Miscellany12: Understanding the
© 2005 Joseph George Caldwell. All rights reserved. Posted at Internet web sites http://www.foundation.bw and http://www.foundationwebsite.org . May be copied or reposted for non-commercial use, with attribution. (14 September 2005, revised 19 September 2005)
Commentary on recent news, reading and events of personal interest.
A few weeks ago (August 29), Hurricane Katrina caused much
The reasons that the government is providing to explain its response (both its lack of pre-disaster planning and preparation and its clumsy post-hurricane response) are not the true reasons underlying their response. This article describes what is going on.
The article is presented in two parts. The first part discusses the issue of why the
government chose not to take steps to reduce the expected human and economic damage
that a large hurricane would cause to
Why Did the
The government is just now beginning to explain its response
to the Hurricane Katrina disaster. Until
now, it has focused on defending its seemingly inept response to the
disaster. It has not yet begun to
explain why it did not take steps to reduce the expected damage that a large
hurricane would cause to
Before proceeding, I shall make a comment on the term
“natural disaster.” As I explained some
time ago when writing about last year’s tsunami in
Earthquakes, tsunamis, tornadoes and hurricanes occur all of the time, all over the Earth. Very large hurricanes and very large earthquakes occur every few years. The damage to human development that they cause by them is simply a result of human beings being in their path. When the planet had a small human population, these events caused very little loss of life and destruction of human habitat. Now that the human population has exploded to massive numbers and people are building in very risky areas (such as along the seashore, or along tectonic-plate fault lines), the frequency and magnitude of the human and economic destruction caused by these expected natural events is increasing dramatically.
In the case of
Well, Category 5 hurricanes do happen. They happen almost every year. It was just a matter of time until one hit
So, the government knew that this could happen, and it chose
not to spend additional money to reduce the risk of massive flooding and
massive economic loss. Why? Well, contrary to what many people think,
“How can this be?” you may ask. Well, it is very simple, really. The government’s primary measure of national performance is the gross domestic product (GDP) – the value of all goods and services produced in the country (“domestically”) in a year (or the gross national product (GNP), which includes the value of US-owned production overseas). The government does not care much about measuring wealth (physical assets), since those are in the main owned by the rich. If those assets are destroyed, it does not hurt the wealthy very much, since they are insured, and will be reimbursed by their insurers. Or they will set about creating / accumulating new wealth. About all that the government cares about is GDP (or GNP) – economic activity, not economic wealth. That is why you see, all of the time, statistics about GDP – how the economy “grew.” If GDP goes up, we are in an economic boom, and if GDP goes down, we are in an economic slump, or downturn, or recession, or depression. The government cares about GDP because the main result of GDP is increased wealth for the wealthy. Its primary concern is to keep people working, to serve the wealthy elite.
As I have pointed out before, a rather curious aspect of using GDP as a performance measure is that GDP increases if you destroy something and have to build it again. If you walk over to your neighbor’s yard and smash his car windshield with a baseball bat, then GDP will increase by several hundred dollars – the cost of manufacturing and replacing the windshield. If you burn his house down, that will boost GDP by the cost of replacing his house (say, a couple of hundred thousand dollars). Break your neighbor’s arm, and GDP will increase by the amount of the hospital and physician bills to treat it.
You can see where I am going with this line of reasoning: the more property damage that a hurricane or other “natural” disaster causes, the “happier” (better performing) the government is! This is a direct consequence of using GDP as the measure of national health / performance.
In the early days of my professional career, I performed a
number of economic cost-benefit studies for the federal government. Cost-benefit studies are undertaken to help
the government choose a preferred alternative (course of action) from a group
of competing alternatives. Briefly, a
cost-benefit study is an analysis that adds up all of the (near-term) economic
inputs (costs) and outputs (benefits) associated with several different
alternatives, in order to compare them. In
a growth-based economy, the preferred alternatives are those that help the
economy grow the fastest (in the near-term, short-run). For comparably-sized alternatives, the
alternative that has the highest ratio of benefit to cost is then usually
selected (unless there is an overwhelming reason (an “externality”) why it
should not be). Apart from the issue of
the economic efficiency of the alternatives (as measured by the cost-benefit
ratio), the other major consideration is the total amount of economic activity
associated with each alternative. In our
growth-based economy, bigger is better. If
two or more alternatives have similar maximal efficiency, then select the one
that corresponds to greater economic activity (if you can afford it, i.e., if
you have the required inputs). (I could
get into a discussion here of Lagrangian optimization, but I will spare you the
technical details.) In simple terms, with
respect to Hurricane Katrina the federal government had a choice: (1) spend 15
billion dollars on improved levees for
Most of the people who suffered physical hardships in Hurricane Katrina were poor – the ones lacking the financial resources to evacuate. They did not own significant assets (homes, businesses – or even cars and the wherewithal to evacuate). The assets that were destroyed were owned by wealthier people, who, by and large, had them insured. The wealthy were not physically harmed by Katrina (since they had the resources to evacuate prior to the storm), and their financial losses were insured. It is the wealthy who control government. From the point of view of the government, the hurricane was an economic boon, not an economic disaster. With respect to Hurricane Katrina, our plutocratic government served its masters – the oligarchs – well. You do not hear them complaining about the government’s response to Katrina, as they line up to receive lucrative reconstruction contracts.
