A paper written by Steven Horwitz, an Austrian-school economist (we’re still not quite sure what that means, other than it’s considered slightly controversial), recounts Wal-Mart’s relief efforts after Hurricane Katrina (PDF) and points out that private businesses, along with the Coast Guard, did far more than any “official” government agency in providing immediate, on-the-ground assistance to victims. His argument is that something as complex as a relief effort is more efficient when it’s decentralized and involves private businesses. Horwitz has also, separately, supported the idea that Wal-Mart should win the Nobel Peace Price. Hey, we told you his school of economics was controversial.
Horwitz describes how, in the hours before Katrina struck, Wal-Mart’s CEO laid out a ground plan of autonomy to store managers to do what they felt was best—in effect, giving them permission to take fairly radical actions that in other circumstances would have been considered criminal:
Another element of Wal-Mart’s successful response was the great degree of discretion that the company gave to district and store managers. Store managers have sufficient authority to make decisions based on local information and immediate needs. As the storm approached, CEO Lee Scott provided a guiding edict to his senior staff and told them to pass it down to regional, district, and store managers: “A lot of you are going to have to make decisions above your level. Make the best decision that you can with the information that’s available to you at the time, and, above all, do the right thing.”
In several cases, store managers allowed either emergency personnel or local residents to take store supplies as needed. They did not feel the need to get pre-approval from supervisors to do so. A Kenner, Louisiana employee used a forklift to knock open a warehouse door to get water for a local retirement home. In Marrero, Louisiana employees allowed local police officers to use the store as a headquarters and a sleeping place as many had lost their homes.
In Waveland, Mississippi assistant manager Jessica Lewis, who was unable to reach her superiors to get permission, decided to run a bulldozer through her store to collect basics that were not water-damaged, which she then piled in the parking lot and gave away to residents. She also broke into the store’s locked pharmacy to supply critical drugs to a local hospital.
Now about that peace prize thing—Horwitz says that consequences are what matters, not intention:
To the extent that Wal-Mart (and market capitalism more generally) have both encouraged people to deal with each other on the basis of voluntary exchange rather than force and have raised the standard of living so greatly, especially of the poor, they have made the world a more peaceful place. And in the long run, their contributions to peace are probably far greater and longer-lasting than the politicians and social missionaries who normally get the Prize.
Whaddya think of that? Do the good deeds of Wal-Mart, intentional or not, outweigh any damage it causes?
Update 2:50pm:
Stephen Horwitz, the author of the Wal-Mart paper, wrote in to clarify a few points.
Thanks for linking to my study on Wal-Mart and Katrina. I’ve been reading the comments section and rather than post myself, I thought I’d email you with three clarifications/corrections that you can either add yourself or tack to the end of the entry or just ignore.
1. I do NOT work for Wal-Mart. I sometimes shop there though. I’m a college professor at the opposite end of the country from the Gulf Coast and equally far from Bentonville. [He's a professor of economics at St. Lawrence University in New York.]
2. The wikipedia entry on Austrian economics is pretty good explanation of what the school of thought is about: http://en.wikipedia.org/wiki/Austrian_School
3. The 1112am commenter about what an Austrian economist supposedly said about 20-30% unemployment etc, is simply false. Nor does Austrian economics say everything should be “left to corporations.”
“Making Hurrican Response More Effective: Lessons from the Private Sector and the Coast Guard during Katrina” [Mercatus] (PDF document)
RELATED
“The Case for Wal-Mart Winning the Nobel Peace Prize” [The Austrian Economists]
“In Wal-Mart we trust” [National Post] (Thanks to Chris!)
(Photo: Brave New Films)
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@EllenRose: Maybe my joke detector is off, but did you mean Fair Trade Coffee?
The image of free range coffee is cracking me up. Little coffee beans free to leave their cages and scamper out in to the pasture to eat grass.
@John Whorfin: More than one city was affected by Katrina; parts of Mississippi had much more damage than New Orleans. Yes, New Orleans was flooded, but cities like Waveland were washed away.
For once, the media couldn’t attack Mississippi for its “racism”, because all the racial tension was somewhere else. Mississippians were too busy helping each other.
