The 1900 Galveston hurricane's devastating impact on the city's economy

Isaac's Storm

The Galveston City is a narrow island adjoining the Galveston bay. Marked by its distinct geographical position its highest point is only 8.7 feet above sea level. This Gulf city was devastated by one of the worst ever storm to strike America on September 8, 1900 claiming the lives of more than 8000 people and total destruction of properties. (Estimated at $30 million in 1900). The hurricane created giant waves up to 8 to 15 feet high and the water from the swelling waves inundated the whole of the city and washed away everything on its path. In the book "Isaac's Storm" Erik Larson describes how Isaac Monroe Cline, a chief staff of the American meteorological department studied the progress of this devastating storm and how it had an destructive effect on the business climate of this once commercially vibrant city. Let us briefly analyze the effects the storm had on the development of Galveston City from a business perspective.

Galveston City (Before the Storm)

The dangerous geographical location of Galveston is very clear from the recounting of Josiah Gregg, one of America's main travelers who wrote as early as 1841 that, "This Island was so fully overflowed that a small vessel actually sailed out over the middle of it." [Erik Larson, pg. 12] Apart from the geographical position (city is very low and close to sea level) Galveston was a grand city which was developing very rapidly. In fact it was a gaining status as a perfect cosmopolitan city with its flourishing business. People from other parts of the United States were beginning to move into Galveston wooed by its natural beauty and opportunities. Galveston was a city where people from all the races were equally represented. By 1900 the city was all set for a status as equal to San Francisco or New Orleans and competing with Houston as a fastest growing business city in the gulf region. In fact the New York Herald Magazine had at that time, described Galveston as the 'New York of the Gulf'. Galveston was one of the busiest ports (third) in the country and the biggest cotton port in the whole of the United States. In short it was a rich cosmopolitan city with more millionaires per square kilometer than the other cities like New Port, Rhode Island. Etc. [Erik Larson, p8 13]

Insurance Sector

The insurance sector is one of the most affected by the frequent hurricane disasters. The United States meteorological department has classified Galveston as the most risk prone area for hurricane attacks. Presently Galveston is a city with a very high probability of hurricane attacks in the whole of United States. Apart from the devastating 1900 hurricane the city was affected by hurricanes quite regularly (1915, 1919, 1932, 1941,1943,1949,1957,1961 and 1983). Even today meteorologists opine that Galveston stands out as the most risk prone city. Since the Insurance aspect is invariably interleaved with the stability and security of the business, especially in high-risk areas such as Galveston any change in the business climate is directly linked with the insurance sector. In view of this the insurance plays a major role when we analyze the implications of the hurricane on the corporate sector.

Fearing the heavy risk insurance companies deserted Galveston and this further decreased the confidence of the corporate entrepreneurs. It is certainly a great risk to operate a big business with a huge spending on the infrastructure without any kind of insurance security. Immediately after the 1900 disaster many insurance companies totally backed out of the high-risk areas. This further stifled the confidence of the business entrepreneurs leading to an economic stagnation.. Presently the situation has improved and the head quarters of the "American National Insurance Company" is in Galveston. Many insurance companies have tried to take advantage of this situation by increasing their premium rates drastically. Even house insurance has become costly with very high premiums. A study has indicated that out of the 35 odd insurance companies that provide housing insurance more than twenty five companies charge more than the standard benchmark rate. [Texas Watch Online]

The Current Economic Situation

Currently Galveston is slowly recovering from the economic setback. The main economic backbone of the city is Tourism, the University of Texas Medical Branch and the Galveston port, which is wholly operated by the state. One of the biggest medical facilities in the country the Texas University Medical Branch employs more than 12,600 employees with an average annual payroll of about $530 million. In fact the Texas University Medical branch provides employment to more than 1/5 of the city's total population.

Tourism

Tourism is another sector, which contributes positively to the economy of Galveston. It is estimated that more than 6.5 million tourists visit Galveston. The main attraction being the attractive well spread out beaches spawning a stretch of more than 32 kms. Katherine D. morre, the director of the port says, "We feel confident that by the end of 2004, cruising from Galveston Island will have enticed 300,000 new vacationers to our Island." [Port of Galveston]

The Galveston Port

Once the backbone of the Galveston City economy, the port was totally ruined by the 1900 hurricane. One of the biggest public ports in the United States Galveston port lost its strategic business importance because of the frequent natural disasters. It was also the biggest cotton port in the whole of United States. It has to be agreed that Galveston port has never really recovered from that devastation. However in the recent years (Since 2000) the port is becoming active again as cruise ships are beginning to find the location of the port more attractive. Today the port is one of the three main pillars of the city's economy.

Conclusion

From a careful evaluation and analysis of the facts it is pretty clear that Galveston has never completely recovered from the devastating effects of the hurricane. The thriving economy has been seriously affected by the loss of investor confidence due to the continuous natural calamities. The astounding increase in insurance costs and in many cases the total absence of insurance facility have seriously crippled the business community. In conclusion we can say that though the hurricane has had a retarding effect on the business climate of this once active and successful metropolitan city the economy is gradually reviving.