What Kelo Hath Wrought, Part 487

Take this as one of your semi-regular opportunities to say, “Fuck you, John Paul Stephens”:

James Dupree is a world-renowned artist and native son of Philadelphia, who is about to see his art studio turned into a grocery store, thanks to the rubber-stamp review that passes for judging when his city exercises the power of eminent domain.

James’ artistic accomplishments are truly awesome. He has five paintings in the permanent collection of the Philadelphia Museum of Art. Others can be found in the National Museum of Art in Cardiff, Wales; the Schomberg Museum in New York; the Pennsylvania Academy of Fine Arts; and the University of Pennsylvania in Philadelphia.

You can see the Philadelphia Museum of Art from James’ studio. It is located in the Mantua neighborhood of West Philadelphia, where James grew up. The studio was a dilapidated warehouse when he purchased it for a little under $200,000. He spent $60,000 installing new electrical equipment and plumbing, $68,000 on roof repairs, and thousands more on renovations, furnishings and appliances.

The investment paid off, for James and for Mantua. What was once a dead, abandoned building is now alive and bustling with activity. James has hosted and taught art classes at his studio and has plans to start a mentorship program in order to give artists an environment where they “can create serious work and receive the support and freedom to explore new ideas.”

Dupree Studios is as much of a part of Mantua as James Dupree. It is a monument to the kind of creativity, hard work and dedication that has always been associated with the American spirit.

The Philadelphia Redevelopment Authority has decided that this isn’t good enough. They want to lowball Dupree, bulldoze the building he restored and put a grocery store and a parking lot there. Pennsylvania strengthened its laws protecting citizens from eminent domain. But the PRA seized his home four days before the law took effect.

Think about that. When this state tried to put the kibosh on this sort of nonsense, the authorities in Philadelphia went on a shopping spree to make sure they stole people’s building while they still could.

Now two judges have basically said, “meh”. There is still a chance to save his studio through political pressure on the local government. But this shouldn’t be necessary. It wouldn’t be necessary if five assholes in robes had not decided that forcing Person A to sell to Person B constituted “public use”.


You Can’t Peddle Prosperity

Ilya Somin makes a great point on the Detroit bankruptcy:

Detroit’s sixty year decline, culminating in its recent bankruptcy, has many causes. But one that should not be ignored is the city’s extensive use of eminent domain to transfer property to politically influential private interests. For many years, Detroit aggressively used eminent domain to promote “economic development” and “urban renewal.” The most notorious example was the 1981 Poletown case, in which some 4000 people lost their homes, and numerous businesses were forced to move in order to make way for a General Motors factory. As I explained in this article, the Poletown takings – like many other similar condemnations – ended up destroying far more development than they ever created. In his prescient dissent in Poletown, Michigan Supreme Court Justice James Ryan warned that there was no real reason to expect that the project would produce the growth promised by GM and noted that Detroit and the court had “subordinated a constitutional right to private corporate interests.”

Eminent domain abuse certainly wasn’t the only cause of Detroit’s troubles. But the city’s record is a strong argument against oft-heard claims that the use of eminent domain to transfer property to private economic interests is the key to revitalizing economically troubled cities. In addition to the immediate destruction and dislocation caused by such takings, they also tend to deter investment by undermining confidence in the security of property rights. One of the main findings of recent scholarship in development economics is that secure property rights are an important factor in promoting long-term economic growth. As economists Daron Acemoglu and James Robinson put it in their much-praised recent book Why Nations Fail, “secure private property rights are central [to development], since only those with such rights will be willing to invest and increase productivity” (pg. 75). Detroit is an abject example of what happens when policymakers ignore this reality.

Always remember: the lot that the Supreme Court let New London boot Suzette Kelo out of ended up vacant. And the specialized tax breaks New London gave Pfizer left Pfizer packing the second they expired. These “big deals” to bring in businesses never work because if locating a business there was such a hot idea, the businesses wouldn’t need eminent domain, special tax breaks and subsidies.

But pay close attention to Somin’s second paragraph about how eminent domain and other attempts to “promote” businesses undermine the very basis of the economic system. In that respect, this is just another form of crony capitalism. Connor Friersorf today discussed this in a different context. He references an NYT article about how Goldman moves around giant piles of aluminum to take advantage of government regulations on the price. It nets Goldman billions while harming the economy by making aluminum artificially more expensive. There are innumerable ways in which this is happening — private industries using government loopholes and regulations to become rich without actually doing anything.

Preventing this sort of thing ought to be a high priority for anyone who wants to see free-market capitalism succeed in America. So long as our economic system resembles what Adam Smith described — the profit motive benefiting everyone, as if by an invisible hand — much of the American public can be counted on to support politicians who campaign as unapologetic capitalists, even if people are rewarded unequally, based on the value their labor is producing.

But if “capitalism” starts to be associated in the public mind with Wall Street profiting by deliberately slowing down industrial productivity (or with Mitt Romney making millions by buying companies and gaming the tax implications of shuttering them), Americans are not going to support capitalism. They’re going to regard it as a rigged system that only profits wealthy insiders.

In the short term, Republicans and Democrats alike benefit by allying themselves with the wealthy insiders. Like the GOP, President Obama has benefited from Wall Street money. But in the longer term, enough stories like this New York Times scoop will destroy Republicans, because rhetorically, they’re the ones insisting that the market is beneficial and more or less fair, even as a transparently corrupt financial sector consumes a larger percentage of the overall economy.

