A new report set to be released by the Department of Homeland Security found that FEMA poorly awarded contracts for the Hurricane Katrina disaster. Most the contract bids were either exceptionally low or high. One goal of FEMA was to hire local companies to spur the devastated economy. Several companies were found to be exceptionally large and non- local, and had ties to the Republican party. Flour Corp. and its subsidiary PRI-DJI received large no- bid contracts and have happened to have donated more than $930,000 to primarily GOP candidates. FEMA officials claimed that expensive contracts would be offset later down the road by lower payments. Some of the examples of erratic bids were; a range of $74 to $4,720 to refurbish trailers, when cost should have been $295 according to Homeland Security audits, and bids accepted from companies with negative net worths (all information from attached associated press article link).
It is of course not surprising that a government entity is inefficient. A company was contracted recently by the Department of Defense to make tourniquets for Iraq, which cost about $40.00 apiece and consisted of a piece of webbing and a couple d- rings (a glorified scout belt). The story of hammers that cost $70.00, etc, etc. And especially FEMA, after all the previous mismanagement and misspending estimated to have cost 1 billion dollars. This sort of mismanagement of a national disaster really makes for a sound argument for privatization of certain government sectors. Real fodder for Rothbard's argument. Even when government contracts private firms it cannot do so in a way which is allocatively efficient. A small group profits while the majority suffers, in this case taxpayers. According to Rothbard: The essence and the glory of the free market is that the individual firms and businesses, competing on the market, provide an ever-changing orchestration of efficient and progressive goods and services: continually improving products and markets, advancing technology, cutting costs, and meeting changing consumer demands as swiftly and as efficiently as possible (For a New Liberty, 195). When government is left to do the allocation, it becomes inefficient.