This presentation was delivered at the Chief Executive Organization’s Women’s Seminar October 7, 2005.

For the lessons to be gleaned in the aftermath of Katrina, I look to two non-profits with which I have been involved for many years and that I see as providing a two-pronged strategy for solving problems—immediate-term and long-term.

I’ve served for 10 years on the San Francisco board, and three years on the National board of The Salvation Army, which Peter Drucker has termed “the most effective organization in the U.S.” It does an amazing job at addressing and alleviating immediate problems and suffering. It brings people in off the street to become clean and sober and learn to lead productive lives through its detox and transitional housing and programming. It provides job training, character-based after-school and summer camp programming for children, toys at the holidays; shelters for battered women and their children; senior feeding and housing; delivery of hot meals to the homebound, housing and programming for aged-out foster care young adults; and is one of the largest relief agencies worldwide. Based in London, it operates in 109 countries every day, with 65,000 employees in the U.S. alone. So when disaster strikes, the Salvation Army is already there, ready to spring into action.

The Independent Institute, where I am a director and Vice President, tackles many of these same problems on a long-term basis. We commission and produce research into the underlying causes of problems like homelessness, urban problems, health-care costs, energy, the crisis in education, drugs, and global poverty. We use these studies to devise and promote innovative, market-based solutions to these problems.

The Gift of Markets

Why market-based? Well, here are some statistics from 100 years ago that I think well illustrate my point:

In 1905, our average life expectancy in the U.S. was 47. Only 14% of homes had a tub; 8% had a phone; 95% of all births took place at home; women washed their hair once a month, using borax or egg shampoo; and the average worker made about $300 per year.

Our rapid advancement to the bounty found in even the poorest home in the U.S. today is due not to any government program or non-profit initiative, but primarily because profit-pursuing individuals have innovated to produce hitherto unknown prosperity.

And it’s also due to the for-profit, market-based sector that many of our threatened crises never materialize. For example, when I was a girl, it was widely predicted that there would be mass starvation in the near future, as exploding populations would overwhelm the planet’s limits on food production. Instead, the development of higher-yielding plants and better farming methods created an international green revolution.

Yet when was the last time you received an invitation for a gala black-tie event honoring a for-profit hero? Don’t most of us instead find ourselves inundated with celebrations of those who have “given back” or honoring “public servant” politicians?

Social Innovation and Civil Society

That said, there certainly are problems we see in our communities that we would like to be able to do something about, and we form non-profit organizations to do so. And innovation and entrepreneurship can do much to address those as well. Americans have a long tradition of banding together to do just that. Probably the best-documented study of this can be found in Alexis de Tocqueville’s Democracy in America. A young French aristocrat, Tocqueville toured America in 1831-32, and he made an amazingly extensive study of our society and institutions. One thing that struck him the most was our penchant for forming what he dubbed “associations”:

Americans of all ages, all conditions, and all dispositions constantly form associations. They have not only commercial and manufacturing companies, in which all take part, but associations of a thousand other kinds, religious, moral, serious, futile, general or restricted, enormous or dimunitive. The Americans make associations to give entertainments, to found seminaries, to build inns, to construct churches, to diffuse books, to send missionaries to the antipodes; in this manner they found hospitals, prisons, and schools....

Unlike the societies Tocqueville had known—the England of a privileged aristocracy, where Noblesse Oblige would tend to the poor, or post-revolutionary France, whose strong central government was assumed to be responsible for taking care of all such problems, in the American democratic society power and money were widely diffused among individuals, such that they had to combine forces to solve any given problem:

Among democratic nations ... all the citizens are independent and feeble; they can do hardly anything by themselves, and none of them can oblige his fellow men to lend him their assistance. They all, therefore, become powerless if they do not learn voluntarily to help one another. [emphasis added]

So, I think our tradition of innovative individuals forming alliances to solve problems stands us in good stead. The Independent Institute’s book, The Voluntary City, similarly brings together case studies of innovative alliances that historically met and many which continue to meet, needs from housing, transportation, education, medical care, to police and law courts. Long before there was unemployment or health insurance, for example, many people belonged to mutual-aid societies, into which they would pay dues. When they found themselves out of work, facing unexpected medical or other costs, they could receive funding from the society. By 1925, there were 120,000 such societies across the country.

