Contingency Planning

Real Disaster Relief Likely To Come From Local Big-Box Stores, Study Says

May 1, 2008

When a major disaster strikes, many rely upon the government for assistance. A new study by St. Lawrence University Dana Professor of Economics Steven Horwitz suggests that real relief is likely to come from the local big-box chains.

The study, from the Mercatus Center at George Mason University, stresses that successful disaster relief depends upon responders having detailed knowledge of a local area and the right incentives to act on that knowledge. Examining federal and private responses to Hurricane Katrina, the study by Horwitz shows why the Federal Emergency Management Agency (FEMA) was destined to fail, and why for-profit firms succeeded at disaster recovery. It also looks at the Coast Guard -- the only federal agency lauded for its Katrina performance - which rescued more than 24,000 people in the two weeks following the storm.

The study by Horwitz shows Wal-Mart, Home Depot and Lowe's made use of their local knowledge about supply chains, infrastructure, decision-makers and other resources to provide emergency supplies and reopen stores well before FEMA began its response. Their local knowledge enabled the big-box stores to make plans ahead of the storm and put them into effect immediately after. Also, leadership gave tremendous discretion to store managers and employees to make decisions rather than waiting for instructions from upper-level management, allowing for more agile disaster response.

The Coast Guard also places a strong emphasis on local knowledge. A flat organizational structure and unique agency culture allow for subordinate officers to alter the plans for a specific operation so long as they follow the commander's intent. The Coast Guard's day-to-day activities (search and rescue operations, and work in the marine environment) as well as its division into specific geographic areas provide greater expertise for disaster response.

Also examined by Horwitz is the conventional wisdom that businesses take advantage of disasters through price-gouging and other unsavory business practices. The paper details how Wal-Mart, Home Depot and Lowe's actually sent truckloads of free supplies to the hardest-hit areas and that this behavior was motivated not only by a sense of being part of the communities where stores are located, but also by a desire to build long-term customer loyalty, rather than focus on short-term profits.

"Disaster response happens at the local level," Horwitz says. "FEMA is not local to anyone except people who live in Washington, D.C."