Slate's Moneybox: Sept. 11 vs. Katrina Recoveries

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ALEX CHADWICK, host:

This is DAY TO DAY. I'm Alex Chadwick.

The whole nation is already feeling economic ripple effects from Hurricane Katrina. But the more hopeful predictions about Katrina's long-term impact have compared it to 9/11, the terrorist attack. They've pointed out how quickly the American economy recovered from that. Well, don't hold your breath this time, says Daniel Gross. He's the financial columnist for the online magazine Slate. He joins us now to talk about why we may all be feeling the pinch from Katrina for a long time, even if we're nowhere near the Gulf Coast. Dan, what are the big differences between what kind of businesses were affected by 9/11 and those being hit now?

DAN GROSS reporting:

9/11 struck at the heart of the new economy. But when you run a service, like a newspaper or a wire service or a brokerage firm, you can get up and running at an alternate office pretty quickly, and that's exactly what happened after 9/11. You can't have a redundant oil refinery waiting to be turned on in case of an emergency. For the shippers that relied on bringing bananas through the New Orleans port or shipping grain out through the New Orleans port, there's no easily replaceable means of doing so. And so it's going to cause a lot more dislocation than you might think.

CHADWICK: But you also write that if Louisiana was simply an old-economy state, it would do better, but it's kind of a blend of old and new that makes it particularly difficult there. I don't quite understand that.

GROSS: When we talk about networked economies, we tend to think about telecommunications and fiber optic networks, but we also have networks of pipelines, trade networks that are rivers, barges, shipping lanes. These sorts of networks have been really disrupted by Katrina, because New Orleans is a central hub in these.

CHADWICK: So you also note that roughly half of all the corn and wheat and soybeans produced in this country, half, goes through ports in and around New Orleans. What's that going to mean in the next months and years?

GROSS: It's going to mean that the farmers and the companies that ship these exports to foreign markets are going to have to figure out a new and probably more expensive way of doing it. The reason they've shipped grain and soybeans by barged down the Mississippi, it's because it was the cheapest way of getting to market. Now they're going to have to use rail or trucks or airplanes, and now there's going to be a sudden demand for trucks and railroads and airplanes, and that's going to push the price even higher. The markets will adjust to these things, but in the short term, it's going to mean higher costs, which means either the consumers will have to pay more, or the companies will have to accept lower profits.

CHADWICK: Looking at how the country responded economically, a lull after 9/11, how is this going to compare to that, or can you even say yet?

GROSS: Well, recall, after 9/11, there was an immense amount of pessimism. When the stock market finally opened, stocks were down several hundred points. And then unexpectedly, things bounced back really quickly. In the first day, after Katrina, the markets were up. People were saying, `Oh, it wasn't as bad as we thought.' And they, I think, were factoring in the fact that things turned out OK after 9/11 into this.

Now we've seen a sudden shift, and there's a perception that things may not turn out OK in the short term or in the long term in particular for the Gulf Coast. Certain industries will be able to adapt very quickly, and others, particularly local New Orleans industries, will take a long time to bounce back.

CHADWICK: Opinion and analysis from Daniel Gross. He writes the Money Box financial column for the online magazine Slate.

Dan, thank you.

GROSS: Thank you.

CHADWICK: DAY TO DAY returns in just a moment. I'm Alex Chadwick.

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