And so we have a rich and proven-effective tradition of voluntary associations solving problems. Yet, in case after case, we see government taking over more and more of our voluntary sector. And that is why I’m so concerned about the calls in the aftermath of Katrina to expand FEMA and other programs.

First of all, there’s just the plain evidence that the public sector doesn’t do the job nearly as well as the private. Let’s take a look at the vast differences in the responses to Katrina from the public vs. the private sector.

Responses to Katrina: Public vs. Private

FEMA, and all levels of state and local governments in the affected areas have claimed that a disaster of Katrina’s proportions could not have been foreseen or planned for and they should thus be given a pass—or better, yet, a bigger budget and more power—for having performed so badly.

Yet let’s take a look at what happened in the private sector:

The giant private hospital company HCA held a “Hurricane Lessons Learned” planning meeting last fall, following last year’s devastating Florida hurricanes. Some key gaps they identified were: cell phones often fail, so alternative phone systems are needed. Roads become impassable, so emergency supplies have to be stored closer to hospitals. Back-up generators are needed. As a result of the meeting, HCA provided its hospitals with satellite phones, hurricane shutters and additional backup generators. It struck deals with local businesses like refrigeration, water, diesel and gasoline companies, to provide supplies quickly in the event of an emergency. In hurricane-prone areas it also warehoused food, medical supplies and other gear closer to its hospitals. In the immediate aftermath of Katrina, senior management set up a “war room” and quickly decided they would need to lease 20 helicopters to evacuate their Tulane hospital. HCA’s chairman and CEO didn’t hesitate in ordering them to do so. They used ham radios to create a makeshift air-traffic control system and immediately began ferrying critically ill patients out, without one mishap.

Literally across the street, the state-run Charity hospital was without emergency supplies and unable to get any governmental help in evacuating. Subsisting on fruit cocktail and a dwindling supply of water, Charity’s patients were only saved by being ferried by boat to Tulane and evacuated by HCA’s privately-leased helicopters.

Similarly, Wal-Mart and Home Depot had emergency-response plans in place and their senior management immediately sprang into action ordering them implemented, sending supplies like generators, food, water, flashlights and batteries into the areas hit. They were able to quickly establish and maintain a supply chain throughout the region. Pfizer distributed needed drugs and medicines via Wal-Mart and other retailers. Budweiser delivered truckloads of water and ice. Ford provided vehicles for search and rescue.

At the heart of the corporate response was a stunning array of advanced communication networks that kept firms in touch and coordinating. Following last year’s tsunami aid effort, the Business Roundtable had arranged for each of its 160 member companies to designate a disaster-relief point man. They were in place and ready before Katrina hit. The U.S. Chamber of Commerce set up a clearinghouse to compile lists of needed supplies. Each donor company indicated what order it could fill, eliminating duplication or delay. Black & Decker’s employees worked through Labor Day weekend to produce more generators.

And on and on.

Meanwhile, what was going on the New Orleans mayor’s and Louisiana governor’s offices? Both expressed frustration and helplessness, caused by having no plans for an emergency of this magnitude. The mayor’s office set up operations in the privately owned and operated Hyatt hotel, judged the safest base. They were equipped with old field-type phones that couldn’t be recharged. Both the governor and mayor claimed they were paralyzed by lack of communication, and pointed the finger at the feds’ failure to come to the rescue. The entire governmental response, from top to bottom, was beset by lack of leadership, action, and absolutely no coordination or communication between any two agencies. It had been immediately pointed out following 9/11 that much of that rescue effort was hindered and many of the deaths of firefighters and police were due to the inability of rescue agencies to communicate among and between themselves. Yet four years later, and despite billions of dollars distributed to and by the new Dept. of Homeland Security, the exact same systems were in place.

When one mayor in Louisiana called FEMA to get supplies, he was put on hold for 45 minutes. Eventually a bureaucrat promised to write a memo to his supervisor. Evacuees on a boat could not receive permission to dock along the Mississippi river. A sheriff was told he could only get the help he was seeking if he emailed his request—of course, his parish was flooded and without electricity.

