Hamish McRae: The modern world shows its resilience after storm's fury

Economic View: We can manage with flights grounded... We can manage with power going down

Sandy has passed, the skies are blue, and Washington, at least, is pretty much back to normal. It is of course different in New York. It is too early to do more that make the roughest tally of the costs of the hurricane, but not too early, I think, to appreciate how extraordinarily resilient our complex modern world is to really big blows.

There are many way of looking at a disaster such as this, and none of us in trying to make an economic assessment should forget the human costs. But I think the narrow – what does it do to growth or GDP? – approach is much less interesting than what it tells about the way we live now.

The first distinction to make is between economic activity and human wellbeing. We take GDP per head as a proxy for living standards, and by and large it is not a bad one. But an event such as this demonstrates the difference. There will be some loss of economic activity because of the disruption, but fixing things generates economic activity that would not otherwise have happened. In the coming months there will be a wave of investment in the infrastructure of the north-eastern states.

There will be some short-term loss of output and estimates of the hit to GDP suggest it may knock 0.25 per cent off US growth. But it is quite possible that measured GDP will eventually end up higher, not just because of the reconstruction but also because the new kit put in will be better than the old kit that has been damaged.

As for the crude numbers, current estimates of the cost at some $20bn (£12.39bn) should be seen in context of the costs of Hurricane Katrina at $100bn and the Japanese earthquake of more than $200bn. Even if that proves an underestimate, the costs are manageable. It is a huge blow; but it is a huge economy.

I find this comforting. The 60 million people in the north-east generate about a quarter of US GDP. They produce more, in terms of economic output, than any other similar-sized region on earth. More important still, if you take national and international business together, New York remains the largest single centre in financial activity in the world. It will not always be so, for while London remains the main rival at the moment, power is shifting to Asia. But we know now that the New York Stock Exchange can shut for two days, the longest weather-related stoppage since 1888, and the world gets along fine. What can devastate the world economy is not a blow to its physical fabric by a hurricane or a tsunami, but rather a blow to its financial fabric and its economic self-confidence from a badly handled banking crisis. You can see the impact of the collapse of Lehmann Brothers on US GDP in the graph, but also the steadiness of growth in 2005 when Katrina hit New Orleans.

There is a huge amount of concern about the way the world has become so interconnected that one small event on one side of it can cause havoc on the other side, but the lesson here seems to me to be quite the reverse. We can manage with flights grounded for two or three days. We can manage with power going down, notwithstanding the fact that computer systems are down as a result. Indeed the communications revolution, giving people a much greater freedom to work from wherever they happen to be, seems to have made for a more robust world economy, not a more vulnerable one.

None of this should downplay the human cost of any disaster, let's remember that again, but let's also try and think through what lessons might be learnt from this experience. I can see at least five.

One is that we should try to build spare capacity into essential services. That covers obvious elements such as back-up computer servers, and making sure the back-ups are located physically a long way from the primary ones, or planning for there to be excess electricity generating capacity, something that the UK should heed – and what about spare airport capacity too?

A second lesson is the value of contingency planning. What happened in New York was at the outer limits of such planning and that carries a lesson too: you need to think the unthinkable. But you could say that in the case of New York's public utilities the system worked. I suspect this was helped by the fact much of the planning was not of a tick-box, health and safely nature but a tough-minded, New York character.

A third is less tangible. Just watching the way ordinary people in Washington went about preparing for the storm and the way small businesses stayed open even when public transport was shut, made me aware of the social glue of a society when faced with trouble. The US has shown the some of these wider strengths in coping with Sandy and that deserves respect.

A fourth is that we learn from the unusual more than we learn from the routine. Just as the UK learnt from the experience of staging the Olympics and is I hope trying to apply those lessons more generally, so we can already see that the US is seeking to learn. Whatever you think of US national politics, municipal administration has done pretty well. If US politicians at a local level can lead competent administrations, could national ones find ways to lift their game? We'll see, but I am hopeful.

Finally, I think the points above have wider application. In other words, building spare capacity is something we should try to do as individuals and employees. Scenario planning is a helpful discipline in many aspects of our lives. We should all be more aware of the importance of social glue, as well as professional competence – and we all need to learn from things that go badly, as well as things that go well.

