Monday, March 31, 2008

The Not-so Evil Giant?

Interesting article over at the National Post (note, the paper has a conservative bias) on how Wal-Mart might have saved hundreds of lives in the aftermath of the Katrina Hurricane.

From the article:

"No one who is familiar with economic thought since the Second World War will be surprised at this. Scholars such as F. A. von Hayek, James Buchanan and Gordon Tullock have taught us that it is really nothing more than a terminological error to label governments "public" and corporations "private" when it is the latter that often have the strongest incentives to respond to social needs. A company that alienates a community will soon be forced to retreat from it, but the government is always there. Companies must, to survive, create economic value one way or another; government employees can increase their budgets and their personal power by destroying or wasting wealth, and most may do little else. Companies have price signals to guide their productive efforts; governments obfuscate those signals."

Governments job is to help us out. But if they don't do a good job, they don't get fired. In fact, often if they don't do a good job, they get more money (because clearly, that will fix the problem).

But a business's job is to also help us out, by providing goods and services. But if they don't do a good job, they lose. We'll go somewhere else. They do a good job because they have to.

Regardless, it is interesting to see how FEMA responded, and how Wal-Mart responded. Two entities who set out to do the same thing, but with different motivations, and the end result was a fairly drastic difference. From the article:


Aside from the public vs. private issue, Horwitz suggests, decentralized disaster relief is likely to be more timely and appropriate than the centralized kind, which explains why the U.S. Coast Guard performed so much better during the disaster than FEMA. The Coast Guard, like all marine forces, necessarily leaves a great deal of authority in the hands of individual commanders, and like Wal-Mart, it benefited during and after the hurricane from having plenty of personnel who were familiar with the Gulf Coast geography and economy.

There is no substitute for local knowledge -- an ancient lesson of which Katrina merely provided the latest reminder."

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