Much of the Mid-Atlantic and Northeastern regions of the country are still recovering and assessing the damage from devastation caused by Hurricane Sandy. Many Sellinger School students, faculty, alumni, and their families are from areas hardest hit by Sandy’s high winds, driving rain, and devastating storm surge. The deepest thoughts and prayers of the entire Loyola community go out to them and all who were affected by the storm.
Although recovery efforts are under way, Sandy’s residual effects continue to have major impacts on businesses throughout the regions. Sellinger faculty members offer their insights on those impacts as well as their hopes for an earnest recovery.
Elizabeth Kennedy, J.D., assistant professor of law and social responsibility:
Millions of New Yorkers descend daily into a subway system described as “the great equalizer” for its ability to bring together people from different racial, ethnic and economic backgrounds. Everyone rides the subway. Hurricane Sandy has been described as another such equalizer, darkening apartments and imperiling the lives of the materially poor and wealthy alike. For many low-wage, immigrant workers, however, the storm’s economic aftermath more closely resembles the city’s above ground disparities, rather than its underground equality.
Workers in low-wage industries, such as restaurant, retail, and construction, are often non-salaried, and therefore not paid when a transit shut down makes it impossible to get to work, or when high winds and raging waters level their workplace. These workers cannot telecommute, nor can they shelter safely without giving up much-needed wages.
Many of these workers, especially immigrant laborers, will perform much of the heavy lifting as communities across New York and New Jersey begin to rebuild. Under dangerous conditions, they will clear debris, repair roads, resurrect shorelines, and construct housing. As documented during the post-Katrina reconstruction, these workers will be vulnerable to abuse, non-payment of wages, serious injury and even death.
In my hometown of Staten Island, Hurricane Sandy claimed lives and left parts of the landscape utterly unrecognizable. What endure, however, are the qualities of resiliency and mutual support that define New Yorkers (a result, perhaps, of those shoulder-to-shoulder underground commutes). We must harness those same qualities to ensure the vigorous enforcement of the legal rights of laborers whose hard work will make a post-Sandy reconstruction possible.
Norman Sedgley, Ph.D., professor of economics:
Hurricane Sandy left loss of life and an even greater destruction of property and infrastructure. Images from New Jersey and New York are discouraging. However, these areas will recover economically. The infrastructure and private property will be fully rebuilt. How can I be sure?
The law of diminishing marginal productivity serves as my guide for forecasting economic recovery after Sandy. The law states the basic relationship between the items that produce output (or capital) and the actual output that is produced. This relationship states that the when the stock of capital decreases, the return on investing in capital increases. In essence, the devastated areas left behind by Sandy have very little capital, at this point in time, and therefore are a location that will invite investment by entrepreneurs.
Our market-based system, which allows financial capital to seek out the highest return, will lead to a large flow of investment. This will help the storm-hit region recover more rapidly than seems possible in the immediate wake of Sandy. The government, at all levels, also has an important role to play, well beyond the immediate response of FEMA and emergency services. The government should focus on rebuilding the basic public infrastructure that encourages the efforts of entrepreneurs.
The law of diminishing marginal productivity was demonstrated during the years following World War II. While no one would argue that WWII was good for Germany or Japan, both of these countries recovered from near-complete and wide-scale devastation in a relatively short period of time. Widespread destruction led to a high return on investment, a large inflow of financial capital, and relatively rapid economic growth. This allowed both nations to achieve complete recovery.
There is cause for optimism in those areas hit by Sandy. Perhaps economics is not such a dismal science after all.
Mark Johnson, Ph.D., assistant professor of finance:
Many financial institutions with a presence in the affected areas have tried to accommodate residents and businesses through this difficult period with a temporary relief of late fees on certain types of loan payments as well as increases in cash advance limits on credit cards so that customers can have additional access to financial resources. The exact terms and availability of these resources depend on the customer and the participating financial institution, but I believe that this is a good gesture from an operational point of view, as well as the right thing to do. For the financial institutions, the incremental monies lost from this fee income will be realized in later months and years as their clients’ appreciativeness and future loyalty will have the potential to result in a more productive working relationship between the institution and the client.
Additionally, an article published in Compliance Week, “Regulators Offer Post-Hurricane Guidance for Financial Institutions,” outlines the lending, investment, and reporting implications of the storm, including responses by federal regulators of the affected financial institutions. Hurricane Sandy also caused some publicly traded companies to submit their required filings with the Securities and Exchange Commission late.
With early estimates of the cost of the storm in the tens of billions of dollars, this is of course overshadowed by the loss of human life. Having lived in both Louisiana and Florida, I have personally seen how a hurricane can adversely impact a family, a community, and a region. Our thoughts and prayers are with the individuals and families affected by Hurricane Sandy. I can confidently say that in response to tragedy, our nation has historically shown a resilient ability to persevere despite tough circumstances.
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