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PRESS RELEASE: The Next Time Disaster Strikes, Call Your Neighborhood Big-Box Store

March 19, 2008

March 20, 2008

Contact: Lura Forcum, lforcum@gmu.edu, (703) 993-4960 

Arlington, VA, March 20, 2008—When large disasters strike, many rely upon the government for assistance. A new study from the Mercatus Center at George Mason University suggests that real relief is likely to come from the local big-box chains. 

The study stresses that successful disaster relief depends upon responders having detailed knowledge of a local area and the right incentives to act on that knowledge. Examining federal and private responses to Hurricane Katrina, the study shows why FEMA was destined to fail, and why for-profit firms succeeded at disaster recovery. It also looks at the Coast Guard—the only federal agency lauded for its Katrina performance—which rescued more than 24,000 people in the two weeks following the storm. 

Wal-Mart, Home Depot, and Lowes made use of their local knowledge about supply chains, infrastructure, decision makers, and other resources to provide emergency supplies and reopen stores well before FEMA began its response. Their local knowledge enabled the big-box stores to make plans ahead of the storm and put them into effect immediately after. Also, leadership gave tremendous discretion to store managers and employees to make decisions rather than waiting for instructions from upper-level management, allowing for more agile disaster response.

The Coast Guard also places a strong emphasis on local knowledge. A flat organizational structure and unique agency culture allow for subordinate officers to alter the plans for a specific operation so long as they follow the commander’s intent. The Coast Guard’s day-to-day activities (search and rescue operations, and work in the marine environment) as well as its division into specific geographic areas provide greater expertise for disaster response.

The study also looks into the mistaken conventional wisdom that businesses will take advantage of disasters through price gouging and other unsavory business practices. The paper details how Wal-Mart, Home Depot, and Lowes actually sent truckloads of free supplies to the hardest hit areas and that this behavior was motivated not only by a sense of being part of the communities where stores are located, but also by a desire to build long-term customer loyalty, rather than focus on short-term profits.

FEMA’s slow response to Hurricane Katrina is explained by both its incentives and its organizational structure. First, FEMA can always argue that its failures demonstrate a need for more funding and staff to accomplish its goals. Furthermore, errors of omission are viewed less negatively than errors of commission—not having necessary supplies on hand is less objectionable than wasting supplies because they were stockpiled but never used. Finally, FEMA’s daily tasks (mainly administrative affairs carried out in Washington, DC) are less useful for disaster preparation than the activities of an agency like the Coast Guard.

“Disaster response happens at the local level,” observes study author Steven Horwitz, professor of economics at St. Lawrence University. “FEMA is not local to anyone except people who live in Washington, DC.” 

“Making Hurricane Response More Effective: Lessons from the Private Sector and the Coast Guard during Katrina” is available online at www.mercatus.org/EffectiveHurricaneResponse. For more information, or to arrange an interview with the author, please contact Lura Forcum, Public Affairs Associate for the Mercatus Center.

Media Contact

• Lura Forcum
  
  lforcum@gmu.edu