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Thanks to Markets, Houston's Disaster Isn't as Bad as it Might Have Been

Tags U.S. History

A political economy of natural disasters does not exactly exist yet. There are no classes in it that I know of. A dearth of writing attempts to define it. Yet, some of its lessons cry out following Hurricane Harvey’s wall banger into the coast of Texas. 

One is the role of capital formation in minimizing death. At the time of this writing, 26 Harvey-related deaths have been confirmed in the United States. That’s 26 too many, but imagine what the death toll would have been if a similar storm slammed into comparable population centers in the Pacific Rim, Venezuela, or other outposts of the Third World. No doubt: They would be in the thousands, devastation even more widespread, and massive stores of foreign aid and charity mobilized. 

What makes Houston different has to do with property rights institutions taking root and developing there over decades, making it a center for capital investment, because capital always flows to those areas where it is most secure. The continued increase in the quantity and quality of capital over time increases wealth, allowing its owners to afford better infrastructure and safety, relative to more benighted areas that attract less capital over time. To get an idea about the effects of decades of capital formation on Houston in 2017, consider the devastation that befell Galveston in 1900, when another Category 4 hurricane swept the Texas coast and claimed about 8,000 lives. 

Another lesson is the emergent insecurity of the state when disasters strike. We saw this following Katrina, when government officials stopped convoys of aid—privately organized and funded—that were attempting to enter New Orleans just hours after Hurricane Katrina passed. Other efforts to deliver aid were squelched when a flotilla of ships were turned away at the Port of New Orleans. It was as though FEMA would not allow credit for aiding the suffering to go anywhere but itself. 

Today, FEMA is considered the most contemptible of any federal agency in New Orleans. In Louisiana, this is quite an accomplishment. As a result, authorities appear to be treating private rescue operations in Texas somewhat more delicately. Although the ragtag “Cajun Navy” operating in Houston has been compared to the private rescuers of British soldiers in Dunkirk—complete with its own online dispatching system — many have been told to go back home.

How much of this insecurity is based on the state’s fears that the masses will turn on it after recognizing the degree to which it makes a bad situation worse? Economists have well established how anti-gouging laws threaten a population suffering in the aftermath of a natural disaster. Surely, some of this logic has seeped into the public mind. But there are other questions. Did Houston’s housing bubble, fueled by the Federal Reserve, cause many home buyers to forego flood insurance to make their homes relatively more affordable? For that matter, did the Fed’s low-interest rate policies promote overbuilding in general, trading green areas with trees able to soak up the water with concrete and condos? Finally, is Houston a victim of years of moral hazard resulting from federal spending following disasters, causing it not to take its exposure to flood damage seriously? 

These are not the kind of questions that are going to be considered on mainstream news outlets, whose sole purpose nowadays is to steer discussion to areas amenable to left or right statism. In our current zeitgeist, raising them might even get you banned from social media, dropped from web hosting platforms, or fired from your job. 

Houston’s plight shows us the degree to which natural disasters have become opportunities for expanded redistribution and positive public relations for an already overweening Leviathan State. So a beleaguered president flies down for photo ops and announcements of billions of dollars of coerced capital flows into the region. To the extent that Texas starts to depend on such funds, it becomes less independent and more of a satrapy, which is part of their intent. 

Texas’ $1.6 trillion economy exceeds that of Canada. It can finance its own recovery. If it did, it would minimize moral hazard problems in the future, making it better able the weather future storms that are sure to come. Such an outcome is vastly more preferable to becoming the latest example of Henry Hazlitt’s lesson that bad economists are primarily concerned about the immediate effects of policies while disregarding the long-run effects.

The unconstrained state always looks for new avenues to help the hell out of you. However, in order to do this, it must defeat the libertarian impulses that still exist in the South and West, and transform places like Texas and Louisiana into versions of New Jersey and Connecticut. Statist responses to natural disasters become means to that end. 

A political economy of natural disasters would tell us at least this much. 


Contact Christopher Westley

Christopher Westley a professor of economics in the Lutgert College Business at Florida Gulf Coast University and an associated scholar at the Mises Institute.

Note: The views expressed on Mises.org are not necessarily those of the Mises Institute.
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