Disastrous Relief

There’s nothing like a good disaster to bring glee to the heart of a statist. Just as there are no atheists in foxholes, there are no skeptics of big government in the wake of an earthquake or hurricane. They all fall to their knees before the Federal Emergency Management Agency and shout, “I believe!”

Then again, maybe not. Sorting through the rubble of Hurricane Hugo and the northern California earthquake, we find more evidence of effective private action than of government omnipotence. Too often, in fact, government stood in the way of rescue and recovery, frustrating private efforts and violating the rights of property owners.

The contrast between private and government action was nowhere more glaring than at the scene of the Nimitz Freeway collapse in Oakland. Immediately after the earthquake, passers-by and neighborhood residents spontaneously set to work, using forklifts and ladders to rescue at least 50 motorists within the first half hour. Firefighters and police did not arrive for 90 minutes, but once the authorities took charge, they cleared the area and set up barricades to keep out all those pesky intruders who had dared to save people’s lives without permission.

In San Francisco, the authorities prevented many people from entering their damaged homes and businesses after the earthquake. In some cases, residents were not even allowed to recover a few belongings before their homes were bulldozed. Too risky, officials said. They never considered allowing the people at risk to make that judgment for themselves.

Such official arrogance was also apparent following Hurricane Hugo. After the storm passed through the Charleston area, Mayor Carmen Bunch of the Isle of Palms declared martial law and barred residents from returning to the barrier island to secure their property. In the meantime, heavy rain poured through torn roofs, causing further damage to homes and possessions.

In Charleston, one of Mayor Joseph Riley’s first responses to the devastation caused by the hurricane was to impose price controls. The move followed reports that storekeepers had jacked up prices for goods that were in great demand, selling blocks of ice for $100 or more and generators for thousands of dollars. As morally reprehensible as such gouging might be, the city did not do the people of Charleston a favor by outlawing it, thereby eliminating the incentive for outside suppliers to bring in equipment and provisions. Had the city allowed the market to work, competitors from nearby towns would have been attracted by the potential for profit, expanding the supply of sought-after goods and bringing prices down.

The resilience of the market was demonstrated by the performance of northern California’s Safeway stores, which continued supplying essential goods following the earthquake. The chain arranged emergency shipments of water, canned food, batteries, and other necessities, while employees immediately began cleaning up the stores and repairing the damage. By 5 P.M. the next day, most of the 140 outlets affected by the quake were open. In addition to sup- plying its own stores, Safeway distributed food to private relief agencies.

By their nature, organizations such as the American Red Cross and the Salvation Army are far better equipped to respond quickly and effectively to a disaster than is a lumbering agency such as FEMA. After Hurricane Hugo, it took FEMA a week to set up an office; local charitable groups pitched in right away. Just minutes after the earthquake, the Salvation Army was providing food; the Red Cross opened shelters within four hours, while federal bureaucrats were still holding meetings and issuing directives.

Faster than officials could propose tax hikes, donations poured into relief organizations. The Red Cross alone had collected $46.5 million as of October 31. Those in California who clamored to raise taxes in response to the earthquake should recognize that, aside from the funds needed for road repair (which, like it or not, is a state project), the money would be better spent on private efforts. Concerned Californians could get more bang for their buck by giving to relief groups that do not have large bureaucracies to feed.

While government money will undoubtedly help victims of the earthquake and Hurricane Hugo, much of the spending will be counterproductive. Congress allocated about $4 billion for relief in the aftermath of the two disasters. Of this, $2.2 billion goes into a fund that will be spent at FEMA’s discretion. The appropriation also includes $500 million for Small Business Administration disaster loans. A lot of this money will be used for grants and loans to uninsured residents and businesspeople. Such assistance may seem noble, but it undermines the incentive to prepare for future disasters. If you know that the federal government will restore your property, make your home or business whole again, why would you bother to buy insurance or reinforce your house?

Federal aid also raises the question of fairness: Is it right to demand that taxpayers in Butte and Des Moines help to bail out people who choose to live in areas that are vulnerable to earthquakes and hurricanes (especially, say, the well-to-do people south of Broad Street in Charles- ton)? Take federal flood insurance, which IS subsidized by taxpayers to the tune of 25 cents for every dollar in claims. Either this business is inherently unprofitable—likely, since the private sector took care of flood insurance until the late ’60s—or it simply cannot make money while offering low rates to everyone. In any case, federal flood insurance amounts to an inexplicable income-transfer program.

By disrupting the insurance market, the government tampers with one of the most effective means for dealing with disasters. In northern California, private insurers plan to pay close to $1 billion in claims. Just as important is the influence insurance companies can have before disaster strikes, by insisting on safe construction. Had the Nimitz freeway been privately built, you can be sure its insurer would have scrutinized its soundness more closely than the state of California did. Furthermore, in a free market, the cost and availability of insurance discourages people from living in dangerous buildings and locales.

When government competes with private insurers-by controlling a segment of the market or, through relief aid, offering insurance for free-it weakens or destroys these healthy incentives. In their stead, it offers building codes and construction restrictions. South Carolina’s Beachfront Management Act, for example, will prevent many oceanside property owners from rebuilding homes and businesses destroyed by the hurricane. These people, along with all the others who have been slapped by government’s helping hand, will be forgiven if they do not feel relieved. 

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