Katrina and Socialist Central Planning

0:00Watching the Capitol Hill hearings on what went wrong after Hurricane Katrina provided a glimpse of what it must have been like in the Politburo in the 1950s. The Soviet bureaucrats would gather with the party officials and the factory and farm managers to figure out why grain production was down, or why shop shelves were empty, or why the bread lines were longer and the quality ever worse. They gathered under the conviction that they had a workable system that was being rendered unworkable because of the incompetence or shirking or wrecking of certain key players in the chain of command. No one was permitted to say that the command system itself was a problem. Instead they had to place blame on someone as if all problems could be reduced to issues of obedience.

0:45It was all as a scramble. Whoever was finally said to be at fault faced certain ruin. To be sure, there was plenty of blame to go around. Even with rats in a maze, there was a sense in which they were all responsible for not having found the exit. If those rats could also organize into a hierarchy of control and hold trials, it would surely produce a great show and many victims. But at the end of the day, the rats would be no closer to getting out of the maze. And so it was with the U.S. Congress. The hearings produced a The Soviet system had to fully unravel before it became permissible to state what used to be a crime to even think. You can't command an economy. You can make every demand, issue a million orders, exhaust every financial resource in the state's account, elevate some people, demote others, dress up in a military costume and make ground pronouncements from a glorified pedestal, cut off fingers, toes and heads, but in the end you can't

1:53make the economy perform in a way that serves the people unless you let market forces work. Not just the Soviets had to learn this lesson. Authoritarian regimes from the beginning of time have attempted to defy the laws of economics, step on the interests of the merchant class, control and redirect the wishes of consumers and Entrepreneurs bend and kick prices and wages this way and that and inhibit trade in every way. But they cannot finally overcome the driving desire and the part of people to control their own fate and not be subject to the slavery that is collectivism of all colors whether red or green or brown. Someday the U.S. managers of crises will have to come to the same point, but for now they are like the Soviet bureaucrats scrambling to make an unworkable system function and and creating a scene that is as farcical as it is tragic.

2:46Consider first how the much glorified Department of Homeland Security responded to the Katrina crisis. There's a mysterious missing day between the time the hurricane hit and the levees broke and flooded New Orleans. During this strange Monday, August 29th, a day in which there was a window of opportunity to prevent the meltdown of civilization, why didn't federal officials respond or even pretend to respond? The head of the Department of Homeland Security, Michael Chertoff, said that he read in the Tuesday morning newspaper that according to the headline, New Orleans dodged the bullet. So to his mind there was nothing to do. This was his testimony. Now this is not exactly an awe-inspiring admission, but it speaks to a truth that few are willing to admit.

3:31Government officials lead normal lives. They do not partake of the mind of God. They get their news just like you and me and they have far less information than the body of knowledge generated by the signaling processes in the market, economy and the private sector. We might even say that they are in effect sub-normal in intelligence because government officials stand outside society, cut off from normal channels of information that the rest of us take for granted. They are isolated from markets and the regular pressures of life. They are not owners of what they control and have no real stake in the value of their product. They're surrounded by some of the most peculiar people in the world, namely lifetime politicians, power-mad politicians, lifetime bureaucrats, I beg your pardon, and lobbyists on the make.

4:19This is their world. This is what they know. Now, they enjoy the illusion of being better informed than the rest of us, so it would hardly occur to a high official to surf Google News to find out what's really going on. This was apparently beyond the capacity of FEMA to find out that the National Weather Service, repeating what private weather services had said, had issued a flood warning right after the hurricane hit. Certainly the municipal government of New Orleans got the message. It issued a warning to residents and then all the officials packed up their stuff and headed to Bataille Rouge. I suppose that this was the plan that the bureaucrats came up with after having received a $500,000 federal grant to Design a Comprehensive Plan for Evacuation. Half a million dollars later, they agree on what the plan should be.

5:07Two words, let's go. Now we can learn from observing this. It is always the case that the government's first interest in a crisis is the protection of itself. The public interest is way down the list. Government employees have no ancient code that requires them to go down with a ship. The seafaring captain might feel disgrace if he lost his crew and passengers but returned safely to shore. But the government bureaucrats would see this as nothing but rational self-interested work. From their point of view, public service is not a suicide pact. If this is so, are we wise to expect government service at times of crisis? Well, here is where it gets complicated. They always promise they will take care of us.

5:55On the day the hurricane hit, for example, President Bush made the following announcement. For those of you who are concerned about whether or not we're prepared to help, don't be. We are. We're in place. We've got equipment in place. Supplies in place. And once we're able to assess the damage, we'll be able to move in and help the good folks in the affected areas. Well, given the calamity that followed, this statement by Mr. Bush might have been a Soviet propaganda poster about the glorious future of socialism. The only response of government, however, were to turn and run that could be accused of hypocrisy, but surely it would be better than the alternative of bad government that stayed to ruin the work that markets and private individuals do.

6:40As the hurricane approached, for example, Mr. Bush, along with nearly every office holder in the entire region immediately announced that there would be no toleration for so-called price gouging. What is and what is not price gouging remains undefined by law, but there are still criminal penalties attached to doing it. If you raise your price to the point where you attract a complaint, there's a good chance you will be thrashed as a gouger. And yet we have to ask ourselves what the purpose of a price is. It's a signaling device that allows market players, including both producers and consumers, to adjust their economic behavior in light of supply and demand. If supply remains the same and demand rises, the price too will have to rise so the market can clear.

7:25Otherwise, there will be shortages and surpluses that prove to be a benefit to no one. Bill Anderson has called gouging rules a form of backdoor price controls, and he's right. to Create Victims, Encourage Economic Dislocation and Foster Black Markets One might think that a Republican administration would understand this, but reflect on the fact that Iraq still has very strict price controls on gasoline, controls that were imposed by the Bush administration after Saddam was overthrown. Don't think for a minute that it is beyond the capacity of the Bush administration to do what the Nixon administration did, which was to believe that the force of regulation can overcome the laws of markets, and by gouging laws to the extent that they are obeyed will create shortages, but in telling the sad tale of Katrina, I'd like to mention not a case of shortage but a strange case of surplus.

8:21One week after the hurricane, FEMA ordered the Army Corps of Engineers to buy 211 million pounds of ice from IAP Worldwide Services of Florida. The trucking companies were notified of a grand opportunity since the government was going to pay for delivery, and the dispatchers sent out the word. Now there's no space to explore the workings of IAP worldwide, but I will observe that the company, which exists solely to get your tax dollars as a Federal contractor, has a new CEO who most recently held the position of Vice President of National Security Programs for the notorious Kellogg Brown and Root. His name is David Swindle. Back to the story of the chaos. One trucker picked up ice in Greenville, Pennsylvania and was told to drive it to Carthage, Missouri.

9:10When he arrived in Carthage, he was told by another female official to go to Montgomery, Alabama. After a day and a half of sitting in Montgomery, he was told to go to Camp Shelby, Mississippi, The News Media Chronicle the stories of these truckers. A truck full of ice was sent from Dubuque, Iowa to Meridian, Mississippi, then to Barksdale

10:20In one of the first incidents reported of what was to be two weeks of catastrophe, a group of volunteer firefighters from Houston came to New Orleans wanting to help. They were ordered to wait. They waited 48 hours and then were ordered to leave. A group of doctors from Maryland tried to get in, but FEMA sent them on to the Red Cross, which said it could do nothing without the approval of federal health officials, which was not forthcoming. After the New Orleans mayor made a call for firefighters to come help, a public call, a thousand volunteers were sent to Atlanta, where they were put in a conference room at the Sheridan Hotel and subjected to seminars on sexual harassment. They were then told that their first job would be to distribute flyers with a message on it, call 1-800-621-FEMA.

11:11Many of these people, well-trained, left town at that point. Those who stuck it out headed for Louisiana were aghast that their first assignment was not to fight fires, which have been raging for a week, but to escort President Bush on his TV-laden tour of the area. You can see all the photos on whitehouse.gov. In fact, FEMA refused offers of help of all sorts because of issues of control as well as incompetence. FEMA declined help from Amtrak in evacuating people from New Orleans. The Chicago municipal government wanted to send volunteers from the fire department, police department and hospitals, FEMA said no. Same happened in New Mexico where the governor volunteered equipment and personnel. FEMA presented Walmart from delivering tank trucks full of water and the Coast Guard from delivering diesel fuel.

12:00They even cut the communication lines for Jefferson Parish. The local sheriff ended up posting armed guards to protect the restored lines from FEMA. An interesting model that many communities around the country would do well to imitate in the future. A chief medical officer for a large ambulance company said he was unable to find helicopters to pick up patients in danger of dying from the Superdome. He walked outside and discovered the two helicopters donated by an oil services company had been ordered to stay in the parking lot. Morticians attempted to donate their help, but FEMA said absolutely not on grounds that As for the National Guard, for days it would not allow reporters into the Superdome where tens of thousands were trapped.

