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October 04, 2005

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Edie

The implications of incorporating such an attitude into policy decisions are really quite significant. Another WSWS article which deals with this in greater detail can be found here:

William Bennett's 'hypothetical' on racial genocide: A spreading stench of fascism
http://www.wsws.org/articles/2005/oct2005/benn-o03.shtml

It is a genuinely chilling phenomenon.

Jodi

Thanks for the heads up, Edie.

Lynn

Stage 1: Hand out no bid contracts to crony contractors.

Stage 2: Hide the dispossessed.

Stage 3: Support your local real estate developer.

Stage 4: Find some suckers to pay the tab.

The business model is both predictable and shameless.

Rodkong

Even if crony contractors do get bids, they're going to have a difficult time finding insurance protection. Given that this was the worst insured loss in U.S. history, the insurance industry will be reluctant to support new development along the Gulf Coast. Despite the anticpated increase in premiums, the reconstruction of New Orleans will be too risky for insurers to handle. The likelihood that New Orleans will become a gentrified city is doubtful.

I'm surprised no one on this site has brought up the issue of Eminent Domain? If it weren't for Katrina, the city could have used Eminent Domain as a means to displace the poor and introduced corporate investment. Katrina may have done New Orleans a favor by scaring away contractors...

Edie

Actually, insurers are expecting more than a bounce-back next year by extorting from average Americans through premium hikes. Believe it: disasters are always a windfall for vultures.

Rodkong

Eddie: what do you propose as an alternative? Government subsidized insurance?

Insurance companies are consumers just like the average American. They buy insurance from reinsurers to cover their loss exposures. So these vultures, which are picking up the Katrina tab, will be subject to the same premium hike. Essentially, insurance companies will be getting a taste of their own medicine.

Prior to Katrina, developers found that it was cheaper to buy insurance, rather than build quality “hurricane proof” structures. Now, at the expense of their employees, companies like Wal-Mart have relocated, taking jobs with them. A premium hike will force developers (commerical & home) to build quality structures that can withstand a hurricane, or at least limit the amount of damage. This would reduce their risk exposures and dependence on the insurance industry…and for the sake of the workers; it would allow them to keep their jobs.


Jodi

Rodkong,

I've found your comments on insurance really interesting. So, insurers pass on risk, themselves getting insured by reinsurers. And, you are saying that the reinsurers are having to pay a lot for Katrina and that this will make them up their premiums on the insurers (did I understand this correctly?). And, then we have an interesting point where developers no longer have an economic incentive to do shoddy work but will have to build more reliable structures. Is this right?

It does seem to follow that insurers will pass on the expense to their customers (as Edie points out). Presumably, the developers will also pass on the expense to their customers. This suggests one of the ways that rebuilding New Orleans will prevent lower income people from living there.

On eminent domain: the process of commercializing New Orleans was going on without eminent domain. Paul found a great article in an architectural or urban planning journal written pre-Katrina but just published. The gist of the article was the city's economic strategy: tourism. So, casinos and hotels, bars and clubs, mainstream stores. Small businesses and owners were rapidly declining. Insurance was mentioned as something that larger companies (Hard Rock cafe, say) could afford but which disadvantaged smaller ones.

Rodkong

yes that is right...the only way to retain lower income people (if that's the goal), is to provide lower income housing. If the federal government were to subsidize housing, they would have to provide either state or federal insurance (the state/federal government is the only provider of flood insurance currently)Not only would this create a heavier tax burden for the rest of America, but it may also lead to shoddy low income housing. Even if the government did have the funds to provide low income housing, they still wouldn't build given that New Orleans is centered in the middle of flood plain. Maybe this city is destined to be a tourist trap filled with strip clubs, casinos, and hotels...

Jodi

How is that expensive housing in flood plains can be built? The housing guy quoted in the piece I re-cited in this post didn't say that the higher income housing would have to go. Or maybe this simply means that it has been built and won't be detroyed?

