan, and it was instantly viewed as a master plan for the business elite, an exercise that Mike Davis dubbed “ethnic cleansing GOP style.”15 And who was in a better position to benefit from such a plan than a real estate mogul? So the answer to John Logan’s question, “Whose city will be rebuilt?” began to emerge soon after the hurricane had carried out its first phase and a wealthy elite saw how to take advantage of the opportunity.

  Not surprisingly, the advisory panel’s plan was met with hostility when it was presented at a packed town hall meeting in January 2006. The presentation drew an oft-quoted remark from Harvey Bender, a resident of New Orleans East (a place that might have ended up as a nice golf course in BNOB), when he stood up in the meeting during the time for public remarks to say, “Mr. Canizaro, I don’t know you, but I hate you. You’ve been in the background scheming to take our land.”16 Who could blame him?

  Canizaro and the mayor and the advisory panel really did seem surprised at the hostility to the plan, just as President George W. Bush and his coterie apparently had been by the damage Hurricane Katrina had caused. And the problem is the same in each instance. Decisions were made by an elite group focused entirely on their own self-interest, distant from those for whom they had responsibility, oblivious and uncaring of the needs and the lives of anyone but themselves and their close-knit group of associates.

  I visited Breezy Point on Long Island, where Superstorm Sandy had come ashore and caused vast amounts of damage, including a fire that destroyed scores of homes. I was asked by CBS television to do a last-minute interview. CBS had, as it turned out, never intended to include hurricane disasters in its series on climate. The arrival of Superstorm Sandy changed network officials’ minds very quickly.

  I had never been to that part of New York before and had little idea what I would see. Breezy Point and much of the region called the Far Rockaways is more or less a large pile of sand. And it is anything but static. The US Geological Survey’s online publication, “Geology of National Parks,” begins its description of Breezy Point with this cheery observation: “Had you planned a visit to Breezy Point before the Civil War you would have been in for a surprise. It did not exist!”17 Most of it is, in fact, less than a century old and came into existence when structures known as groins were built to protect Fort Tilden, a US Army installation with cannons that acted as a defense for New York during World War I and World War II. The groins disrupted the ocean currents that run parallel to shore, causing sand to pile up into what is now Breezy Point. If you live in Breezy Point you live in the sand, and you live very close to sea level. The highest ground is perhaps ten feet above sea level. Storm surges commonly exceed ten feet.

  For me, just being there felt dangerous, though the day was completely calm. The jumble of collapsed and burned-out houses only reinforced my sense of danger. But I know that had I lived through several previous storms there that caused some flooding and some damage but were not devastating or deadly, I would have gained the sense that Breezy Point was a safe and pleasant place to live. And I wouldn’t want to move because a scientist or anyone else told me, against all my experience, that it was a dangerous place to live.

  You could say—and many people did—much the same about the people who lived in the areas of New Orleans that lay well below sea level: Are these people crazy? What do they think they are doing, living in a hole in a delta right by the ocean? Don’t they understand the danger?

  But how could they understand the danger? It’s not like they were living below sea level for the vicarious pleasure of it, laughing in the face of danger. Generation after generation had lived there, far longer than the residents of Breezy Point, and they suffered periodic flooding, even quite severe flooding, as Hurricane Betsy brought in 1965. But that had led to the construction of hurricane protections. Surely those protections made them safe.

  The people who lived below sea level in New Orleans were no more aware of the danger they were in than people living in Breezy Point or the residents of Port-au-Prince. They wanted to rebuild in place, right where they were born, even though each disaster had shown that they did indeed live in a dangerous place. But BNOB wasn’t about to let that happen.

  One part of the BNOB plan did have quasi-logic to it. The argument was made that there should be a moratorium on reconstruction until it was clear how many people would return. There is no point, it was argued, in starting to rebuild a neighborhood if hardly anyone was going to return to it. If the total returnees to New Orleans were a small fraction of the original population, then there would not be the tax base, it was argued, to provide services to communities with just a few houses scattered among the desolation of Katrina’s ruins.

  The authors of BNOB either missed the catch-22 logic of this or knew it and pretended they didn’t. People couldn’t return to nothing and no promise of rebuilding. If there is a serious question as to whether your neighborhood will get services, why would you return? So the whole plan becomes self-fulfilling. Few people would return because few people could return, having nothing to return to. Anyway, the places to which they would return were deemed unsafe, and hence on the bottom of the list for reconstruction and with no real plan to make them safe. To a lot of people, it read like a trick to keep certain people—the “problem people”—from returning; a way of having Housing secretary Alphonso Jackson make good on his prediction that New Orleans was “not going to be as black as it was for a long time, if ever again.”

  And in the first year, the plan worked. Narayan Sastry and Jesse Gregory from the University of Michigan used data from the US Census Bureau’s American Community Survey to show that blacks were significantly less likely to return to New Orleans than whites.18 They tested for socioeconomic status, using education as a proxy, asking whether the higher-status people were more able to return, but found that race was the strongest determinant of the probability of return.

  And these return-rate differences persist today. The least-repopulated areas today are exactly those that Sastry and Gregory found to be the most underpopulated in the year following Katrina. The lights did not come back on for everyone, just for some.

  As one might have predicted and has bee
n written about compellingly by Naomi Klein in particular,19 cronies of the Bush administration benefited hugely in the reconstruction of New Orleans. Kellogg Brown & Root (KBR), a subsidiary of Halliburton, which was run by Dick Cheney from 1995 to 2000 (but not at the time of Katrina), received tens of millions of dollars in no-bid contracts for reconstruction work at US Navy and other facilities. KBR is the largest nonunion engineering company in the United States and has provided large-scale engineering services globally, including during times of conflict. It was part of a group that provided infrastructure for the military in Vietnam during the war, and it received the contract for cleanup after the 9/11 attack on the World Trade Center towers.

  An extremely capable and effective company, KBR has few competitors, and although it has benefited from huge no-bid federal contracts, it has also won many open-bid contracts. It is perfectly possible that KBR would have won the no-bid contracts it was awarded, had they been openly bid. That was more or less the logic, combined with the imperative to move quickly after the disaster—bidding takes a long time, KBR has a proven record in what needs to be done, it will probably win the bid anyway, so why not give it the contract?

  The problem, of course, is that under that scenario, no one has any idea if the price of the contract is fair or inflated. The opportunity to overcharge is enormous.

  Two scholars, Peter Leeson from George Mason University and Russell Sobel from West Virginia University, found that there is a very strong association between the level of corruption and the number of disasters experienced by a state.20 Disasters are always followed quickly by FEMA relief money and the need to get things moving again by cutting red tape, awarding no-bid contracts, and the like. The opportunity for misappropriation is obvious, and the researchers cite several instances when charges of corruption have been made in connection with the alleged misuse of FEMA or other disaster relief funds.