FWIW, I’ve been to both MS and LA in the past few months and even though you can still see damage, they’re both doing much better.
@SkokieGuy: Show me on the doll where Wal-Mart touched you.
@suburbancowboy: Is ADM on your list too? Scary stuff between them and Monsanto involving soy beans.
These things are not the good deeds of Wal-mart. corporate was not involved in any of these decisions (or things might well have been very different). These were the good deeds of the local people that lived in the area that happened to work at Wal-Mart. They were told that they could make decisions as they saw fit, so they made good, kind decisions rather than making Wal-Mart decisions.
Wal-Mart central, on the other hand, decided that they may as well bless the “good deeds” since they were going to happen anyway and reap good PR rather than prosecuting and firing people, and getting bad PR.
Wal-Mart does nothing that doesn’t benefit Wal-Mart’s bottom line. Just ask Hillary Clinton – she helped make it that way.
Austrian school of economics = free-market extremism. They claim to be the ultimate scientists, but they use the most primitive types of economic models and then say that if human behavior doesn’t actually fit those models, too bad: it should. IMO they are more ideologues than scientists.
Anyway, everyone else has already said it: just because WM did better than the Bush administration doesn’t mean business is more competent than government. That’s like saying that the IRS is more efficient than a snack stand run by a kleptomaniac alcoholic.
@dirk1965: No disrespect intended, as I do appreciate the generosity the people of Texas, and here in MO, and all over the US showed (and yes, mostly Texas), but isn’t that just what Wal-Mart did: they opened their property and gave away food, supplies and services to people in need?
By “community involvement” do you mean running locally owned stores out of business and depressing area wages? Or do you mean paving over greenspaces and ruining local ecosystems? Because when I think of “positive community involvement,” it somehow doesn’t involve poverty and urban sprawl.
Y’all I have to respond to this for a few reasons. I live near a brand-new Wallyworld where Avondale Mall used to be in Decatur. In my area there are NO locally owned stores to run out of business or at least none worth running out of business. To buy something simple I have to drive at least 10 miles to get to a decent store. Plenty of locally owned stores survive by providing better service, a better selection or a different selection than what is available at Wallyworld. Try shopping in some of those local businesses and you’ll discover why they go out of business. Like Sears or Kmart, go there to see why they’re doing so badly. Those local businesses generally pay lower wages with no chances of advancement v. Wal-Mart. No one makes a living wage as a cashier. Anywhere. And as for paving over greenspaces and “ruining” local ecosystems, I’d like to see a local ecosystem that’s been “ruined” by a Wal-Mart, they’re not Love Canal, so stop being so dramatic. Our Wally world is a former mall that was abandoned 5 years ago and was a total eyesore. No greenspace paved. I’m delighted that I finally have an inexpensive place to shop and sure the jobs are low wage but if you’re a local teenager without transportation, it’s a great opportunity.
Y’all, Wal-mart is a store and a business engaged in turning money into more money by exploiting its capital. It isn’t supposed to do anything beyond that and you can’t blame it for destroying the planet or give it credit for saving the earth. And held up to any govt agency, of course they’re going to do better, they prepare every day for the basic tasks of distributing goods in large quantities against serious competition for razor thin margins and making a profit at it. What governmental agency faces competition? What governmental agency faces the problem of attracting and retaining customers (arguably, welfare) but of course a for-profit business will always do better than government at what it has day in-day out experience at doing.
Okay, I was there, I lived through it, and I learned how to put a roof on my house. Walmart was definitely a life saver. Faith based groups sent people from all over the country to help out. And, as a Louisiana resident, I learned that local government does make a difference, a lesson that is reinforced every time I drive through Mississippi. Apparently, FEMA does an okay job in the areas where local people and local governments were willing to step up to the plate. I never thought I would have to envy Mississippi.
I find it interesting that in all the commentary about how horribly the government managed things, no one has mentioned the report’s contradiction in saying that the Coast Guard did well.
Just to clarify, the Coast Guard is not a private corporation or volunteer organization, but an honest-to-god branch of the military! One that also falls under the umbrella of the DHS!
I guess at least one government agency did well.
