Like Dick O’Brien, I’m often late to peruse my copy of the Economist, so it wasn’t until this morning that I got round to reading last week’s issue. It wasn’t exactly a choking-on-muesli moment, but I did find myself startled to read this passage from the leader on Katrina:
History suggests that the hurricane will have little effect on the national economy. Despite all the pictures of sinking hotels and flooded convention centres, the overall impact of natural disasters is often close to neutral: lost output (which will be large) is then compensated for by a surge in reconstruction and public spending (also large). That may be scant comfort to individual hoteliers, residents and insurers, but on a national level the economic damage will be real but limited.
Somebody at The Economist needs to be familiarised with the work of a certain French gentleman. Now, I’m no economist, but I can see that any money devoted to this “surge in reconstruction and public spending”, just like the money James Goodfellow has to spend repairing his window, is merely diverted from constructive use in other parts of the economy, not conjured up from thin air. Perhaps a better way of phrasing this might have been to say that the American economy is large and flexible enough to withstand the undoubted shock represented by Katrina’s devastation. You expect to see broken-window thinking in the aftermath of such a disaster – there was certainly plenty of it after the tsunami – but not in a publication calling itself The Economist.