Today I’m writing about the deadly storm approaching the west coast of Florida, because it has a lot of parallels to the Covid epidemic in terms of supply chains and unpredictable consequences. It’s also potentially horrific. Here’s the Mayor of Tampa, Jane Castor, being very clear about the potential of the storm.

Tampa is an important port, and is uniquely vulnerable to a hurricane. And that means we may find out whether we’ve learned any real lessons from the Covid crisis. I suspect the answer is we’ve learned some, but not enough.

Let’s start with the storm.

I have two experiences with hurricanes. I grew up in Miami, and experienced Hurricane Andrew as a kid in 1992. While my neighborhood and house suffered damage, a few miles south was totally destroyed. Had the storm taken a slightly different track, I may not be alive today. But since Andrew’s path jiggled at the last minute, it was more an inconvenience.

Living through powerful hurricanes is terrifying; animals seem to intuitively know a big storm is approaching. The day before Andrew, the wind was perfectly still. But that evening, before the wind picked up, dogs got nervous. We had someone with a pet staying with us, and as the adults got drunk, the dog pooped on the rug, while we all watched. Gradually the wind picked up, howling and ripping things outside apart. I remember the National Hurricane Center, based in Miami, was broadcasting, until it stopped, its broadcast equipment having been blown away.

While the storm was scary, the aftermath, at least for me, was sort of fun. Boys love being off school, even if there’s no electricity or running water. I got to bathe in a nearby swimming pool, and generally saw lots of downed trees and debris. It was very exciting. But the experience was difficult for adults. I remember my Dad being stressed about having only the amount of gas in the car and not being able to refill it. We had to plan on getting ice at a checkpoint where the national guard was handing it out. It was brutally hot, and there were near fistfights over limited supplies. There also seemed to be some sort of smoke constantly on the horizon.

The other experience, perhaps more relevant, is when I worked as a staffer in Congress about 15 years ago. I was lobbied by some trade association representing insurance companies who insure against big disasters. These aren’t the companies who cover the losses of homeowners, but the companies who cover the losses of the smaller insurers who cover homeowners. They get involved when there are damages in the billions, versus the millions. They told me there are five places susceptible to a $50 billion+ damage event from a hurricane, because of their particular geographic layout - Miami, New York City, New Jersey, Long Island, and Tampa. And I suspect that they have planned ways of avoiding liability for what’s coming.

All of that is a way of saying that hurricanes are really dangerous, and involve massive sums of money and important questions of market power and shortages. And that’s especially true today, with our monopolized and thus fragile supply chains. For instance, when North Carolina got hit with immense rain from Hurricane Helene a few weeks ago, it killed hundreds of people, and also knocked out a mine making 90% of the key pure quartz on which the semiconductor industry depends. To take another example, the American Hospital Association has already asked the President to declare a national emergency due to a shortage of IV fluids as a result of the disaster.

And now there’s another monster storm, Hurricane Milton, headed straight for Tampa. Yesterday, Milton strengthened into a Category 5 hurricane, with winds in the 180 mph range. The storm is expected to weaken to a Category 3 storm, with weaker winds, before hitting landfall. It’ll be at hurricane strength and travel across the Florida peninsula.

The wind usually isn’t the real killer in a hurricane, the surge is. Superstorm Sandy that hit New York City was just a Category 1 in terms of wind speed, but the flooding from the ocean was catastrophic. And Tampa, like New York City, is uniquely vulnerable. It’s low lying, and climate change has made the situation worse. “Experts have long cautioned that if a storm pushed water into Tampa Bay,” writes the Washington Post, “it would essentially trap it in too small a space, sending storm surge levels higher. The farther up the bay, the larger the surge.” Tampa hasn’t been hit directly by a big storm since 1921, and it has grown a lot since then.

Hopefully, Milton doesn’t hit the city directly, and it may not. These big storms almost always tend to avoid the most catastrophic hits. But let’s go over some of the consequences if it does. First, Tampa has an important port, managing 33 million tons of cargo a year. It’s the biggest exporter of fertilizer in America, and is the biggest importer of gasoline and jet fuel used in Florida. So that means we can expect significant supply shocks, and probably environmental damage. Utilities are already stretched because of Helene, so replacing electrical equipment is going to be difficult. All the major supplies for recovery, everything from lumber to ice to drinking water to skilled labor, are already being sucked into North Carolina to deal with the after-effects of Helene.

In addition, MacDill Air Force Base is in Tampa, which is where CENTCOM, the command center for U.S. forces in the Middle East, is located. So we could see modest disruptions to U.S. military operations. Tampa is near important NASA assets like Cape Canaveral, so there are space and defense contractors in the city.

There’s a lot more than that, of course, since Tampa is a major metropolitan area, an important hub for fishing, tourism, medicine, manufacturing and finance. It has convenient rail lines and highways to pair with its deepwater port, serving as a trans-shipment point for moving goods throughout Florida. Beyond Tampa, a good chunk of Florida is in the path of this storm, with unpredictable consequences. For instance, I wrote earlier about the shortage of IV fluids due to problems in North Carolina. It turns out another large IV solutions manufacturing plant in Daytona Beach is in the path of Milton. Yikes.

The insured losses could be massive, and we could face shortages of all sorts of random and important stuff. But more than these elements, we might lose an entire city, an apocalyptic level of destruction. And increasingly in Florida, there is no way to insure anything. In fact, the state itself, through its Citizens Property Insurance Corp., self-insures against natural disasters, because private insurers just won’t do business in Florida anymore. That means Florida property owners - who in aggregate own about $4 trillion - could enter a death spiral where they can’t get insurance, and so can’t get financing. That’s similar to what happened when an earthquake destroyed San Francisco in 1906, setting off movement of gold from insurers that led to a financial panic the next year.

