Mover Mike

Speaker Hastert says “It doesn’t make sense” to rebuild New Orleans following the devastation of Hurricane Katrina.

George Friedman founder of Stratfor writes in an amazing piece New Orleans: A Geopolitical Prize (available at Le Metropole Cafe, free trial subscription available)

During the Cold War, a macabre topic of discussion among bored graduate students who studied such things was this: If the Soviets could destroy one city with a large nuclear device, which would it be? The usual answers were Washington or New York. For me, the answer was simple: New Orleans. If the Mississippi River was shut to traffic, then the foundations of the economy would be shattered. The industrial minerals needed in the factories wouldn't come in, and the agricultural wealth wouldn't flow out. Alternative routes really weren't available. The Germans knew it too: A U-boat campaign occurred near the mouth of the Mississippi during World War II. Both the Germans and Stratfor have stood with Andy Jackson: New Orleans was the prize.

(Photo: A cargo vessel appears to swallow St. Louis Cathedral in the heart of New Orleans' French Quarter as it steams down the Mississippi River. Encircled by levees, most of New Orleans lies below sea level—as much as eight feet (two meters) below in places—due to subsidence and compaction of the underlying soil. In the event of a major hurricane, this "soup bowl" geography could spell disaster for the city, which would have to be pumped out if it flooded. (Robert Caputo))

New Orleans isn't just of oil importance, which has been adequately described, but the largest port in the US and the 5th largest in the world. Through the port flows our bounty collected from the fertile heartland to world markets. And through the port flows the raw materials needed for our industry like steel for General Motors. There may be alternative ways to get these things to market, but the river is the cheapest on a value to weight ratio.

Friedman argues what has been lost is more than the infrastructure and the port facilities, which can be quickly repaired, but the workforce.

The oil fields, pipelines and ports required a skilled workforce in order to operate. That workforce requires homes. They require stores to buy food and other supplies. Hospitals and doctors. Schools for their children. In other words, in order to operate the facilities critical to the United States, you need a workforce to do it — and that workforce is gone. Unlike in other disasters, that workforce cannot return to the region because they have no place to live. New Orleans is gone, and the metropolitan area surrounding New Orleans is either gone or so badly damaged that it will not be inhabitable for a long time.

The strategic importance of New Orleans to a properly functioning US economy seems to have been taken for granted and IMO not reflected adequately in stock market action. Speaker Hastert, Friedman says

It is a terrible place for a city to be located, but exactly the place where a city must exist.

Update: