Should We Privatize Hurricane Sandy Disaster Relief?

It looks like 20,000 to 40,000 emergency housing units will suddenly be needed in New York and New Jersey as a result of Hurricane Sandy. Not since Hurricane Katrina has the need for instant and immediate housing been greater – and not since Hurricane Katrina are more people likely to be disappointed.

The modern economy of the United States is built to deliver many wonderful things. A home may be modest but you can be sure that if it is within our borders it will have running water, electricity and at least some source of heat. These features assume that certain public services are in place and function so well that we don’t think much about them, at least until something goes wrong.

What has happened along the Atlantic coast is a disaster of major proportions. Initial damage estimates suggested that losses could be in the range of $10 billion to $20 billion, figures which today seem preposterous. But such calculations also seemed ridiculous when they were first published. Think about it: Downtown Manhattan floods and the repair cost is only going to be a few billion dollars? It makes no sense.

But what if we had “limited” government? Would we still have any expectation of significant help when something goes wrong?

Privatize FEMA?

One way to limit government, so we are told, is to dump the Federal Emergency Management Agency (FEMA) and outsource disaster relief to private companies. But private companies need to make profits so who will pay for relief equipment which sits in staging areas unused for months and years? Who will pay for the specialists needed to operate an emergency relief program? No less important what would private relief companies charge for their services when needed?

We already know the answer. Wikipedia reports that in ancient Rome, “one of his most lucrative schemes took advantage of the fact that Rome had no fire department. Crassus filled this void by creating his own brigade — 500 men strong — which rushed to burning buildings at the first cry of alarm. Upon arriving at the scene, however, the fire fighters did nothing while their employer bargained over the price of their services with the distressed property owner. If Crassus could not negotiate a satisfactory price, his men simply let the structure burn to the ground, after which he offered to purchase it for a fraction of its value.”

As both Crassus and Hurricane Sandy show, privatizing disaster relief is not just a bad idea, it’s another form of disaster.


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