School buses sat idle in parking lots—contrary to the City of New Orleans’ emergency plan that called to use such buses to evacuate residents to safety—not to the Superdome, which lay within the threatened area. Furthermore, the Superdome had been used as emergency shelter before, and there had been violence and civil disorder within it on those occasions. Yet no provision had been made to prevent the recurrence of such violence that had occurred before and worsened under the “hell-like” conditions following Katrina. The people in the Superdome were essentially held under house arrest, not allowed to leave or even go outside for fresh air. No provision was made to provide them food, water, sanitation, counseling, or even communicate to them what was happening and what they could expect. It’s little wonder that such desperate “Lord of the Flies” conditions led to a breakdown in civil society. It could have been a laboratory study in what happens when you treat people like cattle—only worse, because cattle owners feed and water their stock.

A group of 500 guests in French Quarter hotels pooled their resources to come up with $25,000 to charter buses to come and rescue them, subsidizing those without the means to contribute. They waited 48 hours for the buses whose arrival was said to be “imminent,” only to learn that the military had commandeered them as soon as they arrived in the city. Once kicked out of the hotels, “by orders,” they learned they would not be allowed in either of the two city shelters—the Convention Center and the Superdome—which had descended into humanitarian and health hellholes. Yet neither could they leave the city—those trying to leave the city on foot were turned back by armed police, “protecting” neighboring cities from fleeing evacuees. Only those with transport could leave, yet, as we’ve seen, transport was denied them.

Companies wanting to send in planes and helicopters to rescue their people were prohibited from doing so. One company contacted Louisiana Congressman Bobby Jindal’s office for help identifying who could grant them permission to send in a helicopter to rescue their stranded employees. Unable to find anyone at FEMA, the FAA or the military who would accept responsibility to grant permission, the congressman advised the company to just go ahead.

What is probably most inexcusable and has been kept relatively quiet is that the Red Cross and the Salvation Army were staged and ready to enter New Orleans with food, water and other emergency supplies. The roads to the Superdome and the Convention Center were open, and other areas of the city remained similarly accessible. But the Louisiana Dept. of Homeland Security denied them permission to go in, saying their presence would “prevent people from leaving.”

In the ultimate, horrible example of a bureaucratic Catch-22, the government kept people from leaving New Orleans, and the Dept. of Homeland Security would not let aid agencies in, saying having aid available in the city would create a magnet to keep people from leaving.

Eventually, of course, aid agencies were allowed in, and within a few days following Katrina, the Salvation Army had in place 10 mobile feeding units, including at the evacuation points, as well as 2 large mobile kitchens, with a total capacity of serving 200,000 meals per day. As of Sept. 30, the Salvation Army has served over 2 million hot meals plus over 3 million sandwiches, snacks, and drinks from its 150 mobile feeding trucks plus 10 field kitchens deployed throughout the region. It has distributed over 35,000 cleaning kits: brooms, mops, buckets and detergent; and 60,000 food boxes. It has sheltered and provided counseling to approximately half a million people. Its Emergency Radio Network, designed to help people locate family members, has received over 60,000 inquiries and found almost 16,000 survivors. A woman from our San Francisco office was dispatched to run the Astrodome operations, returning last week. As Hurricane Rita built up, the Salvation Army deployed office workers, including our webmaster, to Houston to be prepared to provide disaster assistance there—everyone else was already deployed following Katrina. In all, almost 7,000 Salvation Army officers, together with almost 7,000 Salvation Army employees, plus thousands of trained volunteers have served in the affected areas, and they will remain as long as relief is needed. They’re still serving in Florida in the aftermath of last year’s hurricanes there, and they remained onsite at Ground Zero for two years following 9/11, with a large tent facility housing rest facilities, food, clean socks, counseling and other needs for the rescue workers there.

