Superstorm Sandy Shows the Failure of Government Regulation

Friday, 02 Nov 2012 08:22 AM

By Jacob Wolinsky

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While New Jersey Gov. Chris Christie and President Barack Obama went around taking pictures trying to make them look presidential, millions of people in New York and New Jersey were suffering from cold weather. Many people are living without heat, which will not be restored for over a week in some areas.

The truth is that while most of the country views the handling by Obama, Christie and New York Mayor Michael Bloomberg positively, it has been nothing short of an epic failure. If Superstorm Sandy hit during the winter, we would be seeing fatalities from the cold weather.

The response right away to a disaster is to make government bigger. However, that is a mistake, and Superstorm Sandy actually proves it. The electric companies have come under blistering criticism for their handling of the situation. Not only have the electric companies not handled the situation well, but they have actually turned down help after workers were flown in at the taxpayers’ expense.

In general, throwing money at a problem does not solve it, but in this case it makes it worse. Utilities are either not-for-profit or for-profit. They are highly regulated, and if they are for-profit are given a monopoly over an area and allowed to earn a small profit.

One example is Public Service Enterprise Group (PSEG), which provides power to a whopping 75 percent of New Jersey residents. While millions are without power, they have nothing to fear if they are slow to act — they have a monopoly. This is where the problem lies.

If we allowed competition among utility companies, there would be droves of people leaving utilities like PSEG. In fact, it is likely the utility would have hired as much help as possible to get power back right away. Since the companies would not want to lose customers, they would act quickly to make people happy. When a public company becomes a government-regulated business, it becomes nothing short of a slow bureaucratic agency. The Department of Motor Vehicles has two-hour lines because there is nowhere else to obtain a drivers license. The same thing happens with utility and any other agencies where the government grants monopoly powers.

This is the real lesson of Superstorm Sandy. No matter who wins the election, there will be calls for more regulations and more slush funds for emergencies. The Federal Emergency Management Agency (FEMA) was supposed to be ready for a large natural disaster.

Some critical thinking (and accurate media portrayal) would lead to the exact opposite conclusion. FEMA was unprepared despite billions of taxpayer dollars, just like crony capital electric utilities were unprepared.

We should make everyone have some skin in the game. That is how capitalism works best and helps the most people receive the basic necessities to live.

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