Economist ‘bullish’ on Houston’s economic recovery

Cullum ClarkCullum Clark
Director of the SMU Economics Research Center
jhclark@mail.smu.edu

On whether Houston will make a healthy recovery

“I’m bullish on Houston. Compared to New Orleans going into Katrina, Houston enters with a vastly larger, much healthier economy. It had much more in the way of business and economic infrastructure. It is a far larger metro area – fifth in the nation. And it is above the national average in wealth, compared to New Orleans, which was one of the nation’s poorest metro areas ahead of Katrina.”

“Anyone who had any kind of reasonably middle class job in Houston will keep doing that job in Houston. When you’re a major global center for the energy industry, and an important hub for many other industries, you’re in vastly better shape to recover.”

“The success story that is Houston doesn’t get invalidated by physical damage overnight. The physical infrastructure doesn’t matter nearly as much as the human infrastructure. The strength of Houston’s municipal government, the human capital of its residents, the diversity of its economy – that’s all more important than the physical infrastructure and I’d wager that’s very much intact in Houston.”

On the role government will play in Houston’s recovery

“In an ultimate sense, a whole lot of how the area is rebuilt will be a political decision. A lot of the damage will likely turn out to be uninsured because not everyone has flood insurance, which means a large tax payer-financed rebuilding program is likely. So you have the really interesting question of, when a whole lot of stuff gets destroyed, and politicians are deciding where the recovery dollars go, what decisions get made?”

“After Katrina, politicians made a decision that, on paper, looked like a bad one: They committed a lot of resources to rebuilding lower-lying areas, like the lower 9th ward, which were most-prone to future disasters. In a practical manner, however, if you visit New Orleans now, the lower 9th ward hasn’t been rebuilt to the level of wealthier areas, either because of bureaucratic red tape or corruption. It will be interesting to see where the money goes in Houston.”

Cullum Clark is director of the SMU Economics Research Center.

Can discuss:

  • economics of disaster recovery
  • why Houston’s recovery will be different from New Orleans’
  • impact on state’s economy

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