Start your day with The Independent, sign up for daily news emails
Sport
football This was Kane’s night, even if he played just a small part of it
Travel
travel Dreamland Margate, Britain’s oldest amusement park, is set to reopen
News
news
News
Founders James Brown and Tim Southwell with a mock-up of the first ever ‘Loaded’ magazine in 1994
media
News
Threlfall says: 'I am a guardian of the reality keys. I think I drive directors nuts'
people
Voices
voices The group has just unveiled a billion dollar plan to help nurse the British countryside back to health
News
The Westgate, a gay pub in the centre of Gloucester which played host to drag queens, has closed
news
ebooks
ebooksA special investigation by Andy McSmith
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Retirement Coordinator - Financial Services

Negotiable: Recruitment Genius: To provide a prompt, friendly and efficient se...

Recruitment Genius: Annuities / Pensions Administrator

Negotiable: Recruitment Genius: You will be the first point of contact for all...

Ashdown Group: HR, Payroll & Benefits Officer - Altrincham - up to £24,000.

£18000 - £24000 per annum + benefits: Ashdown Group: HR, Payroll & Benefits Of...

Ashdown Group: Learning and Development Programme Manager

£35000 - £38000 per annum + benefits : Ashdown Group: A highly successful, int...

Day In a Page

The saffron censorship that governs India: Why national pride and religious sentiment trump freedom of expression

The saffron censorship that governs India

Zareer Masani reveals why national pride and religious sentiment trump freedom of expression
Prince Charles' 'black spider' letters to be published 'within weeks'

Prince Charles' 'black spider' letters to be published 'within weeks'

Supreme Court rules Dominic Grieve's ministerial veto was invalid
Distressed Zayn Malik fans are cutting themselves - how did fandom get so dark?

How did fandom get so dark?

Grief over Zayn Malik's exit from One Direction seemed amusing until stories of mass 'cutting' emerged. Experts tell Gillian Orr the distress is real, and the girls need support
The galaxy collisions that shed light on unseen parallel Universe

The cosmic collisions that have shed light on unseen parallel Universe

Dark matter study gives scientists insight into mystery of space
The Swedes are adding a gender-neutral pronoun to their dictionary

Swedes introduce gender-neutral pronoun

Why, asks Simon Usborne, must English still struggle awkwardly with the likes of 's/he' and 'they'?
Disney's mega money-making formula: 'Human' remakes of cartoon classics are part of a lucrative, long-term creative plan

Disney's mega money-making formula

'Human' remakes of cartoon classics are part of a lucrative, long-term creative plan
Lobster has gone mainstream with supermarket bargains for £10 or less - but is it any good?

Lobster has gone mainstream

Anthea Gerrie, raised on meaty specimens from the waters around Maine, reveals how to cook up an affordable feast
Easter 2015: 14 best decorations

14 best Easter decorations

Get into the Easter spirit with our pick of accessories, ornaments and tableware
Paul Scholes column: Gareth Bale would be a perfect fit at Manchester United and could turn them into serious title contenders next season

Paul Scholes column

Gareth Bale would be a perfect fit at Manchester United and could turn them into serious title contenders next season
Inside the Kansas greenhouses where Monsanto is 'playing God' with the future of the planet

The future of GM

The greenhouses where Monsanto 'plays God' with the future of the planet
Britain's mild winters could be numbered: why global warming is leaving UK chillier

Britain's mild winters could be numbered

Gulf Stream is slowing down faster than ever, scientists say
Government gives £250,000 to Independent appeal

Government gives £250,000 to Independent appeal

Donation brings total raised by Homeless Veterans campaign to at least £1.25m
Oh dear, the most borrowed book at Bank of England library doesn't inspire confidence

The most borrowed book at Bank of England library? Oh dear

The book's fifth edition is used for Edexcel exams
Cowslips vs honeysuckle: The hunt for the UK’s favourite wildflower

Cowslips vs honeysuckle

It's the hunt for UK’s favourite wildflower
Child abuse scandal: Did a botched blackmail attempt by South African intelligence help Cyril Smith escape justice?

Did a botched blackmail attempt help Cyril Smith escape justice?

A fresh twist reveals the Liberal MP was targeted by the notorious South African intelligence agency Boss