Effective Disaster Recovery Programs are Based on Personal-Community Relationships

The success of disaster recovery programs has mostly been associated with personal relationships. (Sorry but it’s hardly about governments)

That’s the findings of NPR’s Shankar Vedantam. (hat tip: Prof Peter Boettke) [bold emphasis mine]

Aldrich's findings show that ambulances and firetrucks and government aid are not the principal ways most people survive during — and recover after — a disaster. His data suggest that while official help is useful — in clearing the water and getting the power back on in a place such as New Orleans after Katrina, for example — government interventions cannot bring neighborhoods back, and most emergency responders take far too long to get to the scene of a disaster to save many lives. Rather, it is the personal ties among members of a community that determine survival during a disaster, and recovery in its aftermath.

When Aldrich visited villages in India hit by the giant 2004 tsunami, he found that villagers who fared best after the disaster weren't those with the most money, or the most power. They were people who knew lots of other people — the most socially connected individuals. In other words, if you want to predict who will do well after a disaster, you look for faces that keep showing up at all the weddings and funerals.

Hayek’s local knowledge plays a key role. Again from the same NPR article (bold emphasis)

It's this passion for a local community and granular knowledge about who needs what that makes large-scale government interventions ineffective by comparison. It's even true when it comes to long-term recovery...

Governments and big nongovernmental organizations — which are keenly aware of the big picture — are often blind to neighborhood dynamics...

The problem isn't that experts are dumb. It's that communities are not the sum of their roads, schools and malls. They are the sum of their relationships.

Why does personal-community based relationship matter more than governments?

As I previously explained, (emphasis original)

Remember it is in the vested interest of the private sector to be charitable.

This is not only due to self esteem or social purposes but for sustaining the economic environment.

Think of it, if retail store ABC's customer base have been blighted by the recent mass flooding, where a massive dislocation- population loss through death or permanent relocation to other places- would translate to an economic loss for the store, then, it would be in the interest of owners of store ABC to "charitably" or voluntarily provide assistance of various kind to the neighborhood in order to prevent such dislocation from worsening, or as a consequence from indifference, risks economic losses.

Hence, such acts of charity is of mutual benefit.

Moreover, charity is the province of the marketplace. That's because markets produce and provides the goods and services required by society to operate on. Whereas government essentially don't produce goods or services but generates revenues by picking on somebody else's pocket.

With government, personal relationships are merely reduced to political interests.

With the marketplace, people see the benefit of social cooperation arising from social exchanges, which is fundamental to community building.

As the great Ludwig von Mises wrote, (bold emphasis added)

Within the frame of social cooperation there can emerge between members of society feelings of sympathy and friendship and a sense of belonging together. These feelings are the source of man's most delightful and most sublime experiences. They are the most precious adornment of life; they lift the animal species man to the heights of a really human existence. However, they are not, as some have asserted, the agents that have brought about social relationships. They are fruits of social cooperation, they thrive only within its frame; they did not precede the establishment of social relations and are not the seed from which they spring.

The fundamental facts that brought about cooperation, society, and civilization and transformed the animal man into a human being are the facts that work performed under the division of labor is more productive than isolated work and that man's reason is capable of recognizing this truth. But for these facts men would have forever remained deadly foes of one another, irreconcilable rivals in their endeavors to secure a portion of the scarce supply of means of sustenance provided by nature. Each man would have been forced to view all other men as his enemies; his craving for the satisfaction of his own appetites would have brought him into an implacable conflict with all his neighbors. No sympathy could possibly develop under such a state of affairs.

This is a truism which politicians and their media bootlickers always misrepresents.

Currency Intervention: Japan And The G-7 Aims To Boost Stock Markets

Japan’s fundamental problem today is the risk of nuclear contamination and disaster recovery reconstruction. In dealing with latter, since Japan is a nation largely without resources, it will have to import them. In other words, her economic pattern will likely shift from export oriented to import dependent reconstruction.

So how do Japan and the G-7 address this predicament? Inflate the system!

This from Bloomberg, (bold highlights mine)

The Group of Seven will jointly intervene in the foreign exchange market for the first time in more than a decade after Japan’s currency soared, threatening its recovery from the March 11 earthquake.

Japan began the effort, sending the currency down 3.1 percent against the dollar at 9:34 a.m. in Tokyo. Each of the G-7 members will sell yen as their markets open, Japan’s Finance Minister Yoshihiko Noda told reporters in Tokyo today. The G-7 said in a joint statement after a conference call of its finance ministers and central bank chiefs that it will “provide any needed cooperation” with Japan.

Japan’s central bank also said in a statement that it will pursue “powerful monetary easing” as policy makers sought to reduce the threat the world’s third-largest economy sinks into a recession. The Nikkei 225 Stock Average gained after the announcements, paring losses to 12 percent since the quake and ensuing tsunami killed thousands and led to rolling blackouts and radiation leaks at a nuclear plant.

More from the same article...

The Bank of Japan has been pouring cash into the financial system to stabilize money markets and on March 14 doubled an asset-purchase fund to 10 trillion yen, pledging to step up purchases of securities including government debt, exchange-traded funds and real-estate investment trusts.

Noda and Economic and Fiscal Policy Minister Kaoru Yosano sought to quell speculation driving the yen higher yesterday. Noda said markets were nervous and Yosano said there was no basis for an argument that the nation’s insurance companies were repatriating foreign assets to pay for earthquake damage.

“The speculation was that Japanese life and casualty insurers will repatriate dollar-denominated assets to secure funds in the wake of the earthquake,” Yosano told reporters in Tokyo yesterday. “But they have ample cash, deposits and other liquid assets,” he said, adding that the Financial Services Agency and Bank of Japan have confirmed insurers aren’t selling their dollar assets.

Weakening the Yen would make imports more expensive at the time when the Japanese would need alot of resources.

Moreover a weak yen hardly deals with the risk of nuclear contamination.

So you see, Japan isn’t trying to deal with her fundamental problems. Instead Japan and the G-7 is trying to goose up the stock markets and other financial markets in order to save the banking elite. As well as, approach the economic recovery angle from the wealth effect-aggregate spending point of view.

See how predictable they are!

A Wall Street axiom says, “Don’t fight the Fed”. I’d paraphrase this and say ‘don’t fight central banks and governments determined to destroy the purchasing power of your money, be it the US dollar or the Yen or the Peso’.

And this is why increasing cash balances represents fighting the major trend.

Japan’s Disaster Recovery Program: Wishing Away Real Problems With A Tsunami of Money

The Bank of Japan (BoJ) thinks that by flooding its system with money it can wish away real problems such as the threat of a nuclear catastrophe.

The BoJ has injected more liquidity into the system following 2 successive days of stock market blood bath.

The Marketwatch reports, (bold emphasis mine)

Japan's central bank injected 20 trillion yen ($245 billion) into the money markets Tuesday in an effort to help calm financial markets, according to reports. The move was designed to ensure that banks have enough liquidity to meet a surge in demand from companies and households seeking to raise funds. The same-day funds injection came as Japan's unfolding nuclear crisis deepened on Tuesday, with an explosion at reactor No. 2 and as the danger spread to reactor No. 4 at the stricken Fukushima nuclear plant. Elevated radiation levels were reported in Tokyo as southerly winds carried the radioactive plume from Japan's eastern coast towards urban areas.

This is in addition to yesterday’s injection.

As Economic Policy Journal’s Bob Wenzel writes,

There is no sound economic theory that suggests printing money can in any way help in the case of a physical disaster, as always this money will end up in the hands of the banking elite to provide them with an edge over those who have lost their homes and don't really need elitist bankers bidding against them for resources.