California Burning: WWBS (What Would Bastiat Say?)
Americans are praying for tens of thousands of families who lost relatives and homes in the devastating fires in Los Angeles. Governor Newsom and Mayor Bass face criticism for prioritizing the well-being of fish over people, for misguided environmentalist policies that effectively turned the local forests into a tinderbox, and for diverting state and local taxpayers’ money away from valuable community services such as police and fire departments to subsidize ilegal immigration and fund DEI projects. When such natural and man-made disasters hit, it’s only a matter of time before well-educated activists start tooting the positive effects of destruction, followed by government recovery programs.
During the Great Depression, John Maynard Keynes claimed that massive spending on wars could stimulate the economy. Latter-day Keynesians such as Nobel laureates Paul Krugman and Joseph Stiglitz revived those ideas after the financial meltdown of 2008. These same beliefs must have been common in France as early as the first half of the 19th century, giving Frederic Bastiat an opportunity to expose them as sophisms in his famous parable of the broken window. The story goes like this:
Imagine that a vandal breaks your window or, even better, a fire destroys your home. You now need to fix the damage and rebuild. Your spending generates income for the people you hire to do the job. With more money in their pockets, contractors will buy more stuff from others. On and on this cycle goes, generating more and more spending, income, jobs, and prosperity. But you do not need a PhD in economics to see the flaw in this reasoning.
Consider the LA fires today. Yes, some individuals and businesses are likely to benefit from the disaster. Car dealerships, construction workers, hotels, furniture stores, and many others will get more revenue in the coming months, both from local residents and taxpayers across the country. That is the seen effect. What remains unseen is the fact that the money being spent on replacing the lost property could have purchased movie tickets, restaurant meals, golf lessons, or ski vacations. Resources used up in fighting a war or rebuilding a city could have been invested in new businesses. Those would have generated additional wealth instead of replacing the losses. Keynesian spending is not a net gain; the money simply goes to a different place. The actual result, notes Bastiat, is that society “loses the value of things which are uselessly destroyed.”
This, however, is not a doom-and-gloom essay. Free enterprise in America can find an opportunity in any tragedy. President Trump, Governor Newsom, and Mayor Bass must remember October 8, 1871. That day, a devastating fire burned through Chicago, claiming 300 lives, destroying 17,000 buildings, and causing over $200 million in damages. The city needed to rebuild. Unlike today, no one thought that the solution would be government aid. In a time when no state or national agencies existed, the citizens knew they could restore their communities without relying on politicians.
What followed was an astonishingly fast and effective reconstruction. Just 20 years after the fire, the city population had tripled. Many of the new buildings used steel cores instead of the highly flammable wooden structures that were lost. In this, Chicago did not need or use government spending. The city rose like a phoenix from the ashes, revived by private investment and rebuilt by its hard-working residents, with innovative blueprints from its young architects, who would soon gain global recognition. Voluntary private initiatives, both business and non-profit, restored and expanded one of the greatest cities in America and the world.
The key was freedom. We can do it again in Los Angeles if politicians stop “helping.”
About this Piece
This piece was co-authored by Northwood University students Charlena Banfield and Noel Tokarev for the February 2025 edition of When Free to Choose, Northwood’s signature publication dedicated to promoting free enterprise. Born and raised in Michigan, Charlena is double majoring in International Business and Operations and Supply Chain Management. A student-athlete, Noel is studying Sport Management. He has authored many thought-provoking pieces for Students in Defense of Freedom, an annual collection of student essays, and When Free to Choose. You can subscribe to When Free to Choose for free here.