The economy (GDP) will now grow by a couple of hundred
billion dollars, as
President Bush and the other members of the wealthy elite may express their sorrow at what has happened, but it is exactly what they wanted – they are shedding “crocodile” tears. As GDP grows (because of the economic activity required to rebuild), the government, and the elite who own the country, will “laugh all the way to the bank.” Moreover, they will probably claim that there simply aren’t enough native-born Americans available to do the cleanup and rebuild all of what was destroyed (particularly since many of the dispossessed were unskilled), and so we will need to use aliens – even illegal aliens – to do the job.
Our economy is a “growth-based” economy. Its measure of performance is GDP – size of GDP and growth in GDP. Our economy is fuelled by population explosion, mass immigration, massive free trade, premature obsolescence, wars, waste and “natural” disasters – anything that results in increased economic activity. The government does not want a country with a stable population and goods that last for a very long time. It wants an exploding population and goods that obsolesce quickly (no matter what the cost to the environment or our culture). It wants wars (that use expensive weapons and destroy property). It wants “natural” disasters such as earthquakes, massive fires, and floods. It wants a massive alien invasion (legal or illegal – it doesn’t matter), which generates demand for houses, schools, roads and services. All of these things create new jobs, vastly bloat the level of industrial production, and create new wealth for the elite.
I know that some of my readers may have a hard time believing that our government has a vested interest in not avoiding damage from “natural” disasters. It is, however, true. If you wish to read more about the pernicious nature of a growth-based economy, consult Beyond Growth by Herman E. Daly (Beacon Press, 1996), or For the Common Good by Herman E. Daly and John B. Cobb, Jr. (Beacon Press, 1989, 1994), or The Entropy Law and the Economic Process by Nicholas Georgescu-Roegen (Harvard University Press, 1971,1999).
Why Did the
In the preceding discussion, I did not address the issue of the government’s slow and bungling response to dealing with the Hurricane Katrina refugees – I addressed just the issue of why it was in the best interest of the government and the oligarchs that control it to allow the destruction to occur (by allowing development in areas that were at high risk of storm damage). Why, for example, since the government’s own studies showed what was going to happen, did it simply let the refugees fend largely for themselves, dependent on the compassion and largesse of the private sector, instead of immediately relocating them in an orderly fashion to other parts of the country? This uncoordinated response does seem a little strange, since the economic activity associated with an efficient and prompt response would not have differed much from the helter-skelter nonresponse that was demonstrated. And why, since the cost of a fully interoperable emergency communication system is about the same as the Tower-of-Babel hodgepodge current system in which different emergency services cannot communicate with each other, did the government not fund the former instead of the latter? These slow, clumsy, uncoordinated, unplanned responses were evidently the result of thoughtlessness, inattention and incompetence – there was no strong economic incentive to respond otherwise. The point is that these two quite-different responses to handling refugees in the hurricane aftermath don’t differ much with respect to their associated economic activity – they differ mainly with respect to the misery of the common masses, and that is not a great concern of the wealthy elite.
From an economic perspective, it was lucrative to let the
In the case of the 9/11 attack on the World Trade Center,
the government claimed that no one could have possibly foreseen an attack of
this sort, and it refused to admit that the attack was a direct result of
foolish national policies (of open borders, mass immigration, and massive
international free trade). In the case
of Hurricane Katrina, the government claimed that this is the nation’s largest
“natural disaster,” and so it is reasonable to expect that their response to a
new situation would be a little slow and uncoordinated. (Moreover, characterizing the disaster as a
“natural” disaster absolves the government of any responsibility for it.) As in the case of the 9/11 attack, the
political leaders will pat each other on their backs, commending themselves for
a job well done, and denying their blatant culpability. The government has consistently condoned or
encouraged building in risky areas. It
not only does not care that people’s homes in these places will be blown away
someday, it looks forward to such events, since they will boost GDP. In today’s economy, they also create more
demand for illegal aliens (to help rebuild, doing the construction jobs that
“US workers refuse to do”) leading to further weakening and dissolution of the
nation’s once-strong culture. From the
government’s viewpoint, the human misery and loss of life that accompany these
disasters are simply irrelevant “externalities.” Like the soldiers who died in
President Bush may apologize for the bungling lack of
coordination in planning for the handling of the refugees. He may even apologize for not building
stronger levees. But the fact remains
that he and the oligarchs were fully aware of the consequences of allowing the
economic destruction to occur (by allowing building in risky places), and they
are now reveling in the fat contracts to rebuild
The situation is a little reminiscent of the war in
My mother has an elderly friend who, in her younger days, ran a number of nursing homes. Not too long ago, she started having problems with arthritis, and she was prescribed a medicine called Bextra. The Bextra caused her to suffer a stroke, from which she is just now recovering.
While she was ill, her mother died. She did not have time to make regular checks on her mother’s now-vacant home, and some illegal aliens (Mexicans) moved into the house. They trashed it.
She put it on the market to sell. The only offer she received was for less than the value of the lot! The offerer explained that she had two choices – either remove the house, which the Mexican squatters had trashed, or rebuild it for resale, which is what he was planning to do (with his son). She sold the house, at the offered price.
When I was young, in the 1950s,