24 June 2005

Thinly Veiled Socialism

For those of you who follow the news, the simple mention of ‘eminent domain’ should be enough to tell you what I'm writing about. For those who don't, read the backstory here. Essentially, the Supreme Court (of the United States --> SCOTUS) case Kelo et al v. City of New London says that local governments can make use of the ‘eminent domain’ clause in the Fifth Amendment to essentially transfer ownership of private property from one group/person to another so long as said transfer takes place for the nebulous purpose of ‘providing benefit to the public at large.’ From the Reason Public Policy Institute:

The New London case is a direct outcome of the judiciary's tendency, going back several decades, toward a “hands off” approach to eminent domain. Case law, including the groundbreaking 1984 decision by the Michigan Supreme Court in Poletown v. the City of Detroit, broadened the power of local governments and gave them license to effectively void individual property rights as long as they say it is for a public benefit.

The Poletown case, in particular, was important because the Michigan Supreme Court allowed a city to raze an entire neighborhood to accommodate a new General Motors plant to meet an explicit economic development goal.

Although Poletown was a state court decision, it had nationwide impact. Building on federal law that granted increasingly broad authority to state and local governments, cities and states across the nation have used eminent domain to seize property from some private owners and hand it over to others, with economic development as a justification.

The Michigan Supreme Court overturned Poletown in July 2004, however, when it ruled against use of eminent domain for a private business and office park in County of Wayne v. Edward Hathcock. The effects of this reversal are unclear because eminent domain has become so pervasive in urban redevelopment. The U.S. Supreme Court's decision in Kelo v. New London thus carries even more significance.

John over at Power Line disagrees somewhat about the significance of the ruling, noting that cases such as these (where the local legislature is given free hand in deciding whether to apply eminent domain) aren't entirely uncommon:

Here in Minnesota, we have had a couple of famous cases that have stretched the boundaries of "public use" at least as far as Kelo. In one instance, a block in downtown Minneapolis was condemned so that a local company could build its new corporate headquarters there. Thriving businesses who had no desire to sell out were evicted, and their buildings razed. In another instance, a Minneapolis suburb condemned a stretch along the metropolitan area's major beltway to serve as the new headquarters for Best Buy Company. This was prime real estate, which was already occupied by other profitable businesses--a major car dealer, restaurants, etc. They resisted the taking, but it was upheld.

My point is not that these decisions were correct--I have considerable sympathy for the other side--but rather that the Kelo decision shouldn't come as a shock to anyone who has been following this area of the law.

In any event, there's general agreement on the Right side of the blogosphere and among some more toward the center that this ruling is really pretty awful. Remarkably, there’s actually some agreement on the Left on this issue as well (in the comments—the post itself makes the argument that only right-wing extremists would want to keep the government from ‘improving’ the neighborhood by kicking everybody out), though for somewhat different reasons (e.g., giving Wal-Mart more land is BAAAAAAAD). I really don’t like the ruling—IMO eminent domain should be applied very rarely and only for projects that are explicitly “for public use” (quoting the Fifth Amendment verbatim!) such as roads and parks. A nebulous argument that the new (private, not public!) owner will bring about an improvement in the public welfare is not sufficient reason for the government to seize a citizen’s property.

This actually now ties into the title of the post. The SCOTUS decision in Kelo leaves to local governments (G) the power to transfer property (P) from one private entity (A) to another (B) and also to set the amount of the compensation provided to A. If this transaction were to take place in a purely capitalistic environment, free of governmental intervention, A and B would negotiate fair compensation based upon the value that A has vested in keeping control P. If A would accept no less than (say) $20 million as the cost of giving up the intangible benefit (in economics terms I believe it's called ‘utility’) of retaining posession of P, then that cost would have to be factored into B’s calculations to determine if they really want to pursue the transaction. But, with eminent domain in play, G gets to choose whether the ‘transaction’ takes place and what the compensation should be, regardless of the value that A places on P. Thus, it represents an egregious penetration of government into a matter strictly between two private parties. From m-w.com (emphasis mine):

socialism: 1 : any of various economic and political theories advocating collective or governmental ownership and administration of the means of production and distribution of goods

Thus, granting the government the power to redistribute goods (land) among private entities is socialist. I don't use the term lightly (and to forestall accusations that I'm calling the Kelo majority Supremes socialists, I hereby restrict its application to this one instance while reserving the right to apply it again if I so choose), but I think it accurately describes the mindset of the opinion. SCOTUS is effectively saying, “We hold that government knows best how land should be allocated to private entities.”

I dissent.

Link Roundup

(Most of these were linked above, this is just for clarity)

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