The Salvation Army is being judged the most effective relief agency throughout the Gulf Coast—and, with reason. A front-page story in the September 29 Wall Street Journal praised the Salvation Army for its quick, effective hurricane relief efforts. Based from their operations already well-established in nearly every community, where they work daily in permanent shelters with the homeless and poor and with people trying to put their lives back together after an apartment fire or years of alcohol and drug abuse, they’re well prepared to meet the needs of victims of natural disasters. Its military-style structure is designed for rapid mobilization and puts a premium on training people in advance to deal with disasters. Most people aren’t aware that the Salvation Army is actually a church. Its officers are all ordained ministers and they are in the Army as a calling—their way of ministering to the poorest of the poor in the name of Christ, with love and without discrimination, and for very little pay. The head of the Red Cross draws a salary of $450,000. The head of the U.S. Salvation Army is paid less than $30,000. They do this work from their hearts, and they do it very, very well.

Now I don’t want to make it sound as if I think that every private organization walks on water. Not every private entity did perform well in the disaster. The government says it will bring criminal charges against the owners of a nursing home whose 34 abandoned residents died, and it is proper that they should be held liable for this negligence. But who do the victims of the gross and arguably criminal neglect in the Superdome, the Convention Center—or for that matter, the thousands whose property and lives were lost due to the government’s failure to maintain its levees—sue?

The Lesson

For this is the salient point: private organizations, whether for-profit or non-profit, perform or lose their customers or their donors. When a private entity fails to deliver on its promise, or actually causes harm, it is held liable for the failure and pays the damages. When government fails, it gets a bigger budget and even more power.

Relying on big bureaucracies is itself a recipe for disaster. Bureaucracies do not talk to each other, and they are actually disincented from solving problems. Last year’s 9/11 commission issued a comprehensive, damning indictment of the intelligence community’s failure to perform its basic function. Yet rather than waiting for any facts on which to act, government had instead three years before created a whole new level of bureaucracy that could be guaranteed to only exacerbate the failings we saw 9/11 and now again with Katrina.

And that is exactly the danger we face again now: suddenly, in the heat of the immediate, emotional aftermath of the disaster, frantic calls go up to have FEMA do more, not less. The federal government is jumping in with promises to perform tasks no-one would have dreamed appropriate following previous disasters: reimburse faith-based charities for their expenses in providing relief; rebuilding entire neighborhoods and communities under no-bid, cost-plus contracts.

What’s going to happen when we allow the pre-empting of our very effective charitable sector by bureaucracy? What’s going to happen to the voluntary, charitable sector when people see enough examples of their tax dollars being used for the purpose for which they used to designate their charitable giving? Just as with the tradition of mutual-aid and other voluntary initiatives, private charity will fade as government’s involvement increases.

Although you may not be aware of it, this is already happening. Organizations like the Salvation Army are already dependent on government funding. When that funding is lost in the face of politics, as happened here in San Francisco when the Salvation Army’s faith-based mission fell in disfavor among our extremist city council, we lost $3 million per year in government funding of detox, homeless shelter, and senior feeding programming. Losing the funding forced us to revitalize the board and get back in closer touch with our community—now that we were again wholly dependent upon it for support.

We also took a close look at the programs for which we had suddenly lost funding, and discovered, a bit to our chagrin, that they could actually be run better and more efficiently than government requirements. I dubbed it the “Pentagon model” of social service. I don’t know if you’re familiar with the adage that the Pentagon is always preparing to fight the last war—commissioning weapons systems, for example, designed to defeat the Soviet Union, not fight a dispersed, decentralized War on Terror; and of course its well-deserved reputation for being bloated. While nothing like that scale, several of our government-funded programs turned out to be a bit behind the times, and we revamped them to better meet our community’s needs today. For example, the Federal Meals on Wheels program has an age 60 minimum. Revamped as the privately-funded Meals That Heal, in addition to providing for seniors, we also deliver nutritious meals to younger people homebound by diseases such as HIV/AIDS.

Similarly, there had been excessive administrative and reporting requirements. We were able to cut administrative positions and place a case-worker in every one of our 16 facilities across the city.

