Private vs. Gov't Response

The Katrina tragedy showed the difference in the speed of reaction by private sector compared with the government. Sure private enterprise has a profit motive but they get the job done efficiently. Everybody that was glued to the tv set has seen the footage of the Wal-Mart trucks on its way to disaster areas and also we heard about how FEMA got in the way when they blocked these same trucks. Wal-Mart's response is the cover story of the latest Fortune magazine issue. Below are some excerpts:

Wal-Mart employees arrived so early in the disaster area that they often wound up running their own relief efforts. "If the federal government would have responded as quickly as Wal-Mart, we could have saved more lives," says Jefferson Parish Sheriff Harry Lee. "FEMA executives were there, but they didn't do anything. They weren't up and running for four or five days." In one case, he says, FEMA actually made things more difficult for the retailer. Wal-Mart sent three trailer trucks with water to a FEMA compound. "Much to my dismay, FEMA turned them away," Lee says. "They said they didn't need it.... [Wal-Mart] ended up giving the water directly to us." A FEMA spokeswoman disputes Lee's account.

But other local officials recall things similarly. Philip Capitano, mayor of Kenner, says Wal-Mart's trucks rolled into his city with supplies several days before the Red Cross and FEMA. "The only lifeline in Kenner was the Wal-Mart stores. We didn't have looting on a mass scale because Wal-Mart showed up with food and water so our people could survive," Capitano says. "The Red Cross and FEMA need to take a master class in logistics and mobilization from Wal-Mart."

Many evacuees decided that they were better off dealing with Wal-Mart than with the government. The company set up a phone bank in Bentonville to take calls from displaced employees who needed assistance. It wasn't long before Wal-Mart volunteers began receiving calls from nonemployees seeking help. They even helped a New Orleans couple find their newborn child, who had been moved from a city hospital to a Houston neonatal center in the chaotic evacuation.

As Adam Smith said many years ago, it is not because of the kindness of the butcher or the baker that we get our meat and bread, it's because of their self-interest, and the wonderful thing is when everbody is allowed to exercise their varied self-interest it results in the promotion of public interest as if led by an invisible hand even if this was not their main intention.