As far as Wal-Mart goes, I give them half-credit for their enlightened self interest-opening up to the needy likely allowed them a hefty tax write off for charitable donations, and probably helped reduce facilities damage from looters.
@Canoehead:
In August of 2005 Bush could not have imposed “Federal Martial Law” without the consent of Congress.
From [en.wikipedia.org]
“In United States law, martial law is limited by several court decisions that were handed down between the American Civil War and World War II. In 1878, Congress passed the Posse Comitatus Act, which forbids military involvement in domestic law enforcement without congressional approval. The Military Commissions Act of 2006 possibly rescinds these limits by suspending habeas corpus, but the law is not clear on whether it applies to U.S. Citizens. Since, USNORTHCOM [5] has increased its direct involvement with civilian administration.
The National Guard is an exception, since unless federalized, they are under the control of state governors. [6]. This has now changed. Public Law 109-364, or the “John Warner Defense Authorization Act of 2007″ (H.R.5122), was signed by President Bush on October 17, 2006, and allows the President to declare a “public emergency” and station troops anywhere in America and take control of state-based National Guard units without the consent of the governor or local authorities. Title V, Subtitle B, Part II, Section 525(a) of the JWDAA of 2007 reads “The [military] Secretary [of the Army, Navy or Air Force] concerned may order a member of a reserve component under the Secretary’s jurisdiction to active duty…The training or duty ordered to be performed…may include…support of operations or missions undertaken by the member’s unit at the request of the President or Secretary of Defense.” [7] The President vetoed the Defense Authorization Act of 2008 on December 27, 2007.A provision in the 2008 defense authorization bill would have repealed this section of PL 109-364. [8]“
The fact that most of Louisiana National Guard troops were serving in Iraq at the time also contributed to the tensions between Blanco and Bush at the time. And also the fact that most of their equipment was overseas and not available for other first responders to use as well. Would it have made a difference if the LA Guard was not deployed to Iraq? Everyone one of us has our own opinion based on our feelings about the war.
I am not an economist, but my recollection of the Austrian School is that it centered on the idea that distributed decision making, informed by the profit motive, is more likely to produce a good outcome than centralized command-and-control.
There’s a relatively famous economic essay, called “I Pencil” that starts out saying no one person knows how to make a pencil. It starts with mining the ore from the ground for the brass band, selecting and milling the right kinds of trees, the adhesive used to attach the eraser, the eraser itself and so on. From start to finish, tens of thousands of people are involved in the manufacture of that single pencil, some of whom may not even know what a pencil is. The point was that there’s no centralized “ministry of pencils” which coordinates all this — it’s all accomplished through the price system.
So the take away here is that Wal Mart should run our healthcare instead of the govt.
@Chad LaFarge: It’s very possible that Wal-Mart did what is being stated, but we sure didn’t hear about their involvement… at least until now. I totally agree that a lot of other States helped with this tragic event, so I didn’t mean to leave them out.
@DylanMorgan: Are you kidding? It’s not considered a good investment to spend piles of money only to get back about 15%. People act as if a tax deduction is “free money”, or even “even money”… it isn’t. You seem to be trying terribly hard to find ways that they might have profited from this. They certainly earned some good will, but I think that’s as far as it went. Now they have go back to abusing their employees and pray for another catastrophy to make up for it again (PLEASE note the sarcasm here).
Many have commented above on the good work of the Coast Guard. They were outstanding in their roles. BZ to a government agency that did well
.
I realize this doesn’t compare to Katrina by any stretch of the imagination, but when Oklahoma got hit by that awful ice storm last December, we were without power and in well-below-freezing temperatures for over a week. Our local Wal-Marts did an amazing job getting food, chainsaws, sterno, batteries, camping gear, etc. available to our community when we really needed them. Did they make money off what they sold? Absolutely.
But they were there when we needed them. My doctor makes a profit when he cures me, too. I don’t think either qualify for sainthood, but I’m glad they’re in the business they are and that they are good at what they do.
