Devastation and Recovery: Reconciling Contrary Observations in Biloxi, Mississippi

by George Reisman
by George Reisman

A front-page story in the March 14, 2006, New York Times, datelined Biloxi, Miss., reports,

The devastation of the coast here remains shocking to the uninitiated eye; towns where people have clearly worked night and day just to remove debris look as though they were hit by a hurricane six days ago, rather than six months.

However, just two paragraphs later we are told,

Biloxi is still a tangle of crumbling buildings, bent signs and silent streets. But all that changes in the parking lots of the three casinos that have opened on land, where drivers are lucky to find a space. Crowds appear within the casinos from seemingly nowhere, as if planted in place, with people holding cocktails and clutching room keys that double as casino entry cards in the cavernous, smoke-fogged halls.

Before hurricane Katrina, there were no casinos on land in Mississippi. They had all been on riverboats. The legislation authorizing them on land was enacted only after Katrina.

So how does it happen that brand new casinos spring up in months, while during the same period the rest of the region devastated by the hurricane simply continues to be devastated, showing hardly any signs of recovery?

Here’s a hypothesis to explain the disparity: The casinos are privately owned, profit-seeking business firms of a kind ineligible to receive government financial assistance. Thus, as soon it became legal to pursue an opportunity to make a good profit by opening casinos, their owners proceed to do just that, as quickly and as efficiently as possible.

In contrast, the rest of Biloxi and the Mississippi coast, and apparently most of New Orleans as well, are on hold, waiting for government money and busy doing whatever it may be that the government requires as a condition for receiving its money. Possibly, they are busy simply trying to learn what the government requires them to do as a condition for receiving its money. Possibly, the government itself is busy trying to figure out what it wants them to do as a condition for receiving its money.

If this line of explanation is correct, and I am confident that it is, then it follows that if one wants rapid recovery from large-scale disasters, the government should offer no financial assistance and offer absolutely no prospect of financial assistance.

Is there anything else the government might do, or not do, to speed recovery in such cases? Yes. It should suspend all requirements for obtaining permits of any kind relating to building and construction and the opening of new businesses, including, above all, requirements for environmental impact statements and their approval.

Further, the government should not wait for new disasters to strike. Legislation suspending permitting requirements during the aftermath of disasters should be enacted well before the next one occurs. That would permit banks and insurance companies to develop their own criteria for making loans and writing insurance policies in the absence of governmental requirements.

Given these changes, natural disasters would be followed by the most rapid possible recoveries. The freedom to respond to them would go a very long way in diminishing their character as disasters.

March 16, 2006

George Reisman [send him mail] is Professor of Economics at Pepperdine University's Graziadio School of Business & Management in Los Angeles, and is the author of Capitalism: A Treatise on Economics. Visit his website.

Copyright © 2006 George Reisman