From Public Use To Corporate Abuse
Eminent domain exploited by government / corporate partnerships
By Jeffrey Kaplan
Published June 3, 2005
"It is only under the shelter of the civil magistrate that the owner of valuable property. can sleep a single night in security" protected from the poor who are "often both driven by want, and prompted by envy, to invade his possessions." So wrote Adam Smith in "The Wealth of Nations." Smith didn't suspect that someday giant corporations would use the magistrate [municipal governments] as a tool to grab the property of smaller owners.
Thousands of citizens have lived out a nightmare in recent years as local governments forced them to sell their homes or businesses (at a government-dictated price), only to transfer it to corporations for redevelopment.
City officials say they simply are using the constitutional power of eminent domain to take land from private owners, with "just compensation," when it is needed for a public use -- and that clearing land for commercial development is necessary to gain badly needed tax revenue.
In a case due to be decided by the Supreme Court in June [Editor's note: the case was since decided against the plaintiffs], Kelo v. City of New London, seven homeowners and small business owners are challenging New London, Connecticut 's attempt to seize their property to make way for a shopping mall and other unspecified "redevelopment." The plaintiffs say eminent domain should be invoked only for truly public uses such as roads, fire stations or parks. The contend allowing the property seizures would set legal precedent that leaves ordinary citizens at the mercy of a juggernaut of corporations and tax revenue-hungry elected officials.
The circumstances of the Kelo have become all-too common in recent years. Just this May, an Ohio appeals court allowed the city of Norwood to condemn and transfer five properties for private development of a $175-million complex of offices, shops, residences and restaurants. According to the libertarian litigation group Institute for Justice, Kelo is just one of more than 10,000 examples of government using or proposing to use eminent domain powers to transfer land to private, for-profit entities--over just four years.
The problem has been growing since 1954, when the U.S. Supreme Court expanded the meaning of "public use" to include projects that have a "public purpose" (Berman v. Parker). The justices approved a redevelopment agency's exercise of eminent domain over a neighborhood "blighted" by sub-standard housing.
The decision opened the way for abusive property seizures by cities hungry for tax revenue, typically in conjunction with corporations that stand to reap profits, but guaranteeing no public benefit.
In one instance, Lakewood, Ohio declared any home lacking central heating or at least three bedrooms to be "blighted" and thus could be condemned. The mayor then attempted to turn over a desirable neighborhood to a developer who would raze the houses and construct high-priced condos yielding more property tax revenue. City voters eventually revolted, voided the condemnation attempt, and tossed the mayor--whose own home was blighted under her definition--out of office.
Residents of Poletown, a Detroit neighborhood, weren't so lucky. In the 1980s Detroit used eminent domain to bulldoze the close-knit, blue-collar community out of existence and turn it over to General Motors for an auto plant. In Poletown Neighborhood Council v. Detroit, the Michigan Supreme Court overruled residents' protests, permitting 4200 citizens' homes to be destroyed, along with 600 business, several schools, and a hospital.
However, in his dissent, Michigan Justice James Ryan gave fair warning as to the likely result when he noted, "General Motors will be accountable not to the public, but to its stockholders." GM never delivered on its promises to create 6500 new jobs and more people lost their homes than found employment. Meanwhile, taxpayers were stuck with $300 million in local, state and federal subsidies to GM.
Despite the disastrous outcome, the Poletown case has been cited as precedent in numerous court decisions allowing seizure of personal property for private development.
Last year, even the Michigan Supreme Court recognized the potential harm when it overturned the Poletown decision. In County of Wayne v. Hathcock, the court refused to allow Wayne County to seize homes to enable a new industrial park. The court noted that to take away land and give it to a business in hopes of increasing economic return "is to render impotent our constitutional limitations on the government's power of eminent domain" and would leave "every property owner threatened by the expansion plans of any large discount retailer, 'megastore,' or the like."
Where the Michigan judges see a threat, city officials in New London see an opportunity. In arguments before the U.S. Supreme Court, the city's attorney asserted a right to forcibly seize and transfer property for the purpose of raising "significantly more taxes."
A purely economic rationale for eminent domain would merge two long-standing threats to democracy. First, arrogant government bureaucracies have bedeviled citizens for as long as large nation-states have existed. Second, for over 100 years the giant corporation has dominated much of our economic life, turning free markets into oligopolies and corrupting much of our national politics. Now they threaten to merge with government down to the local level, leaving the property of ordinary citizens vulnerable to the most outrageous usurpations.
Adam Smith knew that public officials often were tempted to allow business owners to guide economic policy. "The clamour and sophistry of merchants and manufacturers easily persuade [the populace] that the private interest of [businesses]. is the general interest of the whole" he wrote, and any proposal of theirs should be examined "with the most suspicious attention."
The "butcher, the brewer, or the baker" who Smith believed would further the general welfare by pursuing their own self-interest (the "invisible hand" theory) overwhelmingly were small enterprises. The idea of corporations with the financial size of nation-states dominating the production of our everyday needs likely was beyond Smith's imagination. He would have understood immediately, however, the economic and political harm that such entities would present
Security of personal property was one of the rights the English people attained long ago through centuries of conflict with the king and the aristocracy. We are the inheritors of that tradition. Indeed, the American Revolution began when the English government denied those rights to the colonists.
We must take care lest we be forced to start all over again.
Jeffrey Kaplan works with the San Francisco chapter of ReclaimDemocracy.org, a non-profit organization working to restore citizen authority over corporations.
Legal Affairs hosts a high-quality debate on Kelo v. New London between two authors of briefs on opposing sides of the case.
© 2005 ReclaimDemocracy.org
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