Further Thoughts on Rebuilding the Gulf Coast

One of my recent companions offered me the chance to return to the Gulf Coast to continue the relief efforts, this time to Gulfport, to work ten days or so in a Salvation Army relief kitchen. I had to decline this time, but I do intend to return. The relief efforts are going to be needed for a very long time. But the task of rebuilding New Orleans and the rest of the Gulf Coast must also be addressed. As I indicated in an earlier article, I returned from my first relief trip to the Gulf Coast despondent and pessimistic. The scale of the destruction and the extent of the human suffering is almost beyond human comprehension, even for those who have been closely following the story in the media. Now that Ophelia has diverted media attention and government efforts to restore order seem to be proceeding a bit less fitfully, attention seems to be shifting to other concerns. But how is the area to be rebuilt, and how is New Orleans to be restored? My libertarian nephew’s ingenious suggestion that the entire area be turned into a tax-free and regulatory-free zone seemed to be one of those simple ideas whose repercussions go far and wide. In fact, I would like to demonstrate that it is the only way that recovery is going to take place, recent government assurances and mainstream media opinion notwithstanding.

While I do not blame the government for the occurrence of the hurricane, government’s actions over the years created the conditions that made the effects far worse than they would have been otherwise. That is so in a number of direct and indirect ways. Directly, the government decided to have the Army Corps of Engineers assume responsibility for the levee system, then failed to provide for a sufficiently high and sufficiently strong system that would withstand the effects of the category 5 storm that was certain to strike, sooner or later. It was not the direct effects of Katrina that killed New Orleans, but the toxic flood caused by the (predictable) failure of the government levee system. Once the hurricane had passed, humanitarian aid was turned back by government, preventing humanitarian aid from reaching the stranded victims. There is even the report of the inexplicable cutting of communications to the stranded area when communication was most desperately needed. The plight of the stranded people of New Orleans was further increased when soldiers and police went from door to door, handcuffing and arresting the dazed victims who had somehow managed to survive the horrors up to that point. It was obvious to those who were there that the priority of the government was to re-establish control, not to take care of the needs of its citizens. The indifference, callousness, and neglect was predictable, given the imperative of government, which is to establish a monopoly of coercion over a certain geographical area, not, as we are told in school, to secure the life, liberty, and property of its citizens.

Indirectly, the government increased the magnitude of the disaster in a number of ways that were not apparent at the time, but that had a tremendous cumulative effect. The confiscatory tax rate prevented the accumulation of wealth that would have allowed many who would otherwise have chosen to leave, to do so with the expectation that they would be able to provide for themselves and their families once they reached their new destination. So often we heard from the victims who stayed that “all they had in the world” was in the path of the hurricane and they were unwilling to lose what little they had. The government had fostered the notion of dependency for so long that many victims were unwilling or unable to think for themselves, and stood about waiting to be told what to do. The debacle at the Superdome and the convention center was the result. When the masses huddled there then tried to leave and take responsibility for themselves, the government forced them to stay. The similarity between these events and what was going on in occupied Europe 65 years ago was chilling, at least to some of us. So to expect the very institution that was so responsible for much of the destruction and misery, to rebuild the area and correct their mistakes for the next act in the drama, is simply unrealistic and flies in the face of logic and experience.

What of the next institution that might be expected to contribute to the rebuilding of the Gulf Coast, private charities? From my observations, the private relief organizations have been magnificent. I specifically mention the Salvation Army because it is an institution that most Americans are very familiar with. But the vast amount of aid I observed was from individual churches (as was the case with my church) and they were and are doing a magnificent job. Their efforts should be recognized and supported. Some members of the various groups with whom I talked had previous relief experience and took a leadership role. Most were well-intentioned amateurs who saw that a job needed to be done and joined with like-minded people to do it. I encourage any readers who are so inclined to volunteer likewise. The efforts are going to be needed for a long time. But eventually students will need to return to school (we had several in our group, and they were wonderful), owners of businesses will need to get back to work, housewives will need to get back to their families, and attention will naturally drift to other matters.

