Disaster relief: lessons from the Chicago Fire of 1871

The damage wrought by Hurricane Harvey has dominated headlines since the end of August and Irma is now garnering similar coverage.

The US president Donald Trump has overseen what has largely been an effective, centralised response to the natural disasters; but with many climate experts claiming that we should prepare for a higher frequency of extreme weather events, does the current emphasis on top-down disaster relief favoured in the US and beyond represent the best strategy?

Emily Skarbek, a professor at Brown University, approached this question by studying one of the most famous catastrophes of the 19th century, the Chicago fire of 1871. Prof Skarbek began by noting that scholars and laypeople alike are convinced that there is no substitute for the resources and direction that centralised governments can provide in the wake of a disaster. A key driving force behind this view is that the alternative most people envisage is anarchy or mutual annihilation, characterised by the 17th century English philosopher Thomas Hobbes' "state of nature" in his works Leviathan and in the earlier On the Citizen. Frequent tales of post-disaster looting and general lawlessness bolster the perception that humans' need for a big, strong government reaches its apex when a natural calamity strikes.

This maxim was apparently inconsistent with the Chicago fire, however, as the Midwestern city was reconstructed in a remarkably short period of time, and without the supervision of an overbearing central government. Prof Skarbek’s award-winning research on the fire was therefore motivated by a desire to better understand effective disaster relief, and to critically appraise the assertion that top-down, monolithic relief is the universally optimal solution.

The Chicago fire was a highly destructive event, leaving more than a third of the city’s 300,000 inhabitants homeless. Almost 18,000 buildings were consumed by the flames, including the city’s most expensive properties. Critically, from the perspective of the disaster relief scholarship, in 1871 there was no analogue to the present-day, Federal Emergency Management Agency (Fema), meaning that relief efforts had to be decentralised. Moreover, there was no institutionalised source of government financial aid, or a ready-made disaster relief plan that could be implemented. To a large extent, it was up to Chicago’s residents to develop solutions to the calamity that they faced.

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Part of the weakness of the central government at the time of the fire was due to the absence of federal income tax. Moreover, as a corollary, there were no tax write-offs associated with charitable donations, meaning that the relief funding needed to be primarily private, and incentivised either by having a direct stake in the outcome, or by pure altruism.

In fact, 57 per cent of the funds secured by those charged with coordinating relief efforts came from private contributions, including individuals, businesses and corporate entities.

Equally important to the raising of the necessary capital was the emergence of local solutions to the local problem. The Chicago Relief and Aid Society was founded, and set about coordinating the funds and efforts, including sophisticated bylaws regarding who merited support, and at what level. Critically, the society exhibited the flexibility and adaptability necessary for it to expand dramatically immediately after the fire, and to serve the residents’ needs effectively; and to subsequently contract once the needs for its services fell.

This latter feature distinguishes Chicago’s relief efforts from those of 21st century government agencies across the entire globe. Modern governmental agencies are typically characterised by extreme rigidity in their activities, including a fundamental inability to adapt their operations to the emergence of unexpected needs; and deeply ingrained opposition to any effort at curtailing their executive authority, or the volume of resources under their control.

These attributes are not random coincidences; they reflect an endemic problem with governmental organizations arising from the lack of competition for the services that they offer. The funding for organisations such as Fema is drawn from general taxation, meaning that it is very difficult for the funder to hold the organisations accountable for its performance. Elections, petitions, public forums and many other systems do ensure that citizens have some influence over the quality of government services but the link is extremely tenuous compared to one’s ability to suspend donations to an ineffective charity, or to stop dining at a restaurant with poor service.

In fact, Chicago’s Mayor, RB Mason, decided to allocate all inflowing financial contributions to the Chicago Relief and Aid Society as a direct result of its demonstrated effectiveness. The Society was competing with several other civil society organisations for the ability to spearhead the relief effort, which provided its founders with a strong incentive to get the right governance structure in place.

It would be naïve to conclude - based on Chicago’s experience - that private, decentralised disaster relief trumps centralised, government efforts universally. However, in light of some of the failure seen in Hurricane Katrina in 2005 that hammered the US Gulf coast from central Florida through Texas, it would be sensible to surmise that Hobbes’ doomsday outlook should not be considered a foregone conclusion. Moreover, policymakers and civil society organisations should seek to benefit from research such as Prof Skarbek’s as they draft their disaster response plans, including how to get the best out of bottom-up efforts.

Omar Al-Ubaydli is the program director for International and Geo-Political studies at Derasat, Bahrain. We welcome economics questions from our readers via email (omar@omar.ec) or tweet (@omareconomics).