12:54People were hungry and thirsty, but the National Guard would not allow the Red Cross to deliver food. Here's an astounding statement from the spokesperson for the Red Cross. The Homeland Security Department has requested and continues to request that the American Red Cross not come into New Orleans. Right now, access is controlled by the National Guard and local authorities. We cannot get into New Orleans against their orders. The Salvation Army attempted to rescue two of its own officers trapped in a building and on dialysis. They rented three boats for a rescue, but they were not allowed through, though to be fair, the Salvation Army did not specifically name the government as at fault, The U.S.S. Bataan, a floating hospital for 600 patients that happened to be nearby at sea and had ridden out the storm, was still sitting empty by the third day, not permitted to do its job.

13:50An astounding case of ineptness comes to us from the case of three Duke University students who drove to New Orleans to help but were turned away by the National Guard. They had seen the news and knew they could help and wondered why they should be pushed around by bureaucrats. Being college sophomores, they took a risk. They forged press credentials with fake IDs and shirts and the works. They went back and adopted a very haughty tone. The National Guard let them right in.

14:21Then the students drove to the convention center where they found thousands of sick, hungry, thirsty and dying people in desperate need. They found a man who had welts all over his body. He'd been in a tree covered with fire ants as the waters rose and it stayed there being bitten repeatedly for up to 24 hours. The boys picked him up and along with three others and drove them to a Baton Rouge hospital. They made another trip there and back with more people before they began to become frightened about what the government might do to them. In one return trip, they observed 150 empty buses driving the other way, and they have a video to prove it. One can only express astonishment at how the government treated the tens of thousands of people that it had herded like cattle into large public spaces.

15:08For reasons that are still unclear, the government couldn't get its act together on transporting them out, even as the people themselves were forbidden to leave. Once the central planners decided to move all these people from the Superdome to the The first bus to reach Houston was not driven or approved by the government. It was commandeered by a 20-year-old Jabar Gibson, who drove it from the floods and picked up as many people as he could and drove them all the way to Houston, a 13-hour drive. He beat the government system by a day. Meanwhile, the tens of thousands of people who had been shipped and shoved in the Superdome on Sunday before the floods came, were still suffering in that massive calamity by Friday and Saturday.

15:58Perhaps the most astounding case of incompetence was to receive the least attention. It relates to a 500-boat flotilla stretching over five miles that left New Orleans from Acadiana Mall in Lafayette. It involved a thousand people who had hoped to rescue hospital patients and take them to safety. It consisted of private boaters, fishermen, hunters and others who had spent their entire lives navigating the waterways of Louisiana. Once this caravan arrived, they were turned away by the Department of Wildlife and Fisheries, now being run by FEMA. All 500 boats were ordered out. Now keep in mind that this was three days after the hurricane hit. There were still a thousand people inside the Charity Hospital in New Orleans alone. They had no supplies and only three had been rescued.

16:44And at this very time, the head of the FEMA-ized Wildlife and Fisheries Department announced to the world on television that it needed no help from anyone and that it had all matters under control. Some White House staff members put together a DVD of the evening news coverage for Mr. Bush, who prides himself on not reading newspapers or magazines or watching television news, for him to watch on Air Force One, which was the only way they felt they could get him to understand the depth of the crisis. In fact, by the time he actually arrived in Louisiana, food and medicine deliveries, such as they were, were halted on orders of the White House to make way for the presidential caravan.

17:29In one particularly interesting detail, Katrina triggered the first use of the Department of Homeland Security's great accomplishment since it was created after 9-11, the National Response Plan, A 426 page central plan for dealing with a crisis on the level of the post-Katrina floods. Here's how the government describes its plan. The National Response Plan establishes a comprehensive all hazards approach to enhance the ability of the United States to manage domestic incidents. The plan incorporates best practices and procedures from incident management disciplines, homeland security, emergency management, law enforcement, firefighting, public works, public health, Health, Responder and Recovery Worker, Health and Safety, Emergency Medical Services and the Private Sector, and integrate them into a unified structure. It forms the basis of how the Federal Government coordinates with State, Local and Tribal Governments and the Private Sector during incidents.

18:27What happened to the National Response Plan after the floods? Well, it remained what it A Colorful PDF Download, A Thick Book on the Management's Shelves, An Item in the Government Printing Office Catalog, Birdcage Liner, and Many Other Things. One thing it was not was a National Response Plan that did all the glorious things listed above. As with all such plans from time immemorial, it was a dead letter. As for the National Guard, when it arrived, it did what the military does best, harass the residents. Working with the police it began to enforce an order for everyone to evacuate. As the New York Times summarized the order, no civilians in New Orleans would be allowed to carry pistols, shotguns or any other firearms. The National Guard allowed themselves to be videotaped going from house to house and mansion to mansion, knocking down doors, searching for weapons, handcuffing owners and humiliating them.

