The Philippines has just gone through the worst storm on the planet ever. Indeed no one can approximate the agony of the loss of loved ones – and for those who have suffered much loss, I can extend my deepest sympathies but it will not be enough.
After the storm comes the challenge of picking up the pieces and rebuilding what was broken. We have seen how the Philippines reacts after a disaster – time and time again.
Here’s the drill:
1. A disaster alert is given.2. The disaster arrives.3. Property and lives are destroyed.4. Government comes in to distribute relief goods – and imposes a monopoly on the conduct of relief efforts.5. Long lines form as victims wait for relief.6. Government then enforces price control measures an cracks down on “price gouging”.7. Donations arrive and are channeled to government for distribution.8. The donations do not receive the intended recipients.9. And for those donations that do reach the recipients – these have been switched with inferior goods from government inventories – and comes with a sticker that has the name of a public official – plus the usual photo ops.10. This is then followed by a public outrage about the government’s ineptitude – and it stops there.
We are witness to this annual ritual of government incompetency in differing magnitudes. The process remains the same, the outcomes remain the same.
What can we do different the next time around as the relief efforts for the victims of Typhoon Haiyan are underway?
We can learn a lot from the experience of Katrina, Sandy – and even the Cubans who are hit by hurricanes regularly.
Lessons from Katrina
Here’s an excerpt from an article called Katrina and the Never-Ending Scandal of State Management
For those who maintain that the government “failed” its “mission,” I must say that they are wrong. True, the government with its ham-fisted policies of blocking relief missions, imposing price controls, and acting in a dictatorial, but incompetent style, seems to have “failed” in making things better, especially in the days directly after the storm passed. But, if you understand that government is a mechanism by which some people impose their will by force over others, then you would have to admit that the government succeeded and succeeded beyond its own expectations.
Lessons from Sandy
In another article, Post-Sandy: A Man-Made Disaster
the shortages of gasoline now being experienced in the New York metropolitan area and elsewhere in the path of destruction left by Hurricane Sandy simply do not need to exist. They could be made to disappear very quickly, within a matter of hours. All that would be necessary is to remove the threat of prosecution of gas station owners, and all others in the chain of supply of gasoline, for raising their prices to the extent necessary to reduce the quantity of gasoline demanded to conform with the reduced supply of it available.
Lessons from Hugo
Here’s another lesson from the City of Charleston which was hit by Hurricane Hugo.
As a result of the devastation, the city of Charleston was of course short of many commodities. Responding to this sudden scarcity, the market acted quickly to clear supply and demand by raising prices accordingly: providing smooth, voluntary, and effective rationing of the suddenly scarce goods. The Charleston government, however, swiftly leaped in to prevent “gouging”–grotesquely passing emergency legislation making the charging of higher prices post-Hugo than pre-Hugo a crime, punishable by a maximum fine of $200 and 30 days in jail.Unerringly, the Charleston welfare state converted higher prices into a crippling shortage of scarce goods. Resources were distorted and misallocated, long lines developed as in Eastern Europe, all so that the people of Charleston could have the warm glow of knowing that if they could ever find the goods in short supply, they could pay for them at pre-Hugo bargain rates.Thus, the local authorities did the work of Hurricane Hugo intensifying its destruction by preventing people from staying at or returning to their homes, and aggravating the shortages by rushing to impose maximum price controls. But that was not all.
Lessons from Cuba
Cuba is seen as having the most well rehearsed storm preparation system. It is regularly visited by Category 4 and Category 5 hurricanes with relatively few casualties. Some say that this is due to the ability of the centralized state to mobilize and order evacuations.
However, in an article on the NY Times called “Hurricane Tips from Cuba” Cubans are quick to point out that:
In Pinar del Río, the province most vulnerable, the government deploys large brigades to prepare for disaster.“If you have nowhere to go, then there’s the state shelters with food and water and doctors,” said María Fajardo, a resident.Still, evacuees are more likely to take shelter with family members, friends or strangers, according to the relief organization Oxfam. “We have learned to take care of ourselves and not just rely on the state,” said Yesi Mejía, 43, of Havana.In that way, they are no different from storm survivors in the United States. Barbara Morita, a first responder from California who visited Cuba to learn more about its disaster preparations, said that after Hurricane Katrina, “so many people told me, ‘I wouldn’t be alive if my neighbor hadn’t come over.’ ” And she added, “Maybe more could have been saved if we were better prepared.”
The Issue of Price Controls
You can bet your bottom dollar the Philippine government will impose price controls by way of the DTI. Expect Noynoy to go on TV issuing commands to keep prices low – and to demonize businesses for price gouging.
Let’s look into this a little more.
Let’s say the DTI imposes price control on a can of sardines. Let’s postulate that a store has 100 cans of sardines selling at PhP 100 before the storm. Noynoy imposes price controls – and the following day 10 people show up at the store.
The first person buys 10 cans, the second person buys 40 cans, the third buys 20 cans, the fourth buys 20 bags, and the fifth buys 10 cans. The last five people get no sardines. Yet one or more of the remaining five buyers may need the sardines more desperately than any of the first five.
Rationing the sardines will not help either.
Rationing of price-controlled sardines still keeps the price for sardines artificially low, so the day after the storm hits there would still be no economic incentive for store owners to scramble to keep sardines available given limited supplies that cannot be immediately replenished.
And while it is true that rationing might prevent the person casually purchasing 40 cans of sardine from obtaining all 40 of those cans, the rationing would also prevent the person who desperately needs 40 cans of sardines from getting it.
No one knows the local circumstances except the local sellers and buyers – and government does not possess such knowledge. By imposing command and control structures – government has caused more problems than it has solved.
What can we do differently?
In plain and simple terms, these are the things we can do differently:
1 – Restrain government’s monopoly on conduct of relief – let all who are able to provide relief, participate in any capacity or manner whatsoever.2 – Refrain from asking for price controls because it only serves to reduce supply as businesses have no incentive to replenish inventory.3 – As individuals and communities, learn to be prepared for disaster. When disaster hits, communications and other facilities will be down. Government officials will be out to cover their necks – and you ought to be covering your neck too. At this time, government cannot save you – but your next door neighbor will be your most likely savior.
The bottom line is this – individual preparedness and markets trump government preparedness and price controls.
The combined resources of the entire array of volunteer organizations, individuals, community groups mobilizing to provide relief to disaster victims VASTLY outperform government on all fronts – as it has whether it is in education, health, education, energy, entertainment, communication and what not.
Will the Philippines be able to learn from the lessons of Katrina, Sandy, Charley and all the storms that have come and gone? Obviously not.
However, if we are indeed in search for alternatives – it is high time to look at ourselves for answers and not the criminal Philippine government.
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