Katrina's Real Heroes

It is just a month shy of three years since Hurricane Katrina landed on the Louisiana coast, leaving an unprecedented trail of destruction across that state and neighboring Mississippi. Damages total into the hundreds of billions of dollars, plus billions more in lost productivity. More than 1,600 people died, and we may never know the final figure.

The storm left 35 times as much debris as the September 11, 2001, attacks across an area twice the size of England. It is one of the largest disasters in American history, and one that had become a byword for a host of social ills and failures.

In the days and weeks after the storm, a significant contingent from the chattering and political classes — most memorably the House Speaker at the time, Dennis Hastert — questioned the wisdom of rebuilding after the damage. The task was so mammoth and unprecedented that nobody knew where to begin.

While the elites wrung their hands, the mayor of New Orleans, Ray Nagin, cursed the feds on television, and the Federal Emergency Management Agency redefined "incompetence" as a fleet of thousands began sailing back into New Orleans and other cities and towns devastated by Katrina.

The entrepreneurs had arrived.

While the press has largely spent the last three years focusing on the failures of government at all levels to rebuild the Gulf Coast, entrepreneurs have been quietly doing what no government is capable of — leading the rebuilding effort. And in the process they're proving that local knowledge trumps conventional wisdom when it comes to rebuilding after tragedy.

After natural catastrophes, communities need the business sector to take leadership in rebuilding them for two key reasons.

First, without the business and the jobs and the normalcy they provide, rebuilding is simply not sustainable. Ask people after a disaster what they want, and most will tell you that they want things back the way they were before — and, in fact, better. They yearn for the quotidian life of going to work, shopping for groceries, hanging out at the local coffee shop, taking the kids to school, etc. None want to be fed by charities and housed in trailers. Businesses are critical to returning to status quo and shrugging off what one Louisianan dubbed the "FEMA economy."

But even more importantly, entrepreneurs are the risk-takers who can quickly judge the needs of their communities, figure out what resources can be brought to bear and to get things done, from clearing debris to opening schools, that would take bureaucrats months or years to plan and execute.

Tim Williamson, the president of the Idea Village, a non-profit that supports local entrepreneurs in New Orleans, argues that entrepreneurs were able to take the lead in rebuilding southeast Louisiana because they practiced what he called "entrepreneurial yoga" by remaining relevant, flexible, and, most of all, resilient. While bureaucracies by nature and by design are rule-bound and inflexible, entrepreneurs are risk-taking and adaptable. As situations change, so do entrepreneurs' plans. Therein lies their magic.

The conventional wisdom argues that the answer to better disaster response is more flexible bureaucracies. This is fatuous. Public bureaucracies, as manifestations of governmental authority, have to be rule-bound. The only realistic alternative is subjecting people to the whims of individual bureaucrats. So-called "flexible bureaucracies" substitute the rule of law with the whims of a thousand little potentates.

This conventional wisdom further says that disasters on the magnitude of Katrina are so big that only government can orchestrate rebuilding. The opposite is true. The problem is so big that it can't be orchestrated from the top down. It's hundreds of thousands of people making millions of decisions. That's why, across the Gulf Coast, we've seen that bottom-up solutions succeed while top-down solutions fail.

Certainly, people demand that government play a role in supporting entrepreneurs after disasters. But again, the conventional wisdom on what works best is wrong. It's not small business administration disaster loans, which are too little too late for the entrepreneurs who begin their recovery hours after a disaster. It's not targeted tax incentives, which are thinly-veiled corporate welfare and social engineering schemes. And it's certainly not big new redevelopment plans that throw property and contract rights to the winds.

Government at all levels can best support post-disaster recovery by making clear, realistic goals such as getting utilities restored, reopening schools, and establishing rules for permitting and debris removal — and sticking to them. This gives entrepreneurs the information they need to get on with leading their communities back to some level of normalcy.

After Katrina and when other disasters strike, we don't need committees. We don't need new laws. We don't need to look to Washington. Instead, we need to look to the people on the ground who can make things happen: the entrepreneurs.

Mr. Rothschild manages the post-disaster research initiative at the Mercatus Center at George Mason University, which just released a collection of new studies about the role of the for-profit sector in post-Katrina rebuilding.