200,000 Jobs Lost to Katrina

News reports indicate that about 200,000 jobs have been lost to Hurricane Katrina, yet some insist that the construction and other recovery-related work will actually help the economy. Although the money being pumped into the economy from the relief work will help, that money would have helped far more had it been spent to create wealth rather than to repair damage.
Think of it this way. You own a business and your facility suffered $50,000 in storm-related damage. You spend the $50,000 to hire the contractors. But when they’re finished you’re just back where you started. Your facility is no better. You’re producing the same products at the same price with the same level of staffing. If you had invested the $50,000 in new equipment or training for your staff, you would be able to produce your products for less money, which would allow you to sell them to your customers for less, make a greater profit, or both. That investment, therefore, would produce real economic gains for your customers, your company, or both.
No question that we need to spend the money to repair the damage just as we need to spend money to maintain a military strong enough to defend our nation, but spending money to repair damage or to buy tanks is an economic dead end. Once the money is spend, the outputs don’t create new wealth. The replacement windows and the tanks are needed, but unlike new production line equipment or worker training, replacement windows and tanks don’t create new wealth.
Steven Rothberg, President and Founder
CollegeRecruiter.com