I like Wal-Mart because I can buy better quality groceries there than I could otherwise afford. I also get my vitamins there, as well as casual clothes for my family. If need be, one Wal-Mart run takes the place of going to a hardware store, a department store, a grocery store, a health food store (yes, they sell health food at Wal-Mart) a pharmacy… and if the mood strikes, I can have a Subway sandwich and get my oil changed while I shop.
If someone comes up with a better store, I’ll go there. But for now, I think Wal-Mart is as big as they are because they are good at what they do.
@dirk1965: I don’t know why you didn’t hear about it but I certainly did.
[www.washingtonpost.com]
@Sudonum: Call the Waahbulance – your city was built below sea level, has been run in a massively corrupt fashion for at least a hundred years. Your Democrat Mayor and Democrat Governor massively screwed the pooch and your mad because the Feds didn’t bail you out immediately? How about the LA National Guard unit that set up its HQ below sea level, so that they spent the first 36 hours after the storm rescuing themselves? Or were the Feds supposed to assume total local imcompetence as a given? A lot of New Orleans folks are like a drunk who goes out, gets wasted and then drives into a tree – and is upset because the ambulance is a bit slow.
Anybody who thinks FEMA under Clinton was great didn’t live through Andrew. I did, and their response stunk almost as badly as Katrina when they did anything other than cut checks. But they didn’t try to run everything after Andrew, thankfully, like they did after Katrina.
“On the other hand, it’s pretty fucking sad that corporations like Wal-Mart come out of this looking better than the federal government.”
You ever work for the Feds? I have. Once in, you can’t be fired unless you do something criminal. The best case scenario is that incompetents get shunted off into meaningless paperwork shuffling. The more typical case is that they’re promoted to management where they can do less damage during normal operations, but that means that during non-routine situations they flounder.
Walmart, on the other hand, is famously efficient and doesn’t put up with failure or incompetents — they don’t have to deal with Civil Service regulations.
@dorkins: Oh, right, because the NATIONAL REVIEW is a straight-laced, UNBIASED place to hear the national news, and they always base all of their news on FACTS. Riiiiight.
I’m not saying that journalists across the country weren’t busy hamming it up – for God’s sake, watching the news for longer than five minutes during that fiasco would have been akin to overdosing on sensationalism – but the NRO (some of whom I can only describe as “Federal Fanboyz”) is not exactly the bastion of truth you’re making it out to be.
@Canoehead: Just wondering, have you ever been to New Orleans?
I can never understand the insistence that Wal-Mart pay everyone some magic wage. They often hire people with no job experience whatsoever; do they have some obligation to pay them $15/hour right off the street?!
First WalMart lets the brain-damaged lady keep her money, now this report? Next thing you know, Consumerist will be sponsored by WalMart!
I know, crazy talk. I get carried away sometimes.
Between this post and the one where W*M didn’t make that poor brain-damaged lady pay up after all, I’m starting to worry that Hell is actually freezing over.
Sorry i like wal-mart, the “mall” stores can all rot for all i care. Wal-mart and kohls get my money because they are me, im not from some family that i was given everything and i have $400 pieces of clothing on like you shop for at rich places that complain about wal-mart.
i work for a living and im working OT right now to make up for the time i can’t afford to use pto to go to the doctor right now.
Wal-mart, ‘you my only friend’
@Canoehead:
Nagin is not a democrat, he ran against, and defeated, the democrats candidate during his first term, when Katrina hit. He was the “Pro-Business Candidate” who was going to clean up City Hall. And he was doing just that when the storm hit, then he went crazy.
And who said anything about whining or being mad because the Feds “Didn’t bail us out immediately”? I simply stated the fact that Walmart was able to get help to those affected before the Federal Agency, who’s sole reason for being is to assist disaster victims, was able to. As this post pointed out.
Can you give me a citation for the LA National Guard unit you speak of?
As to you “drunk behind the wheel” analogy, it doesn’t apply. As I’ve stated MANY times on this blog. The Federal Government, with OUR tax dollars, built the levee system that was designed to withstand a Cat 3 hurricane. The Army Corp of Engineers built the levees using outdated maps. They admit that the reason for the flooding was because they did not build the levees to the specifications they themselves required. Many people, Republicans and Democrats, black and white alike, built their lives and livelihoods based on the assurance from the Corp and the Feds that the levees were strong enough to withstand what Katrina dished out. The “Corrupt Locals” had nothing to do with the levees.
