Sunday, May 15, 2011

Mississippi Floods, Economic Damage and Insurance Companies

With all the levees being opened to relieve the swollen Mississippi River Several thoughts occur to me.
First, the obvious concern and sadness for all the folks who may lose everything.  It’s hard to imagine going through such an event. 

Then, one must wonder at the massive economic loss.  Since I am not in the business of gathering such data I will have to wait to get some idea of the exact economic impact to these localities and the nation.  I know it will be huge.  Now comes several legal and moral questions. 

These levees were built over the years to prevent exactly what’s happening now.  That is, to protect certain areas from flooding. These decisions were made by the Central Government many years ago and I’m sure that when the decisions were made, the locals actually had very little input on where the levees would be placed, what areas would be protected and what area sacrificed or condemned.  In any event, the decisions were made and people planned their lives and where they would live based on the structure decided by government to contain or not contain waters of several rivers and lowlands.  That in its self, had huge economic impact on the area at the time decisions were made and going forward as these levees were put into place. 

Government studies, Army Corps of Engineers obviously determined areas that were protected and people listened, believed and built lives and livelihoods based on this information.  As the communities grew there is no doubt the insurance companies developed actuarial models in order to provide property insurance.  Based on these figures, insurance rates are determined. 

Now we have a case where government has decided to open the levees and flood some areas to “save” others.  This is essentially what it seems to me to have occurred and now I can’t help but wonder who is to absorb the bulk of the economic loss.

In this controlled flooding, (I just love this part as government attempts to control nature just like they attempt to claim to control the economy both best described as a “fool’s errand”) Government has decided who losses and who is saved. 

When those chosen to lose everything enter insurance loss claims, why would the insurance companies simply say “look your loss was not a natural act but rather and intentional act by government so the terms of the policy does not entitle you to compensation.” 

It is my understanding that the reason for opening the Morganza Spillway is to relieve pressure on levees downstream, protecting Baton Rouge and New Orleans.  This particular levee was built after the flood of 1927 to prevent a recurrence of such an event.  The levees they are attempting to “relieve” from pressure are protecting large population areas downstream.  One has to question why were these levees not built or upgraded to, actually do, what the millions upon millions of dollars spent for their construction, was intended to do?  This question can only be answered by the Central Planners i.e. government. 
Mississippi Flood 1927

It is quite likely that the entire sum of the economic loss to the citizens affected and the country as a whole from this one event may exceed the initial cost for government to “Protect” the citizens of the Delta from nature.  It is estimated the damage in the Cario, IL area will exceed $100 million. 
To be fair in my concerns about government and the Corps of Engineers, I understand the citizens in these areas about to be flooded are warned in writing, annually by the Corp of the possibility of the Corps of Engineers opening the spillways and flood them out.  That’s got to be a hell of a thought to live under.  Which begs another question. 

If you live in an area that is constantly at risk of the possibility of being flooded, intentionally or otherwise, are you not accepting that risk individually and personally?  Should it come to a point that the practically inevitable comes to pass, should the rest of the nation assume the financial burden to make you whole again?  These are emotional questions and I conjure up thought similar to that about folks who live in the known usual path of hurricanes and have no insurance against such events.

As I write, huge amounts of aid is being gathered and requested and, as usual there will be the concerts by Star quality entertainers, hundreds of web sites, along with the standard “give to help” pleas from all organizations (non-profit off course, except for the “Administration staff”)  So, in addition to the obvious economic cost to the nation there is the amount of resources privately “donated” (tax deductable by the way another loss) that will be expended due to this event. 

Now, considering these levees have been in place for nearly 100 years, one must consider how many small losses have been prevented over the years due to the construction.  That would be a figure very hard to come up with.  Perhaps in total, many times more has been “saved” but it is just as likely that it will all be a wash.  (no pun intended). 

The point is, damned if you do and damned if you don’t.  Nothing in this life is without cost and someone will ALWAYS bear the cost of anything requiring effort.  When it comes to government, the PRODUCTIVE Citizen will bear the cost while the non-productive gets a free pass.  This is why all socialist societies always fail, always.  

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