19:21They called these people holdouts, a phrase right out of Baghdad. One stormtrooper, and strikes me as a pretty good name for them, was asked whether he would shoot residents if they resisted. Yes, he said he would, though. It's surreal. You never expect to do this in your own country. I provided a look at some of the terrible failures by the government, not only failing to do what it claimed it would do, but actively working to prevent others from helping. The cost to human life and prosperity is incalculable. But one might say at least the government is generous now in preparing to spend perhaps $250 billion to clean up and reconstruct what was destroyed. But who will get this money and where will it go?

20:09Cynics could not be more correct. The first company to receive the money was our old friend Kellogg Brown and Root, a current client of Mr. Bush's former campaign manager and also a former head of FEMA. EBR is a subsidiary of Halliburton, the company formerly headed by Dick Cheney. Another winner is the military contractor Bechtel, whose former head is now in charge of Bush's Overseas Private Investment Corporation. Former Secretary of State George Shultz was once head of it as well. The top rebuilding priority for them, repairing government military bases in Louisiana and Mississippi. Now, if you work for one of these companies, you could do very well by this aid. As for For the victims, my guess is they can expect little from the monstrosity that taxes and controls them relentlessly on the pretext that it will protect them and care for them when no one else will.

21:00Fortunately for the people who lived in flooded areas, they did not face the crisis alone. The private commercial sector, along with thousands of religious charities, was there to help. Indeed, John Tierney of the New York Times was one of the few mainstream journalists to note that Walmart improved its image after Katrina. Its stores in the disaster-stricken areas still carry generators. Walmart trucks rode into areas immediately following the hurricane and gave away chainsaws, boots, sheets and clothes for shelters plus water and ice. It alone had prepared for emergency with its own Emergency Operations Center. Chris Wesley further noted that Walmart gave $20 million in cash donations, 1,500 truck loads of free merchandise, food for 100,000 meals and the promise of a job for every one and its Displaced Workers.

21:48After comparing FEMA's failures with Wal-Mart's successes, he concluded that government emergency management ought to be abolished. Tierney, however, drew the wrong conclusion. He said that the Wal-Mart CEO is, quote, the kind of leader we need to oversee the tens or hundreds of billions that Washington will be spending on the Gulf Coast. President Scott could insist on laws on low everyday prices while still leaving the areas was well prepared for the next disaster as Wal-Mart was for Katrina. In fact, if Lee Scott were given a government job, it would only be a matter of time before he became just another Michael Brown, the disgraced former FEMA head. This isn't a matter of character, it's a matter of the maze in which you find yourself, either with market-generated exit signs or none at all, thanks to the government.

22:37As Walter Block, Mark Thornton and many others have shown, it was not the storm as such that did the damage, but the failure of the government levies. Combined with the levies-only river management strategy of the Army Corps of Engineers, the floods were a disaster waiting to happen. Just imagine if the town were private like your home or your car. Insurance companies would have taken a huge role in risk assessment, not only charging more for higher risk,

23:32Government is like a bad mother who pays her children to run with scissors. Government ownership is even worse because there's no signaling system at all in operation. It is also the government that created a false sense of security for people in New Orleans, who were led to believe that the levees would hold and the pumps would work. And when the floods finally did come, they were told the government would be there to manage the crisis. But the government cannot manage crisis, as the response to Katrina demonstrated. The local government fled, the state government was dithering, and the federal government actively worked to present good things from happening. The thousands and millions of acts of private heroism and charity that took place after Katrina occurred despite government, not because of it.

24:17And yet what lessons does the political culture want us to take from this? The same lessons we're instructed to learn after NASA spends and spends and still can't seem to make a reliable space shuttle. The Federal government spends trillions to protect the country and can't fend off a handful of malcontents with an agenda. And so we're told the government needs to start several new wars and erect a massive new bureaucracy and put sections of the country under martial law at the slight cost of the state. So too Congress can allocate a trillion dollars to fix every levy, fully preventing the last catastrophe, but not the next one. The real problem is the same in all these cases, not insufficient resources, but public ownership and money. and spend more money.

25:02So too Congress can allocate a trillion dollars to fix every levy, fully preventing the last catastrophe, but not the next one. The real problem is the same in all these cases, not insufficient resources, but public ownership and management. Public ownership has encouraged people to adopt a negligent attitude towards even such obvious risks. But private developers and owners, in contrast, demand to know And to know, every possible scenario is a way to protect their property. But public owners have no stake in the outcome and lack the economic capacity to calibrate resource allocation to risk assessment. In other words, the government manages irresponsibly and incompetently. Actually it was Mr. Bush who said one of the most sensible things on September 2nd.

