by Fred E. Foldvary

The world is astonished at the gross incompetence of the US government in handling the New Orleans disaster. Now that recovery is underway, the government agencies seem to be draining the city, securing safety, and gathering the bodies rather efficiently. What failed was the swift reaction and coordination which is supposed to be the rationale for centralized government.

It is said, by those who don’t think it through that deeply, that the market, that voluntary action, that private enterprise, cannot deal with such emergencies. They say, here is where we really need centralized government to command the resources, coordinate action, and issue orders.

How many more disasters will it take for folks to realize that top-down centralized big government is not the best answer? When a local enterprise fails, the consequence is small. When big government fails, it fails big.

Indeed, not only has centralized government failed, it has prevented private action from providing aid to save lives. The Homeland Security Department ordered the American Red Cross and Salvation Army to not come into New Orleans with food, water, and boats because the "security" chiefs wanted to evacuate the people. Homeland Security even prevented Canadians from entering the US to provide aid that could have saved lives.

The fate of history has given the world a particular model of democracy. We cherish governance by the consent of the people rather than the whimsical rule of an elite. But the mass-democracy model that history has handed down is fatal. People fail to understand that in electing government chiefs, size matters. As the Scottish philosopher David Hume explained in his 1752 essay, Idea of a Perfect Commonwealth, small groups can do it well, while large groups become subject to voter ignorance and special-interest influence.

Now we are engaged in a great civil catastrophe. Because the rescue was late, the poor and the unlucky slipped through the cracks of fate, and drowned. But others, churches and brave volunteers, have by themselves slipped through the bungled governmental fait accompli to rescue thousands. Millions of dollars have been raised voluntarily to help the evacuated victims.

But how can the market and private enterprise and voluntary human action handle such a catastrophe? The answer is that the spontaneous order coordinates in three ways. One is by the price system, for commercial exchanges, as enterprises respond to profit and loss. The second is with voluntary sympathetic action, private charity. The third is with association in equality.

The error people make about free markets is to believe that it consists of millions of atomistic individuals whose actions cannot be coordinated to respond to crises other than by central planning. But historically, human beings are always, already, in community. In a free society, they form voluntary local associations: land trusts, cooperatives, civic associations, condominiums, and proprietary communities. These neighborhoods then themselves associate, forming higher-level associations, when then league together to create a higher tier all the way up to a global network. The three ways of voluntary coordination join together in harmony.

For example, instead of a politically-driven top-down ineffective federal Homeland Security Department, there could have been an interstate agency. State and provincial legislatures would create and send representatives to a Continental Emergency Management Agency, CEMA. The funding would also be bottom up, from the states and provinces. Funding would then not have been shifted from flood control to the anti-terror porcinocracy, because the states would have controlled the funding. The people would be even more decisive if the state legislatures were also elected by the state county boards and councils.

Purely voluntary governance would flow up from local associations to the highest level in tiers, each elected from the lower level. Each tier would be responsible for action best made at that level. So the continental level could indeed coordinate the response to a catastrophe.

With the mass democracy handed down to us by fate, folks are led to believe, because they have been taught so by governmental schooling, that government chiefs are competent and care only for the public interest. Much of the public believes that the present system of governance is not perfect, but is the best we can have, and if government fails, it is because of bad persons in charge, who can be replaced with better chiefs, and then all will be well.

This is a failure to analyze systematically. Economic logic tells us to look at the incentives of any governing system. The incentives of mass democracy are pathological. Mass democracy creates the rule of the special interests at the expense of the people. Mass democracy creates the fata morgana mirage of benevolent government, while rent seeking plunders wealth away from real security.

What will it take for people to learn that top-down big government will not make us secure? Unfortunately, history tells us that learning this lesson will require an even bigger disaster bigger than the one we have just suffered from.

This article first appeared in the Progress Report, www.progress.org. Reprinted with permission.

Dr. Fred Foldvary teaches economics at Santa Clara University and is the author of several books: The Soul of Liberty, Public Goods and Private Communities, and the Dictionary of Free-Market Economics.