It's fair to suggest that a week ago, most people around the world had never heard of Fort McMurray, Alberta. Now, the horrifying images of the destruction wrought by the wildfires in and around the city have topped news reports everywhere. At the time of writing, the worst of the danger appears to have passed for the city itself, as winds push the inferno away from the built-up areas. It's a tribute to the people of the city and the emergency services that the city was evacuated so quickly, with only one reported casualty, a young girl killed during the rush to leave.
It will be some time before an accurate estimate of the damage can be made, though that hasn't stopped some wild speculation -- one insurer suggested that claims could reach C$ 9 billion. What can we safely infer about the short-term prospects for recovery, and what does all this mean for the long term?
Let's start with the city itself. It's reliably reported that the major infrastructure -- civic buildings, hospital and such -- is unscathed. The airport had a close call, but it's open and operational. Industrial parks around the city are reported to be largely undamaged. However, most media reports suggest that 1600 "structures" have been lost. How do we put that into perspective? Well, if we assume that all of those structures are homes -- which they're almost certainly not -- and that each home housed five people on average (probably high), then we can estimate that about 8000 people have no homes to go home to*. That's awful, but if you keep in mind that the population of Fort McMurray is somewhere near 80,000, then it's "only" 10 percent of the population that needs to rebuild from scratch. That's a formidable task, but maybe a somewhat smaller one than some of the media coverage would suggest.
Now, how about the local economy, heavily dependent on the oil sands? Oil production has been largely shut down in the immediate area, but not because of damage to the facilities themselves: those are well to the north of the city, while the fire is to the south. Rather, production has been shut down so that the lodging facilities at the mines themselves can be used to house those fleeing the fires. Many of those people have now begun to relocate to the south -- enduring what must be a perfectly horrifying drive through Fort McMurray itself -- so it's unlikely that the shutdown in production will be prolonged. Still, expect some negative impact on GDP, and especially exports, for the month of May.
As to the longer term, it's worth recalling Keynes's advice from the Great Depression, that it would make perfect sense to pay the unemployed to dig holes and fill them back in again. Natural disasters always compel even the most anti-Keynesian of governments to spend heavily on reconstruction; to the extent that this spending is not financed by cutting back on planned spending in other areas, this creates a boost to the local economy. With left-leaning governments in place in both Ottawa and Edmonton, such a boost seems assured.
There's one further complication, however. Prime Minister Trudeau has mused that it could take years to rebuild Fort McMurray. That may be true, if you plan to put everything back as it was. But....there's growing sentiment in much of Canada that the oil sands operations that are the city's prime reason for existence will need to be scaled back in short order, so as to meet the environmental targets set by the Paris Accords. Some workers from across the country who had moved to Fort McMurray to work in the oil sands had already started to return home even before the wildfires struck, as opportunities and employment began to dry up. Deciding how big the city will need to be in one or two decades time will be a very tricky task, once the fires finally die down.
*This estimate will be on the high side if a lot of the destroyed structures are not homes, and on the low side if many of them are apartments rather than single family dwellings.
No comments:
Post a Comment