Co-ordination Failures in New Orleans

Just before going to Oslo to collect his Nobel Prize for Economics in December 2005, Thomas Schelling was
interviewed by L.A. Times journalist Peter Gosselin about the challenges facing
post-Katrina New Orleans. The sheer
size of the reconstruction task is daunting, of course, but Schelling talked
about something different: the difficulties faced by individual evacuees trying
to decide whether or not to move back to the city: “It is essentially a problem
of coordinating expectations”, he said. “If we all expect each other to come
back, we will. If we don’t, we won’t. But achieving this co-ordination in the
circumstances of New Orleans seems impossible.”

Gosselin described the “circumstances of New Orleans” that Schelling was talking about. Washington,
he showed, had initially promised large-scale aid, but had then backed off from
those commitments, leaving evacuees to make tough decisions on their own. The New Orleans recovery became “a private market affair”.
Unfortunately, as Schelling said, the recovery was all about co-ordination, and
“There are classes of problems that free markets simply do not deal with well.
If ever there was an example, New Orleans is it.”

One of the things about co-ordination problems is that small
things can make a big difference. A relatively small kick at the right time can
give the process a start and help virtuous cycles to develop. As a result, the
right kick can pay benefits out of all proportion to its size. Once the ball is
moving in the right direction, people start to move back because others are
moving back, and each individual or family that makes the decision makes it easier
for still others to move back too.

Without a successful kick start, co-ordination problems are
prone to cycles that are vicious rather than virtuous. When uncertainty over
the future looms large, many evacuees will not return unless they know that
others are moving back too. As Republican representative Richard Baker said “It
does no good to stand up just one person or family, because there’s nothing
left where they once lived – no schools or grocery stores, doctors or banks,
police stations or fire trucks. We’ve got to go into the business of restoring
whole communities.”

After Katrina, two things were clear about the kick that New Orleans needed to get resettlement and rebuilding
started. First, it had had to come from Washington – the only level of government with the resources to provide it. Second, it had
to deal with the core issue of safety. As the New York Times said in an
editorial, 
“It all boils down to the levee system. People will clear garbage, live in
tents, work their fingers to the bone to reclaim homes and lives, but not if
they don’t believe they will be protected by more than patches to the same old
system that failed during the deadly storm. Homeowners, businesses and
insurance companies all need a commitment before they will stake their futures
on the city.”

Early on, it looked as if Washington might be prepared to make the kind of commitment that was needed. The tone was
set by President Bush in a September 15 (2005) speech in New
  Orleans itself: “There is”, he said “no way to imagine America without New Orleans”, and he promised “one
of the largest reconstruction efforts the world has ever seen.” “We will do
what it takes”, he continued, “we will stay as long as it takes to help
citizens rebuild their communities and their lives.”

These are fine words, but they needed to be backed quickly
with decisive, large-scale action. And they weren’t. The White House “sat on
its pledges all autumn, mumbling homilies about the limits of government.” The
Treasury refused to guarantee New Orleans municipal bonds, which had lost all their value, and as a result the mayor was
forced “to lay off 3,000 city employees on top of the thousands of education
and medial workers already jobless”.

Nine months after the storm, over half of the 500,000
residents of the city of New Orleans have not returned. There is little doubt about the fact of the failure.

* * *

But the story of the reconstruction is not just the story of Washington’s failure to provide
tangible commitment. Louisiana in
general, and New Orleans in
particular, are full of groups with their own agenda. There are some who see the failure of poor people to come
back to their homes as a good thing. In New Orleans itself, some of the richer residents wanted to see a different kind of city. In
the weeks following the flood Jimmy Reiss, the head of the city’s Business
Council, talked to Newsweek of “a once in an eon opportunity to change the
dynamic” of the city. He has been quoted as saying “Those who want to see this
city rebuilt want to see it done in a completely different way:
demographically, geographically and politically," […] "I’m not just
speaking for myself here. The way we’ve been living is not going to happen
again, or we’re out.” In short, fewer poor people and a smaller, whiter, richer
city.

The inability of free markets to help people return gives an
opportunity for agendas such as these to be driven forward, all the while
asserting that people are making their own choices about their futures. The
horns of the return-or-not dilemma are sharper for some than for poor people
than for rich people. Those without savings can least afford to make the effort
to generate the coordination and investment of effort and resources needed to
rebuild their own communities. A recent US Census study showed that the poorer
people tended to be driven further away from the city in search of affordable
places to live. And the
poorer areas of the city are in the more vulnerable areas, where continuing
uncertainty over issues such as insurance plagues any attempt at progress.

So it’s not surprising that Joseph Canizaro, another wealthy
property developer and prominent Bush supporter said as early as October 2005
“As a practical matter, these poor folks don’t have the resources to go back to
our city just like they didn’t have the resources to get out of our city. So we
won’t get all those folks back. That’s just a fact.”

And so it has proved. Overall, poor people have returned in
fewer numbers than wealthy people. In a city where the lines between rich and
poor are often the lines between white and black, those who have returned are
more likely to be white and wealthy than those who have not. New Orleans had a black population of 36% before Katrina,
now it has a black population of 21%.

Some would argue that Canizaro, in his role as head of the
urban planning committee of the Bring New Orleans Back commission, helped to
turn his blunt “that’s just a fact” observation into a reality. He lobbied for
a building moratorium in the hardest hit neighbourhoods while they proved their
viability: funds would go only to those neighbourhoods where at least half of
the residents had made a commitment to return. Such a moratorium just compounds
the Catch 22. Now no building can happen unless there are people willing to buy
or rent it. And no one will return to buy or rent unless they know there will
be a building for them. And we know who is affected most by such a criterion:
it’s the poor people again.

There was a bigger agenda behind the suggestion. Once these
areas had predictably failed to “prove their viability” the BNOB commission
proposed a new public agency that would have been “empowered to seize land in
areas that failed the challenge” (NYT). That is, homeowners who did not have
the resources to return would be doubly punished by having their land seized. A
visiting developer told the BNOB commission “Your housing is now a public
resource. You can’t think of it as private property any more."
The Urban Land Institute, a property developers’ organization, argued that the
mayor let the market reshape New Orleans,
and turn areas where redevelopment fails into parkland.

* * *

Washington’s
failure of commitment, the predictable failure of market mechanisms to help
people return to New Orleans, and
the exploitation of that failure to remake New Orleans in a different manner, is not a cheery story. There are, however, a few bright
lights in the picture.

The developer-led agenda for a smaller, richer, and whiter
city is meeting with some resistance. The BNOB plan was greeted by a public
outcry. Mayor Nagin, whose position is difficult to read and who is often happy
to go along with the inevitable co-ordination failure in the absence of real
commitment — he has said that anyone who really wants to will "figure out
a way to come back." —rejected the
plan, and according to the NYT the BNOB has hardly been heard of since. But
many of those who proposed it continue to be in influential positions, and
continue to have ways to meet their goals.

The main source of hope is strong community organizations. In
his LA Times article, Peter Gosselin wrote about Greek Orthodox community and
the way in which its church helped its members to co-ordinate their escape from
Katrina and their return afterwards. “By acting in concert, members of the
Greek community have in effect provided each other with an immense
self-insurance policy, guaranteeing that if one family rebuilds, others will.”
Community activist groups such as the ACORN Katrina Survivors Association have
helped to give people the means to co-ordinate their own return and a voice to
influence the way that New Orleans is being rebuilt, campaigning for a right to
return.

The future still looks grim for the survivors of Hurricane
Katrina. But if the residents of New Orleans are to be a part of the rebuilt city, and if Washington is unwilling to help, then it is groups such as these that hold the key to
success.