Personally, I had flood insurance. My insurance worked exactly like it was supposed to. I had a check in my hands, that covered all of my INSURED losses within a reasonable time of filing a claim. I’m not whining about a damn thing except for all the assholes out there who don’t know what the fuck they’re talking about when they speak on Katrina.
Here is the link to the ACE that states the levees were sub-standard: [www.usace.army.mil]
Here is the link to the NOAA that shows the intensity of Katrina when it made landfall: [www.katrina.noaa.gov]
I never realized Walmart had a heart…Maybe its time to let a corporation officially run America. Walmart for ’12.
Those individual Walmart store managers did a great service to their communities, which I believe they would have done regardless of what the Walmart CEO told them to do.
On the other side of things, the Walmart corporation profits from nearly every local and regional catastrophe. We have all seen throngs of purely generous citizens pour into Walmart and buy water and other staples in mass quantities to donate to relief efforts. Walmart makes its usual profit on each item purchased for relief efforts; I’ve never seen Walmart offer discounts on those sales. It’s Walmart’s right to charge regular price for all of its merchandise, but in profiting from the community’s generous response to a disaster, Walmart is a taker, not a giver.
@nerdbert: I don’t mean to defent FEMA or Bill Clinton, but Andrew was in August 1992. Not only was Clinton not president, he wasn’t even president elect.
@razremytuxbuddy: And if it weren’t for Wal-Mart’s supply chain and infrastructure, the supplies would be more expensive. Wal-Mart’s existence is a discount on those sales, regardless of what prices they charge the rest of the time.
@razremytuxbuddy: “I’ve never seen Walmart offer discounts on those sales. It’s Walmart’s right to charge regular price for all of its merchandise, but in profiting from the community’s generous response to a disaster, Walmart is a taker, not a giver.”
hey did you even read the article????
@Sudonum: I think people get a false perspective when they don’t actually live or visit New Orleans. They think everyone is complaining and wants a bailout but that’s not true for the majority of New Orleans citizens. As you point out, it’s crucial to realize that the worst part of Katrina was when the levees gave out, not the actual hurricane.
This was an interesting paper. I have to admit, WalMart’s delivery and supply infrastructure is impressive.
I also will give credit where credit is due and that’s the fact that Corporate gave the managers the OK to do what’s right vs. making them contemplate what they should do. That manager who used a bulldozer to clean out their store was a bit drastic but it goes to show that an asst. manager was thinking with their heart vs. their heads and worried about someone giving them grief for it.
As stated in the paper, WalMart is a business and that is to make money – if they can swarm into a disaster area and sell their goods to those who need them at the same price that they would pay in a store across the state, they’ve done a good service in my world since during hurricanes and other disasters, cash is king and price gouging is endemic. Having a company that can supply goods at the same price in New Orleans as in New Hampshire is making money, but being fair and supplying those who need those goods the most the ability to purchase them without paying an insane price.
Well, hurricane season is coming up fairly soon down here in New Orleans, and hopefully the WalMart on Tchoupitoulas will go for a peace prize. Send Alex down to take some pictures!
@defeatism: I’m hoping to go there this Saturday. Maybe I’ll bring along my camera…
I have been suggesting for some time that the government should contract out FEMA duties to WalMart. They can get the job done.
pitiful.
@ecwis: I don’t even read my local paper, so I’m surely not going read the Washington Post. But thanks for going out of your way to try a prove something that “I” didn’t read or hear about. Phfft!
I do personally know someone who drove a forklift through the Walmart warehouse door to get water for Ochsner hospital. What he actually said, though, was not “can I break into your warehouse?” but “I’m breaking into your warehouse and will make it up to you later.” To their credit, they said go right ahead.
With this and the dropping of their claim against the brain-damaged woman, they’re getting all kinds of good press lately.
It’s just another illustration that proves few entities are completely good or bad–Wal-Mart included.
@skitzogreg: Screw the little mom and pop stores, huh? I mean, seriously, who wants that kind of individual attention when shopping, right?