New Orleans is a city vulnerable to rising sea levels. Financial capital will abandon New Orleans long before rising seas overwhelm the city.

The city of New Orleans celebrated its 300th anniversary this year. Sadly, the city that gave the world modern music will not be around to celebrate its 400th anniversary. Climate scientists predict that New Orleans will be fully subsumed by rising sea levels by 2100. Other experts predict the city could be uninhabitable by 2050.

However, it will not be the rising seas that destroy one of the most historically and culturally significant places in the United States. The financial system will abandon New Orleans long before, and leave it a shell of its former self before sea water rises over the levees.

Bad Credit

The economic livelihood of a city relies on the ability of its residents, local businesses, and municipal governments to access credit. Residents need mortgages to buy property as well as to renovate and repair homes. Local companies rely on commercial loans to build housing and commercial buildings, as well as fund business activities and pay their employees. City governments rely on municipal bonds to run day to day operations and fund infrastructure projects.

Each loan has a set repayment period whereby the borrower must fully repay the loan back to the lender. Mortgages on average have a 25 to 30 year repayment period. Commercial loans have shorter repayment periods being anywhere from 5 years to 20 years. Municipal bonds repayment periods vary from 1 year to 30 years. The decision to make a loan, and borrowing costs, are predicated on the ability of the borrower to repay the loan, and whether the asset securing the loan will retain its value.

In the near future, there will be a batch of new loans with a repayment period crossing into a time when New Orleans will be made uninhabitable by climate change. These loans will become incredibly risky for the lending agencies, which will impact the costs of borrowing, the amount available for borrowing, or whether any loan will be made at all.

You gotta go see the Mardi Gras

Based on the prediction that New Orleans will be subsumed in 2100, it will become too risky to lend to the city of New Orleans, its residents and local businesses some time in the 2070’s. If climate change continues to accelerate, and the world accepts that the date will be earlier than that, 2050 for example, it is possible that the city of New Orleans and its residents will have trouble accessing credit some time in the 2020's.

Moody’s, a ratings agency, has already warned New Orleans that they will be evaluating the city of New Orleans efforts to adapt to climate change. If New Orleans does not develop a plan to adapt to climate change in the future, they will suffer a downgrade to their credit rating in the present. A downgraded credit rating will increase the cost of borrowing for the city as well as impact the amount of borrowing available to them.

When the credit is gone

If New Orleans and its residents can no longer access credit, or if that credit is too expensive, it will send the New Orleans economy into a death spiral.

If banks stop lending to residents or if the cost of borrowing is too high, fewer people will be able to buy property in New Orleans. If demand for housing weakens too much (ie there are not enough home buyers), property values in the city will implode. If property prices plummet, the city will lose its property tax base. A loss of property tax revenue will mean that the city can no longer afford to run its critical services like fire, police, sewage and water. A loss to these critical services will mean a degradation in the health and wellbeing of New Orleans residents. Much the same as happened to Detroit, New Orleans will experience a spike in crime, and its residents access to basic services like clean drinking water will be threatened. People with the economic means to do so will leave the city, further exacerbating the loss of tax revenue for the city, starting off an economic death spiral.

Similarly, if local companies cannot borrow money to build or operate their business it will result in companies going bankrupt or choosing to move to other locations. This will result in an increase in unemployment in a city with a higher than average unemployment rate, that will then have a diminished ability to cope with unemployment due to the implosion of its property tax revenues.

If the city government of New Orleans is unable to access credit, this will further impact its abilities to fund its services. More worryingly, it will impact New Orleans ability to undertake the significant infrastructure required to adapt to climate change.

The Crescent City Connection over the waters of the Mississippi, and the levee that holds those waters at bay.

Financial capital is in denial about the impact climate change will have on their willingness to lend to a city like New Orleans. This is not priced into the credit markets more broadly nor the real estate markets in New Orleans specifically. If the city of New Orleans will become uninhabitable in 30 to 80 years, and lending to that market will dry up sometime in the next decade or two, its should start experiencing immense downward pressure on property prices. The markets are in denial, and once the market starts pricing in climate change the bottom will fall out of the New Orleans real estate market and its economic death spiral will commence.

This is not a matter of if, but when.

What is to be done

If the financial capitalism is going to abandon the people of New Orleans, as well as millions of others in US coastal communities (not to mention billions around the world), then it is time we abandon capitalism. The capitalist economic system wrought destructive climate change on us, and it is fundamentally unequipped to deal with the consequences. The capital class is so desperate to avoid giving up their wealth and privilege that they would rather dim the sun than face the consequences of their actions.

The time has come and gone for individual choices to be the solution to climate change. If we are going to save New Orleans, it will not be because more people started eating less beef or driving a Prius. The Green New Deal being pushed by Alexandria Ocasio-Cortez is a good start. However anything that threatens the wealthy and powerful will be quashed before it can be effective. Only a fundamental restructure of the political economy can remove the largest carbon emitters from power.

Carbon emitters like Exxon have an iron grip on the political process and will make it impossible for us to reduce carbon output by the amount necessary to forestall the worst effects of climate change.

These carbon emitters control the political process through their immense wealth. We must wrest control of the political process from their blood stained hands, and redistribute their wealth to help us all adapt to the changing climate.

Capitalism is going to abandon us in the face of the crisis it created. We need to abandon capitalism in favor of a political economy that places the survival of humanity over profits. The city of New Orleans has given the world so much, the world needs to give back to save it.

Solidarity Forever.