Crony capitalism is the antithesis of free-market capitalism. It is similar to what Adam Smith was writing against.

But, as Detroit shows, it doesn’t even have an economic benefit. Detroit, like New London, ended up with nothing for all their seizures, subsidies and graft. Is that the model we want for America? Because it’s certainly the model we’re pushing.

Post Scriptum: Now if you want to see someone get it totally wrong on Detroit, enjoy.

Another SCOTUS Win

After you’ve watched the enragifying video in Rich’s post, you can calm yourself with this:

The federal government suffered a major defeat today at the U.S. Supreme Court in the case of Arkansas Game & Fish Commission v. United States. In their unanimous decision, the justices rejected the government’s sweeping claim that a series of recurring floods induced by the U.S. Army Corps of Engineers did not qualify as a taking of property under the Fifth Amendment because the flooding was only temporary in duration.

This is, potentially, an even more momentous decision than you think. One of the problems in environmental law is the government has often gotten away with depriving people of the use of their land without technically depriving them of the land itself. This is particularly common with the Endangered Species Act, in which development or even management of a parcel of land is denied because it has an endangered snail.

If the Court had wedged open the idea that depriving someone of the use of something is no different from simply taking it, we could see major changes ahead. Right now, the ruling is narrower than that, applying to specific destruction of property. But the Court’s growing recognition of property rights is a good sign.

The Norfolk Tyranny

This one has it all:

Central Radio Company, which first opened 78 years ago and has been at its current location of 1083 West 39th Street for 50 years, is currently under siege. First officials at the Norfolk Redevelopment and Housing Authority attempted to seize their property in order to transfer it to Old Dominion University, which currently has no specific site development plan for Central Radio’s property. The owners of the company, Bob Wilson and Kelly Dickinson, rightfully objected to the eminent domain proceedings. They then commissioned a 375-square-foot banner (left) and hung it on their building to protest the taking.

So what happened next? In response to the ensuing outcry by the citizenry, the city … found some ordinance forbidding banner over 60 feet in size and threatened to fine them $1000 a day. CRC is not taking his sitting down; they’re fighting it.

Oh, yeah. I found this out through the people defending them — the eeeevil libertarian organization Institute for Justice, who are making a habit of fighting both tyrannical governments and business monopolies.

Susette Kelo’s Land Fill

About once a generation SCOTUS whiffs it beyond belief. Dred Scott (blacks are property, not people), Plessy v Ferguson (separate but equal), Katzenbach v. McClung (providing Congress under the auspices of The Commerce Clause the ability to pass any damn law they want), all good examples. But for me the decision that really stunk up the joint was Kelo, which basically shot to hell any private property protections. Where as in the past the government could imminent domain your property for the good of the community, extending a highway, a railroad, or deciding that public school in the works can’t be built anywhere else except smack dab in your back yard. Kelo pushed that land grab one step farther, permitting a private entity to compel the government to evict you and sell your property because that private investor promised a better return to the community. If some carpetbagger decided that your farm would make one hell off a strip mall, creating a higher tax base for the city, out you go, don’t matter if your farm was in the family for 200 years, economic development trumps any sentimentality you might have concerning your property. So now, under the guise of “redevelopment,” local governments across the country often condemn property for the purpose of transferring it to politically favored interests, with those interests promising big bucks in the form of tax receipts to those in the government complicit in the theft.

Incidentally, although Justice Sotomayor was not a part of this travesty, don’t think that she would go weak at the knees in extending this further into the realm of lawlessness. in Didden v. Village of Port Chester she introduced mafia style extortion into the law of the land:

In 1999, the village of Port Chester, N.Y., established a “redevelopment area” and gave its designated developer, Gregg Wasser, a virtual blank check to condemn property within it. In 2003, property owners Bart Didden and Dominick Bologna approached Wasser for permission to build a CVS pharmacy on land they own inside the zone. His response: Either pay me $800,000 or give me a 50% partnership interest in the CVS project. Wasser threatened to have the local government condemn the land if his demands weren’t met. When the owners refused to oblige, their property was condemned the next day.

Didden and Bologna challenged the condemnation in federal court, on the grounds that it was not for a “public use,” as the Fifth Amendment requires. Their view, quite simply, was that out-and-out extortion does not qualify as a public use.

I bring all this up because you would think that the government knows what it is doing, that if it took land and property from poor Susette Kelo it would have to be for the betterment of the community, oops:

As regular readers of this blog know, the redevelopment project that gave rise to the wretched U.S. Supreme Court decision in Kelo v. New London, never came about. In spite of the city’s boasting about the quality of its plans, nothing was ever built on the Fort Trumbull site from which the city displaced an entire unoffending, well maintained lower middle-class neighborhood. Though the formal taking took place in 2000 and the U.S. Supreme Court gave its approval to it in 2005, the city’s project has been a failure, with 91 acres of waterfront property sitting there empty and overgrown by weeds.

Empty, nothing there to employ people or provide tax revenue, nothing. But don’t think that this will be a permanent problem, those clever city planners have come up with something novel, a dump. After Irene, the locals need some place to dispose of their refuse. I wonder if this is what Rahm Emmanuel meant when he talked about never letting a serious disaster go to waste, the Kelo decision qualifies.