“Storm socialism” and other failures of imagination

This recent article by Christian Parenti at first seems to make a good point, considering what other people failed to consider. In times of weather disaster, it seems that the government can live up to its wildest dreams and really save the day. In any one instance, this may be so. When the National Guard airlifts people supplies that wouldn’t have been airlifted otherwise, good for them.

It then follows, for Parenti, that government is a categorically Good Thing. This may be so, but attempts to get to that result by examining one level deep are surely not the ticket. It may be that government intervention before the fact created conditions in which disaster was just a matter of time. Let’s take flood insurance.

As for flood insurance, the federal government is pretty much the only place to get it. The National Flood Insurance Program has written 5.5 million policies in more than 21,000 communities covering $1.2 trillion worth of property. As for the vaunted private market, for-profit insurance companies write between 180,000 and 200,000 policies in a given year. In other words, that is less than 5 percent of all flood insurance in the United States. This federally subsidized program underwrites the other 95 percent. Without such insurance, it’s not complicated: many waterlogged victims of 2011, whether from record Midwestern floods or Hurricane Irene, would simply have no money to rebuild.

At this level of reasoning, sure, federal flood insurance is a great thing. But let’s go one level further: why won’t private insurers write policies for so many of these places?

I’ll quote from John Stossel here, one of the beneficiaries of federal flood insurance:

In 1980 I built a wonderful beach house. Four bedrooms — every room with a view of the Atlantic Ocean.

It was an absurd place to build, right on the edge of the ocean. All that stood between my house and ruin was a hundred feet of sand. My father told me: “Don’t do it; it’s too risky. No one should build so close to an ocean.”

But I built anyway.

Why? As my eager-for-the-business architect said, “Why not? If the ocean destroys your house, the government will pay for a new one.”

What? Why would the government do that? Why would it encourage people to build in such risky places? That would be insane.

But the architect was right. If the ocean took my house, Uncle Sam would pay to replace it under the National Flood Insurance Program. Since private insurers weren’t dumb enough to sell cheap insurance to people who built on the edges of oceans or rivers, Congress decided the government should step in and do it. So if the ocean ate what I built, I could rebuild and rebuild again and again — there was no limit to the number of claims on the same property in the same location — up to a maximum of $250,000 per house per flood. And you taxpayers would pay for it.

Surely some of the people getting flood insurance were among the poor and downtrodden, but by and large this program is a way to let rich people make bad decisions and charge everybody else for them. The same kinds of commentators who in one article complain that the government unduly favors rich and powerful people over everybody else (think of the item about Warren Buffett’s secretary) can in the next article write that without federal flood insurance “we’d” be in trouble.

This is not to mention that the private market for flood insurance is distorted by the overwhelming presence in that sector of federal flood insurance. If that were removed or cut back, it would be distorted less. Since flood insurance is something that people in flood-prone areas demand, I would expect to see a lot more of it. Yes, private flood insurers would not insure or would charge more to insure risky places, but what is a compelling argument that the “heads I win, tails you lose” strategy is a good, just, or efficient one when it comes to building houses?

How about wildfires? Do these fires tend to happen on or near federally managed land? Are we not subtly making a case against federal management of land? There will always be wildfires, this we will have to deal with. It may be that we can minimize them with a different structure of property ownership, one in which there is some person or group of people with a direct, personal interest in better fire management strategies. That’s a conjecture, but it follows economic reasoning better than the current strategy does.

I could make similar remarks about each point Parenti has in his article, but I’ll spare you the reading. It’s the same each time.

At its heart, this piece commits the same error as a hundred million other pieces on related topics: the failure of imagination. If we could not have gotten to our current state of affairs without government intervention, that isn’t necessarily an argument in favor of government intervention. In some cases it could be, but why is it that societal conditions that obtain right now are the optimal ones? If society were permitted to develop more organically, why would that be a bad thing? Sure, it would be different, but it might be different in good ways.

One example is how much people complain about cars, sprawl, suburbs, and pollution. It just so happens that the federal government (and smaller-scale ones too) persistently intervened in the structure of society to support more roads, more cars, and more sprawl. Find me almost any city in America that has a vibrant downtown area where people can walk to and enjoy walking around in, and I’ll show you a city that had this downtown area before World War II. Many cities lost this kind of neighborhood, but very few cities—if any—developed this kind of neighborhood.

Government has a lot of power now and has had a lot of power in the past. That’s a poor argument for why it should have a lot in the future.

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Author: rfmcelroyiii

Student and instructor of economics.

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