This week we remember the calamity of Hurricane Katrina, the indelible images of New Orleans families stranded on rooftops amid house-high floodwaters, of helicopters carrying people to safety, of looting, of parking lots of school buses put to no use. In hindsight, the devastation wrought by Katrina reminds us above all of the limitations of government to manage crises and the importance of allowing people to mobilize every resource at their disposal.
When the levees broke, pundits pointed fingers everywhere. Most concluded that the Federal Emergency Management Agency hadn't done enough to evacuate people or bring them aid, but in the end, it was the agency's sins of commission, not omission, that made its response so disastrous.
As Louisiana Governor Kathleen Blanco complained, "No one, it seems, 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 didn't return calls from the American Bus Association. Sheriff Dennis Randle of Carroll County, Indiana, had a team ready to help, but 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 plane sat in Germany for nine days because FEMA didn't return its calls.
FEMA's failure was that it employed a command and control approach—central planning—as the basis for organizing relief activities. This compounded disaster with disaster, because 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.
How could any one agency go about coordinating thousands of people with different needs with thousands of people who have supplies that could help them? FEMA's model required both the demands for relief and offers of supply to be communicated first to the agency for approval. Private individuals and local governments that attempted to bring in their own supplies quickly found that FEMA would not allow it.
FEMA actually 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 the city. Why would anyone want to prevent those deliveries when they were needed most?
On some level, we all recognize that markets are the alternative. Think of the Chicago Board of Trade, which coordinates millions of commodity exchanges a day. The trading floor seems chaotic, but 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. Some enterprising samaritans even used eBay to facilitate exchanges and offers of assistance, which they did more effectively than FEMA.
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 claims processing hotlines. Wal-Mart's incredible response had even its staunchest critics praising it. Decentralized, market-based institutions use information and respond in ways that a centralized government planning agency simply can't.
Unfortunately, the May 2006 report of the Senate Committee on Homeland Security and Governmental Affairs recommended replacing FEMA with an even larger and more centralized agency: the National Preparedness and Response Authority, which would also oversee central planning of economic activity after future disasters.
These proposed reforms will only compound the problem. To solve it, 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 individuals with particular abilities to apply them in times of crisis, just as they do in times of calm. It would limit government's role to repairing roads and protecting the lives and property of disaster victims and relief workers. At the very least, it would forbid FEMA from confiscating private property and preventing relief suppliers from going where they were needed. It would prevent looting, and allow people to organize and help each other. And the next time a hurricane hit, among all the images of hardship, papers could seize on an image of solidarity: a medic, a soldier and a trucker distributing aid and driving people to safety.