Liberty is Prosperity

Saturday, September 02, 2006

A free market solution to Katrina

I recently watched Spike Lee’s documentary on Hurricane Katrina. While the political slant was not to my liking, the depiction of the scale of the suffering and the role of big government in making the situation worse was effective and heart breaking. It raised several questions:

What is a better solution to the problem of a massive natural disaster that occurs within a community that is already an economic and political disaster area?

How do we harness the power of the crowd that is affected to help themselves immediately- without waiting for the government to come along with physical assets?

My idea is this- to create credit and let the free market work.

Could the president proclaim a new “currency” for those affected by the disaster? Let the U.S. government give its guarantee to any reasonable handwritten note presented for payment at the Federal Reserve that contained the following information:

For the buyer/disaster victim: Name, address within the declared emergency area, thumbprint, photo, SSN
For the seller/service provider: Name, address, company information if applicable, thumbprint, photo, SSN
General: What purchased, where, when, dollar amount

This scheme would immediately empower all of the victims to seek their own solution. Even if they were in an area without normal communications capabilities they would soon find out about the grant of credit because sellers of essential services would converge on the area within hours to “exploit” the situation of willing buyers with ample credit.

People in nearby communities would have a financial incentive to immediately start renting rooms in their homes to displaced persons.

The buyers and sellers would be the ones to decide how much of this credit to use. There would be no guarantee of any grant of aid- the idea is simply to get purchasing power to the affected people immediately and then sort it all out later. Fraud will occur but the threat of being caught is very high due to the photo and thumbprint identification of both buyer and seller in each transaction. Notes for obviously ridiculous transactions could be refused for payment at the Fed.

In an area where everyone now has all the “money” they need to take care of themselves, lawlessness can rightfully be treated as zealously as necessary in order to maintain order.