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?
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)
“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)