The Senate succeeded last week in reconciling two bills intended to reform the Federal Emergency Management Agency, but the proposals do little more than tweak FEMA’s organizational chart.
The bills ignore the real problem: FEMA’s central planning approach to organizing economic activity after a natural disaster.
The great weakness of central planning is its inability to respond quickly and adapt to changes and unforeseen circumstances. No centralized authority, no matter how well-intentioned its employees and well-functioning its internal operations, can overcome this problem. The superiority of markets over central planning is widely recognized around the world, except apparently by those responsible for American disaster relief policy.
FEMA’s command and control approach requires that both demands for relief and offers of supply be communicated first to the agency for approval and allocation. Private individuals and local governments who attempted to circumvent this process quickly found that FEMA would not allow it.
As Louisiana Gov. Kathleen Blanco complained, “No one … even those at the highest level, seems to be able to break through the bureaucracy.”
FEMA turned away generators needed by hospitals, refused Amtrak’s offer to evacuate victims, and wouldn’t return calls from the American Bus Association. Sheriff Dennis Randle of Carroll County, Indiana, who had a team ready to help, was never able to navigate FEMA’s approval process to enter New Orleans. FEMA failures caused millions of pounds of ice to be shipped mistakenly to Maine and Arizona, and firefighters and rescue squads to be sent to areas where they were of little help. A mobile communications unit with a chartered private plane sat in Germany for nine days because FEMA didn’t return its calls.
FEMA confiscated medical supplies for Methodist Hospital and fuel purchased by Jefferson Parish, and even prevented the Red Cross from entering New Orleans. The day before Katrina, Coca-Cola needed no permission to deliver Dasani bottled water to New Orleans, so why would anyone want to erect hurdles preventing those deliveries when they were needed most?
How should one go about coordinating thousands of people with different needs with thousands of people who have supplies that could help?
Take, for example, the Chicago Board of Trade, which coordinates millions of commodity exchanges a day. Although the trading floor seems chaotic, it works to connect those who demand things with those who can supply them. Using the trading floor for a few hours would have done infinitely more to coordinate relief efforts than FEMA ever could.
A version of this model went into effect after Katrina, with some enterprising types using eBay to facilitate exchanges and offers of assistance. The private sector responded admirably in other ways:
Weeks before the storm, Home Depot transferred generators, flashlights, batteries and lumber to its distribution centers near the strike area. Phone companies readied mobile cell towers and sent in generators and fuel. Insurers flew in special teams and set up claim-processing hotlines. Wal-Mart’s incredible response had even its staunchest critics praising the company.
Decentralized, market-based institutions utilize information and respond in a way that a centralized government planning agency simply can’t.
Unfortunately, the report of the Senate Committee on Homeland Security and Governmental Affairs recommends replacing FEMA with an even larger and more centralized agency: the National Preparedness and Response Authority, which would oversee planning of economic activity after disasters. This will only compound the problem.
Government should stick to what it does best - protecting property rights and allowing markets to work - rather than taking responsibility for services it has no experience or expertise providing.
Real reform would allow private individuals with particular expertise to apply it in times of crisis. It would limit government’s post-disaster role to repairing transportation infrastructure, which will enable private suppliers to reach people in need; protecting the lives and property of disaster victims and relief workers; and resisting the temptation to interfere with the temporary price changes that markets require to function.
Finally, any reform would make it impossible for FEMA to confiscate private property or prevent private relief suppliers from entering disaster zones.