Disasters of Government Failure

As the Independent Institute’s research shows time and again, the Katrina disaster aftermath is simply the current most obvious example of government failure. It is not the exception, it is the pattern: a crisis occurs, often because of existing government failure such as inadequate levees, the cry goes up that government must “do something,” it moves in with ambitious new programs that drive out voluntary initiatives, until the myth that government has to do it or it wouldn’t be done is true.

We saw only too clearly in New Orleans what happens when government is allowed a monopoly on disaster response: bureaucratic bungling and mistreatment of those who most need help.

But to me, at least as important as the fact that government performs relief work less well than private initiatives, is the message Tocqueville drew from observing our society: voluntary association brings us closer together and keeps us free and “democratic.” By working together in voluntary association to help one another and solve our own problems, we learn that we as individuals are effective and powerful.

The lessons of Katrina provide a picture-perfect case study of what happens when we surrender these functions to nameless, unaccountable bureaucrats: levee systems that everyone knows are inadequate and no one does anything about; a Keystone Cop scenario of bureaucrats pointing fingers and waiting for the feds to save them; and helpless victims.

I prefer the very real and well-functioning world documented in Tocqueville’s Democracy in America and The Independent Institute’s The Voluntary City. Communities in which individuals working together in voluntary association meet and solve their problems in common.

Unlike the Superdome, the Astrodome was operated as a shelter under the auspices of the Red Cross and The Salvation Army. Government forecasts had predicted that evacuees would be there for months. Instead, less than 4,000 remained in the Astrodome two weeks after Katrina, with all of them placed within a month.

So instead of the Federal government’s disbursing no-bid, cost-plus contracts to rebuild New Orleans (and who on earth is the master planner of what is being built, where, and why?) how about instead declaring the affected region an enterprise zone—exempt from tax and regulatory restrictions? There would be an inflow of investment as dramatic as the phoenix rising from the ashes. Think Hong Kong, that island rock with no natural resources, having even to import drinking water. Yet the economic success story of the 20th century—that could be New Orleans, freed of the most corrupt government at all levels in the entire country. Freed of slums, dead-end lives of hopelessness.

As for the levees, the failure of which was the proximate cause of New Orleans’ devastation, let’s fire the Army Corps of Engineers and turn that agency over to stakeholders who will have incentives to invest in bringing it up to 21st century standards and be held accountable if it fails. You could privatize it as many former iron-curtain countries privatized formerly state-run enterprises, by distributing a share to every citizen of the area; or have the levees be owned and operated through insurance schemes; or bid them out for sale to a consortium of business or other condominium-type holding.

The wonderful thing about the market is that no one has to be prescient—when you get barriers out of the way, innovative entrepreneurs devise ways of solving needs never thought of before. For example, one of the most vibrant economies today is Estonia. This former Soviet satellite was so thrilled to be freed of their hated Russian rulers that they have since 1990 allowed almost no central control. The result is the most booming, energetic, happy place—rediscovering and revitalizing things like traditional native dance. At the same time it is one of the most advanced countries technologically in the world. Estonia leapfrogged traditional telephone technologies and jumped right into the wireless age. You can even pay for your parking meter from your cell phone.

It’s amazing what happens when you set the private sector free.

So, what can we learn from Katrina? First of all, let’s realize that no knight in shining armor is going to come save us, so let’s do what needs to be done ourselves. Let’s believe Mayor Gavin Newsom when he tells us he won’t be able to evacuate San Francisco in the event of an emergency, and that Rudy Guiliani didn’t actually single-handedly save New York post-9/11. They’re just guys, they’re not super-heroes.

The Independent Institute will pursue activities like documenting and publicizing examples like the Business Roundtable’s proactive emergency communication system. Let’s champion those examples, get involved in efforts to promote and replicate them, and support and get involved with organizations like the Independent Institute and the Salvation Army that produce solutions.

And let’s help spread the word to others that this is the way to take care of ourselves and those in our communities who need help. Yes, it’s work, time, and money, and government’s promises to do it for us, at an invisible cost to us, are tempting to believe. But next time we hear a great new proposal for a great new government initiative that’s going to solve everything once and for all, let’s just say, “No, thanks. We’d rather do it ourselves.”