The only institution I see that can ever restore the Gulf Coast is the one that created our nation’s wealth and prosperity in the first place, the free enterprise system. Much maligned in the popular media, left undefended in our government school system, attacked by our political class as a rich source of plunder (or as I maintain, the only source of plunder), it is the only institution that has the power, the ability, and the willingness to restore that which has been so thoroughly destroyed. The proposal has been to turn the area into a tax-free and regulatory-free zone, for a period of, say, ten years. Period. That is the extent of the proposal. The freedom from taxes has been explored in an earlier article. As indicated, this would be absolute. The miniscule amount of revenue raised (from user fees) would be for the provision of police protection. I would prefer that police protection be provided by the private market, but I wish to make the proposal as acceptable as possible to the average American. And the freedom from government regulation would be absolute. Note that there would be freedom from administrative law, not natural law. Thus there would still be an absolute prohibition of crimes of violence and violations of private property. Murder, theft, rape, fraud, and like activities would be prohibited. But government regulation of our lives would be forbidden. Contracts freely entered into would be enforced, but individuals would otherwise be free to do as they pleased. Potential employees would be free to contract with any employer at any wage rate and under any conditions mutually agreeable. People would be free to enter any line of work they chose, without any government interference whatsoever (but not to misrepresent their credentials, which would be an offense prosecuted as fraud). There would be no tariffs or quotas on goods coming and going from New Orleans, and the attraction to importers and exporters would be undeniable. New Orleans would soon be a bustling port again. The attraction to small, nimble business enterprises would be strong, and I would expect the employment opportunities would quickly attract industrious people who saw the opportunities. Without the price supports that artificially prop up the price of many commodities, foreign automobiles, electronic goods, and innumerable other products, the price of living would be expected to decline, and wealth to invest would increase. This is so even if nominal wages were to decrease. Regulatory costs are an economic burden hidden from most Americans, but they are real and they are expensive. For example, the regulatory costs of compliance with government red tape is estimated to have eaten up 40% of the health care dollar a few years ago. This figure would be expected to be even higher today. There is hardly an area of American life that is not affected.

There is another area of American life that is sorely affected under the current system, the banking system. Under the current system, the Federal Reserve creates money out of thin air to help fund government expenditures. The resulting inflation is a hidden but significant source of the confiscation of our wealth. Under the proposal, the banking industry would be unregulated (as would all other economic and social activities). It would be expected that many potential customers would much more carefully investigate the soundness of a banking institution before investing hard-earned funds, and that some institutions would evolve into 100% reserve money depositories. Perhaps many more would offer 100% reserve banking as an option for those who wanted it. I would also expect that a commodity-backed currency would emerge. Gold would perhaps again emerge as the currency of choice, and the possibility of government confiscation of our wealth through the instrument of deficit financing and the resulting inflation would be greatly reduced or eliminated (remember that the modest amount of expenditures are to be funded by user fees).

Being unregulated, the insurance industry would be free to stratify risk and charge premiums accordingly (unlike the present system, where the careful and the prudent subsidize the foolish and careless). Health insurance costs would plummet (remember also that regulatory costs are to be eliminated) and people would be free to seek care from anyone they chose. Harvard-trained super-specialists would be available to those who wanted them, and undoubtedly many others would also offer their services (but not to misrepresent their credentials).

The possibilities are endless and more far-reaching than I can cover in this space. The reader is encouraged to think of such possibilities for him or herself. And the response of the free market is unpredictable as to exactly what would emerge. But each inhabitant would be free to live his life as he sees fit. That must be absolute. The reason the proposal sounds so revolutionary is merely an indication of how far we have strayed from our original purpose to protect life, liberty, and property. The Gulf Coast can be rebuilt, and better than it has ever been before. Let’s get going!

September 17, 2005