Anyway, the question then arises: where will the people who do clean these hotels and casinos live? Will they be paid enough to drive to work? Will there be adequate public transportation so that they can get to work that way? I talked for a while with a bartender in Las Vegas who praised their hotel and casino workers unions for providing sustainable wages. (The battle for these unions was long and fierce and continues; not all the casinos there are unionized).

On the political front: I think it makes sense to distribute risk and responsibility throughout the citizenry in the form of taxes.

Rodkong

"How is that expensive housing in flood plains can be built?"

...expensive housing won't be built on the flood plains. Most of the structures that survived Katrina were reinforced industrial based structures (i.e. Norfolk/Gruman shipyard). In the aftermath of hurricane Andrew, heavy commercial/industrial insurers (see Factory Mutual Global) built research facilities that were designed to test the impact of hurricanes on commercial structures. They found that if they spent more money upgrading and reinforcing existing structures that they would save money on existing reinsurance contracts. Ultimately it was the desire to increase profit that drove the insurers to build better fortified structures...So rather than building expensive housing in the flood plains, there is a greater likelihood that contracts will go to heavy industry...

pebird

First of all lets not forget that insurance companies spend a great deal on litigation.

They have a dual advantage: 1) size, 2) they have a lot of experience in the courtroom. While they may be the "bad guy" if a trial gets to jury - they also know how to work the system better than most claimants.

In California, expensive housing IS built on flood plains (called the Delta), as well as fire lanes and earthquake faults.

You used to be able to get earthquake insurance in California at a reasonable premium. Now it is either impossible to get or priced out of your budget.

That's another thing that insurance companies do well, if the risk is too high, they don't sell insurance and they socialize the cost back to the state. Then they lobby the state to make sure they are not on the hook for any taxes to fund those costs.

I want that gig - pick the bets I want to place with the odds in my favor, and shove the real risk to everyone else.

RodKong

That's the Excess and Surplus Lines Market (ENS) which is basically junk insurance that won't be picked up by the state or national insurance carriers...you also must realize that insurance regulations vary from state to state. While New York is considered consumer friendly (regulates premiums through price controls), states in the Gulf Coast are less stringent when it comes to the needs of consumers...

Edie

I am no expert on the insurance industry, which might be likened to the neighborhood gangster. "Pay us regular-like, so's nothin' bad happens to your nice family."

Yes, I am suggesting that the capitalist system had everything to do with the catastrophe in New Orleans. Much tragedy might have been prevented if proper (but "prohibitively expensive") safeguards had been in place.

As far as city planning goes, when New Orleans was settled, it was hardly a conscious decision to build on an area that was below sea level. Between then and now, it has sunk appreciably. However, I point to Holland. Proper dykes can avert tragedy. By no coincidence were the wealthier neighborhoods of New Orleans "spared" while the Lower Ninth was obliterated.

Jodi

The Holland example is a good one. Some of my Dutch friends say that their entire political orientation, toward compromise and cooperation (as well as lots of involvement and committees etc) is because of the dikes. Given the problem of flooding, they have to cooperate, or everyone suffers. Of course, it's more complicated than this, but it isn't impossible. It only seems impossible when one lets a particular set of assumptions about markets constrain one's thinking.

Manion

Ken Mehlman, on behalf of the GOP, has been floating the notion that the Republican Party offers black voters a real choice. I believe it was also he who declared that too much government dependency was destroying black families. In the light of FEMA’s abysmal performance in New Orleans, I would have to agree. I for one will never forget the pictures of my brothers and sisters floating down Canal Street. The strength of feeling provoked by these images has prompted me to join the Millions More Movement in Washington on the 15th.
Regardless of any disquiet about its sponsorship I believe it is a viable opportunity to express our contempt of Republican hypocrisy.

http://www.millionsmoremovement.com/index_noflash.html

Pinto

Well, why do rich and upper middle class white liberals live in overwhelming white neighborhoods?

Not a lot of ethnic divershitty among the liberal rich elites of the Hamptons, Beverly Hills, and Monterey.

Hmmm? I guess divershitty is okay as long as the elite white liberals rarely have to practice it. Suckas.

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