25:48If you want to help, if you're listening to this broadcast, contribute cash to the Salvation Army and the Red Cross, They were on the front lines providing help to people who need help. But it was two weeks later when his other instincts kicked in and he delivered a very different message, one that was deeply alarming. He said it is now clear that a challenge on this scale requires greater Federal authority and a broader role for the armed forces, the institution most capable of massive logistical operations on a moment's notice. It seemed that his beloved military was not there at a moment's notice. It now cites its own failures as the great excuse to expand its powers and get more money. So the government will spend the next several years preparing for another Katrina that will never come, just as it has spent the last several years preparing for another 9-11 that will never come.

26:38The next crisis will be something completely unexpected, and once again the government will fail. But we will be left with a government with some very bad additional habits, Marital habits, among which are declarations of martial law, mandatory evacuations, gun and price controls, and other totalitarian ways. And given that this is a Republican administration, with its own internal culture and its attachment to military means, we get what can only be described as the continuation of the fascist track, the militarization of the country under its own armed forces. As far as I know, this passing remark by Mr. Bush has provoked no commentary in the national press. Researchers in the organized conservative movement have displayed an appalling difference to the administration's priorities, with National Review consistently arguing for more spending and more militarization, Rush Limbaugh calling for price gougers to be strung up, and even a good free market friend calling for billions to rebuild New Orleans as a way of showing the terrorists we won't let the weather get in the way of progress.

27:40On the last point, I kid you not, conservatives have been especially bad on tolerating egregious We need to reflect on what it means to have the military take over in the event of crisis. What kind of ideology promotes such things, and looks the other way when it happens? I think I know, and it serves as a reminder that not all threats to freedom come from the left. A clue comes from the neo-Nazi novel called the Turner Diaries, sometimes cited as the motivating force for the bombing of the Oklahoma Federal Building. The book ends in what the author regards as a great political utopia. After a world war that exterminates all non-whites, a military regime takes over the United States and centrally plans the economy under permanent martial law. All food and water is distributed on military trucks, all production takes place on a planned basis, and the merchant class is required to obey or be shot. The government also places flower boxes under everyone's The author describes his race-based national socialism as if it were a system with an inherent appeal to the reader and perhaps there are people economically ignorant enough and full of enough loathing for humanity and freedom to regard it as attractive.

28:55I do know that in our own times there are people waiting in the wings who long for power and are drawn to the ideal of a militarized society and a centrally managed economy. Some call themselves conservatives, and they are every bit as much a threat to civilization as those with the same ideas who call themselves liberals. But nevertheless, let me end on a note of optimism. The first is implied in all that I said above. The government actually cannot do what it promises to do. And there is a way in which we can only be thankful for that. It cannot succeed in managing a central plan. Its plans will always fail. The government tries to use its failures as an excuse for more power, but with every failure comes a substantial degree of public humiliation for the public sector.

29:43And that humiliation can provide a business a basis for the undoing of government authority. Some people say that a loss of government authority will mean a breakdown of civilization. Actually, it will create the preconditions for the reestablishment of civilization and in a state of freedom that can happen very quickly. The aftermath of Katrina illustrated in a million individual acts of charity and enterprise that people can manage their affairs even amidst chaos. The calamity following Katrina was an egregious display, one that gave the federal government a black eye. The Democrats will continue to use it to harm the Republicans, which is fine by me, but it is not just Mr. Bush that is suffering, but the whole apparatus of central planning by decree from above.

30:29A government that cannot manage a crisis should not be trusted to manage anything at all. Thanks to Katrina and its dreadful aftermath, I think it's fair to say that the age of not trusting government has returned with a vengeance. It took decades for the rot underneath the Soviet apparatus of central planning to give way, but eventually the implausibility of the entire project was no longer possible to deny. It gave way under an intellectual reaction against the whole of socialism. We're seeing something like that take place today as government fails in Iraq, in New Orleans and in every place around the country and the world where it causes problems and creates no solutions. The age of confident central planning is behind us.

31:15Right now, the state is just trying to keep its head above water. If freedom is to have a future, the time will come when it will sink to an ignoble end and We will wonder just how we ever believed in this myth called government crisis management. The advocates of freedom and the partisans of private enterprise will be there with the intellectual equivalent of flotillas, barges, buses, helicopters and the whole apparatus necessary to rescue liberty from every attempt to kill it. And when our city on the hill comes to be, it will be privately built to withstand any and the Money Flood. Thank you.