If you drive, chances are you have damaged a car. Maybe, through no fault of your own, a fender was damaged or, as happened to me, a violent hailstorm dimpled your car like a large golf ball. What’s next? You make an insurance claim, cash the settlement check, and make a decision to fix or replace the car. Alternatively, you could drive a dented and pockmarked car and bank the money. The choice is yours.
In New Orleans, houses were ruined through no direct fault of the homeowner. The Bush administration’s plan is to spend billions of public dollars to rebuild the city “better and stronger than before the storm.” We saw on TV news that many of the flooded homes were modest at best. Most of those left standing will be demolished because of toxic mold or structural problems. Many people lived where they did because they had nowhere else to go and no way to get out.
In mid-March New Orleans Mayor Ray Nagin presented his plan for recovery, saying residents should be allowed to rebuild at their own risk anywhere in the city -- including the flooded areas -- and the city will continue issuing building permits to all comers. The inevitable result will be that residents will be forced to stay in New Orleans, many in their former neighborhoods. That will accomplish two things: it will set them up for another personal tragedy, and they will continue to live in New Orleans’ racist, backward economy. The mayor’s plan will not help those wishing to rebuild their lives and is not a good deal for taxpayers.
Here is a constructive alternative that respects the residents. Give the $10.5 billion released so far by Congress and the $500 million raised by private charities directly to the victims. Let’s apply the insurance model and cut a check for the replacement cost of the home and land and let people do what they want -- many will move and rebuild in a more appropriate location to start a new and better life.
A similar condition exists in Montana with the hardrock mine trust account. This severance tax is paid by companies to help communities transition after the closure of mines. The hard lessons of boom-and-bust commodity economies suggest that for many communities, dividing the money -- sometimes several million dollars -- is better for individuals and their families than waiting for the mine to reopen or another large employer to come to town. Given a choice, many would use the money to relocate or retrain themselves for the 21st-century economy.
The rush to rebuild New Orleans is driven by two imperatives. First, it saves the Bush administration and other politicos from continued embarrassment from mishandling the whole Katrina mess. If they can replace the levees and document some construction, they can score votes in the fall election cycle. Second, it serves the interest of the regional business community (oil, casinos, the French Quarter) to preserve the cheap labor pool of relatively unskilled workers. Neither of these reasons will make people better off; low wages, low taxes, more luxury condos, and hotels will only preserve the status quo.
Frederick Hayek said true freedom is release from the compulsion of power held by others. Such power inevitably limits the range of choice for all of us. At the other end of the political spectrum, John Kenneth Galbraith said the greatest danger for the community is in subordination to the needs of the modern industrial system, in this case the needs of the New Orleans Business Council. Under the current plan, New Orleanians face coercion from government, nonprofits, and the business community. Without freedom to decide their own future, Katrina victims are constrained from improving their lives.
Sometimes, unexpected change offers the prospect of doing something different with our life. For the victims of a massive natural and governmental catastrophe, the post-Katrina recovery provides that moment of opportunity. The value of the homes and land of many victims is relatively small and will not rebuild a life spent in the tight-knit neighborhoods of New Orleans. It might be enough to rebuild a life elsewhere. We should not let politics and bad economic logic stand in the way.