Market Solutions - Disaster Response

By Jacob C. Maichel

Economists such as Adam Smith, Friedrich Hayek, and Milton Friedman have proclaimed the pitfalls of central planning, but their message has not been heard with regard to disaster management. One of the most glaring shortcomings can be seen in The Federal Management Agency (FEMA). FEMA is the government organization tasked with coordinating and leading disaster relief efforts. While this sounds good, the relief programs operated by the government are often disasters themselves. We have seen time and time again where the private sector responds more effectively than the government. 

One of the first things to point out is the significant waste both monetarily and in relief supplies. After Katrina, we saw case after case of fraud that resulted in over $2 billion in taxpayer money being wasted in false claims. Examples such as a Texas hotel owner collecting $232,000 in bills for phantom victims or 1,100 prisoners receiving more than $10 million in rental and disaster relief highlight taxpayer money being taken from those who needed it. In 2018 we witnessed extreme mismanagement of aid that was intended for the victims of hurricane Maria in Puerto Rico. It was revealed there were government parking lots with food rotting in the boxes, which themselves were covered with rat feces. FEMA 91,000 tons of ice intended for disaster victims to the wrong state! The situation became so hopeless that Puerto Rican officials asked for aid to be exclusively in the form of money and personnel.

Most importantly the free market provides care for victims significantly better than the government does. Louisiana understands this better than most. In 2005 over 1,500 residents tragically perished in hurricane Katrina, many waiting on government alleviation from the flood waters or needed supplies. In 2016 when floods threatened Louisiana it’s people responded much different. Local efforts saved lives far before any government assistance ever arrived. Facebook groups sprang up to coordinate supply deliveries and rescue efforts. The “Cajun Navy” was created by people using private boats to rescue those in their communities. Phone applications with walkie talkie and GPS functions were utilized to help those who were in need.

Not only has FEMA been considerably less successful than private efforts, the organization significantly hampers non government relief assistance. During disasters it is commonplace to see miles of retail truck convoys carrying precious life-saving supplies stopped by FEMA as to not interfere with their government strategies. During Katrina buses belonging to private businesses who were relocating displaced victims were requisitioned and instead used to deliver people to the New Orleans Convention Centre. Many more deaths were caused by this as the convention center lacked many basic needs yet people were continually placed there by FEMA efforts. When left unhindered local businesses actions have been significantly more successful in getting much needed supplies into communities. When hurricane Sandy struck it hit 295 Walmart stores, 250 were open the next day. Local churches and charities are always the first ones of the ground to help the victims of catastrophe and support their communities.

Unfortunately FEMA even negatively impacts local efforts by disincentivizing charitable giving and creating free trade zones. Public aid creates the illusion that there is a diminished need to give to charities who act during disasters. The organizations that provide the most benefit are the same ones that FEMA hurts. Impact on local business should also be considered as well. FEMA creates free trade zones where normal market conditions vanish. Licenses and taxes which protect sellers and buyers are suspended and businesses have less motivation to provide needed goods and services. Business' motivation for helping may involve profit but being able to survive is priceless.

When FEMA leaves an area after a disaster, business’ drive for profit and free markets are largely responsible for rebuilding. Companies will sell raw materials to others begin to rebuild. Private businesses will repair homes and infrastructure while taking payment for this all while hiring displaced workers for these projects. It was in fact for profit app developers and Facebook that created the tools the Cajun Navy used in saving their own communities. Government responsibility in disaster should be to reopen infrastructure that supports trade and to continue securing property rights rather than be the hero that saves us. Historically we have been let down time and time again by FEMA’s efforts whereas the free market left to its own devices has helped communities come together and rise out of devastating situations.

Jacob C. Maichel is a Graduate Assistant at the Gwartney Institute and an MBA student at Ottawa University