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Commitment to free markets will kickstart N.O. recovery

In a recent analysis of New Orleans Mayor Ray Nagin’s performance in spurring recovery in the city, the author curiously proposes that he cure the disease by giving the patient the same medicine that has been killing it.

Stephanie Grace argues that Nagin isn’t doing enough to stimulate recovery efforts by doing too little, because he believes in a market-driven solution whereas Grace thinks it’s a “reluctance to exert a heavy hand” which is causing slow development. In doing so, she displays ignorance about economics and human psychology.

What Grace doesn’t seem to realize is recovery, if we define that as people returning to and enterprise spreading in New Orleans, will occur only when people wish to invest their time and efforts in it. And that is dependent not on anything that government does, including planning, but is on what it doesn’t do.

Government that spends efficiently and wisely will attract development; government that doesn’t will not. Government that runs with a minimum of corruption will attract development; government that doesn’t will not. Government that slashes regulation will attract development; government that doesn’t will not. Government that understands it’s not there to redistribute wealth will attract development; government that doesn’t will not. And nobody with a straight face can argue over the past few decades that government in New Orleans (and, in fact, Louisiana) hasn’t done the things necessary to attract development – planning didn’t help then, and it certainly won’t help now.

It may be news to Grace, but no plan in the world can stimulate New Orleans’ recovery, nor can government, especially one known by reputation by potential investors and intimately by its residents as such a poorly run, intrusive one. Free markets cause growth; government solely causes problems when it interferes with them (except in the case of extensive public works projects such as, in this case, levee building). Only free markets with any reasonable anticipation of how government intends to meddle, and minimally so, with them have any hope of bringing the progress Grace would like to see to the city – totally at odds with its recent policy history.

At least she unconsciously stumbled upon the proper course of action. It’s not that Nagin and the city haven’t come up with a five-year plan or whatever which has delayed things, it’s that Nagin has done too little to reassure citizens and investors that government won’t interfere with their individual desires (and that the Army Corps of Engineers can’t yet completely guarantee a minimal level of flood protection, but hopefully that will be resolved by next hurricane season). Simply, he needs to follow the advice I gave months ago: declare which parts of the city will receive a normal (for New Orleans; to the rest of the world, inadequate) level of service, and which areas will face relative underprovision, then get city government otherwise out of the way.

That’s all markets need to know to make investment decisions and for citizens “looking for signs of progress and guidance on how they can come home.” Whether Grace wishes to admit it, conservative principles, long abandoned in the city’s governance, exemplified by reliance on the market, promise to make New Orleans better than it ever was. Any government intervention beyond the above suggestion will keep it the backwater it had become long before Katrina hit.

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