So what’s the right approach to addressing the resulting crisis?

The response will require more state capacity. Clearly there’s search and rescue and immediate crisis response, which requires a lot more funding for the Federal Emergency Management Agency (FEMA). We’re going to need a permanently larger FEMA, since climate change has dramatically increased the pace of natural disasters. The government should probably just rebuild and then make all cell phone service free in the area for the next two months, and find a way of extending Medicaid to everyone so no one has to deal with billing. Or they could just temporarily nationalize hospitals.

What we can learn from the Covid crisis and the CARES Act is that we should immediately be sending resources to individuals and small businesses in the area. A quick disbursal of cash to everyone in the region, as well as a revival of the Paycheck Protection Program for small business loan/grants, would help people afford basic necessities, and keep businesses alive. Bank regulators should also freeze credit reporting and student debt payments for people in affected counties.

Given the potential crisis of Florida property values and all the financing attached to those, we need to think about bank solvencies. To address the possibility of a financial crisis, Congress should stop working through the Federal Reserve, which is too focused on helping private equity and large banks and far too opaque. Instead, the government should structure a new public bank called the Reconstruction Finance Corporation. It should be run by the FDIC, and be allowed to use the Fed balance sheet for loans, which would all be publicly posted.

We can also learn some lessons from the post-Katrina moment, as well as what happened during Covid, and the CARES Act. What we can learn from Katrina is that it’s important to do as much within the government as possible, instead of through contractors. Here’s why.

As the immediate emergency receded, the percentage of contract dollars awarded without full and open competition actually increased. In September 2005, the month after Hurricane Katrina, 51% of the contract dollars awarded by the Federal Emergency Management Agency were awarded without full and open competition. Rather than declining after September, the percentage of contract dollars awarded noncompetitively increased to 93% in October 2005.

With all the cash flooding in and the limited supplies, we need much stronger laws against price gouging. Gouging is already happening across the areas hit by storms, as well as by airlines in Tampa jacking up fares for people fleeing the storm. Fortunately, the FTC and the Department of Transportation are watching the situation and the DOT seems to be investigating. The attorney general of Florida is taking tips from the public, though I’m less confident in that official. None of this is enough, we need a Federal law.

One reason I wrote my piece in April clarifying that price gouging isn’t price controls is because they really are different, and this experience shows why. I asked economist Jason Furman, who criticized Harris for her price gouging proposal, about whether price gouging laws make sense in the context of recent hurricanes, and he said “I genuinely don’t know because I haven’t seen the research. I can see arguments on either side.” Josh Hendrickson, another critical economist, pointed me to this blog post, saying that such laws “don't seem to matter that much.” In a crisis of this magnitude, price gouging is something to stop, but the underlying problem is getting enough material and skilled people into the area fast enough.

Are those all the actions we need to undertake? Not even close. In truth, there is no way to prepare for such an event, though it would be nice if there were more knowledge in the government about what exactly exists in these areas. The most comprehensive database of commercial assets is probably held by the different branches of the military, since they have to keep a list of all uses of the Defense Production Act. I’m guessing that some of the middlemen monopolies, like group purchasing organizations, drug distributors, or firms like Amazon have useful data, though they’ll probably try to resist giving public officials access. Pharma companies wouldn’t tell the FDA where their factories were during Covid. So some legislation mandating that the government can get access to critical commercial data during a natural disaster is probably useful.

How likely is the worst case scenario to happen? I don’t know. Hopefully the storm swerves and misses Tampa. That said, if the storm is as bad as it could be, we have some knowledge of what to do. We have lived through crisis and an expansive use of the state. Still, we face significant obstacles that didn’t used to exist. In 1992, the recovery from Hurricane Andrew went pretty well. But the economy was very different, much less vulnerable to supply shocks. Politically, government was more competent and institutionally well-structured, and there was a consensus that disasters should be addressed swiftly with public funding. Today none of that is true, FEMA is overstretched with a string of disasters, House Republican Speaker Mike Johnson isn’t willing to put in more funding, the press is weak, and there are endless lies online about what’s happening.

Regardless, we are entering a world beset by climate change, which will require a different political order. Last July, I wrote a piece on how we are forgetting the lessons from Covid. We are still highly dependent on China, and the fragility of our supply chains hasn’t improved. And that’s because, while there are some good policymakers in positions of authority like Lina Khan and Rohit Chopra, the bulk of our leadership class is still in thrall to a finance-friendly model of industrial fragility. And this dynamic is as much an ideological problem as anything else. Here’s a key passage from that July post:

In 1932, just before he took office, Franklin Delano Roosevelt discussed the politics of the stock market collapse. “The public has burned its fingers in the flame of wild speculation and has learned to fear the fire,” he said. “While it still fears the fire is the time for us to act.” FDR implemented a different philosophy of governance, using the recent memory of the crisis to reorganize our social hierarchy. The point of the New Deal he engineered wasn’t a specific policy framework, but to structure society so that the failed financial elite was displaced, and the public itself could govern.

Though today most of us know of the many failures of the last fifteen years, the philosophy of the old order has never been displaced, as neither Trump nor Biden articulated a different and sustainable governing arrangement. And so the pushback is severe.

That is still where we are. Hopefully Tampa will get lucky. But if not, we will have another opportunity to learn some painful and ugly lessons.

Thanks for reading. Send me tips on weird monopolies, stories I’ve missed, or comments by clicking on the title of this newsletter. And if you liked this issue of BIG, you can sign up here for more issues of BIG, a newsletter on how to restore fair commerce, innovation and democracy. If you really liked it, read my book, Goliath: The 100-Year War Between Monopoly Power and Democracy.

cheers,

Matt Stoller