[FoRK] Eminent domain vs. poor people.

zuzu sean.zuzu at gmail.com
Mon Feb 21 14:10:15 PST 2005

one problem (of many) with walmart is exactly this same type of
government-business partnership you describe for stripmalls; what used
to be called in a slightly-more honest recent history as "corporate
welfare" (remember what michael moore used to complain about?).  tax
breaks for "job creation" among other excuses, but really all forms of
government intervention in the marketplace, keep honest
entrepreneurial individuals (which should be all of us!) down at the
expense of politically connected business entities (the status-quo
power brokers).


Making Economic Sense by Murray Rothbard
Chapter 51 
Government--business "Partnerships"

The "partnership of government and business" is a new term for an old,
old condition. We often fail to realize that the point of much of Big
Government is precisely to set up such "partnerships," for the benefit
of both government and business, or rather, of certain business firms
and groups that happen to be in political favor.

We all know, for example, that "mercantilism," the economic system of
Western Europe from the sixteenth through the eighteenth centuries,
was a system of Big Government, of high taxes, large bureaucracy, and
massive controls of trade and industry. But what we tend to ignore is
that the point of many of these controls was to tax and restrict
consumers and most merchants and manufacturers in order to grant
monopolies, cartels, and subsides to favored groups.

The king of England, for example, might confer upon John Jones a
monopoly of the production of sale of all playing cards, or of salt,
in the kingdom. This would mean that anyone else trying to produce
cards or salt in competition with Jones would be an outlaw, that is,
in effect, would be shot in order to preserve Jones's monopoly.

Jones either received this grant of monopoly because he was a
particular favorite or, say, a cousin, of the king, or because he paid
for a certain number of years for the monopoly grant by giving the
king what was in effect the discounted sum of expected future returns
from that privilege. Kings in that early modern period, as in the case
of all governments in any and all times, were chronically [p. 184]
short of money, and the sale of monopoly privilege was a favorite form
of raising funds.

A common form of sale of privilege, especially hated by the public,
was "tax farming." Here, the king would, in effect, "privatize" the
collection of taxes by selling, "farming out," the right to collect
taxes in the kingdom for a given number of years. Think about it: how
would we like it if, for example, the federal government abandoned the
IRS, and sold, or farmed out, the right to collect income taxes for a
certain number of years to, say, IBM or General Dynamics? Do we want
taxes to be collected with the efficiency of private enterprise?

Considering that IBM or General Dynamics would have paid handsomely in
advance for the privilege, these firms would have the economic
incentive to be ruthless in collecting taxes. Can you imagine how much
we would hate these corporations? We then have an idea of how much the
general public hated the tax farmers, who did not even enjoy the
mystique of sovereignty or kingship in the minds of the masses.

In our enthusiasms for privatization, by the way, we should stop and
think whether we would want certain government functions to be
privatized, and conducted efficiently. Would it really have been
better, for example, if the Nazis had farmed out Auschwitz or Belsen
to Krupp or I.G. Farben?

The United States began as a far freer country than any in Europe; for
we began in rebellion against the controls, monopoly privileges, and
taxes of mercantilist Britain. Unfortunately, we started catching up
to Europe during the Civil War. During that terrible fratricidal
conflict, the Lincoln administration, seeing that the Democratic party
in Congress was decimated by the secession of the Southern states,
seized the opportunity to push the program of statism and Big
Government that the Republican Party, and its predecessor, the Whigs,
had long cherished.

For we must realize that the Democratic party, throughout the
nineteenth century, was the party of laissez-faire, the party of
separation of the government, and especially the federal government,
from the economy and from virtually everything else. The
Whig-Republican party was the party of the "American System," of the
partnership of government and business. [p. 185]

Under cover of the Civil War, then, the Lincoln Administration pushed
through the following radical economic changes: a high protective
tariff on imports; high federal excise taxes on liquor and tobacco
(which they regarded as "sin taxes"); massive subsidies to newly
established transcontinental railroads, in money per mile of
construction and in enormous grants of land all this fueled by a
system of naked corruption; federal income tax; the abolition of the
gold standard an the issue of irredeemable fiat money ("greenbacks")
to pay for the war effort; and a quasi-nationalization of the previous
relatively free banking system, in the form of the National Banking
System established in acts of 1863 and 1864.

In this way, the system of minimal government, free trade, no excise
taxes, a gold standard, and more or less free banking of the 1840s and
1850s was replaced by its opposite. And these changes were largely
permanent. The tariffs and excise taxes remained; the orgy of
subsidies to uneconomic and overbuilt transcontinental railroads was
ended only with their collapse in the Panic of 1873, but the effects
lingered on in the secular decline of the railroads during the 20th
century. It took a Supreme Court decision to declare the income tax
unconstitutional (later reversed by the 16th Amendment); it took
fourteen years after the end of the war to return to the gold

And we were never able to shed the National Banking System, in which a
few "national banks" chartered by the federal government were the only
banks permitted to issue notes. All the private, state-charted banks,
had to keep deposited with the national banks permitting them to
pyramid inflationary credit on top of those national banks. The
national banks kept their reserves in government bonds, which they
inflated on top of.

The chief architect of this system was Jay Cooke, long-time financial
patron of the corrupt career of Republican Ohio politician Salmon P.
Chase. When Chase became Secretary of the Treasury under Lincoln, he
promptly appointed his patron Cooke monopoly underwriter of all
government bonds issued during the war. Cook, who became a
multi-millionaire investment banker from this monopoly grant and
became dubbed "the Tycoon," added greatly to his boodle by lobbying
for the National Banking Act, which provided a built-in market for his
bonds, since the [p. 186] national banks could inflate credit by
multiple amounts on top of the bonds.

The National Banking Act, by design, was a halfway house to central
banking, and by the time of the Progressive Era after the turn of the
twentieth century, the failings of the system enabled the
establishment to push through the Federal Reserve System as part of
the general system of neo-mercantilism, cartelization, and partnership
of government and industry, imposed in that period. The Progressive
Era, from 1900 through World War I, reimposed the income tax, federal,
state, and local government regulations and cartels, central banking,
and finally a totally collectivist "partnership" economy during the
war. The stage was set for the statist system we know all too well.

The Bush administration carried on the old Republican tradition: still
raising taxes, inflating, pushing a system of fiat paper money,
expanding controls over and through the Federal Reserve System, and
maneuvering to extend inflationary and regulatory controls still
further over international currencies and goods.

The northeastern Republican establishment is still cartelizing,
controlling, regulating, handing out contracts to business favorites,
and bailing out beloved crooks and losers. It is still playing the old
"partnership" game--and still, of course, at our expense.

On Mon, 21 Feb 2005 13:01:14 -0800, Adam L Beberg <beberg at mithral.com> wrote:
> Something to keep an eye on.
> We've all seen this personally I'm sure. Find the poor neighborhood,
> take their land and give it to the rich alt.pave.the.earth guys to build
> a strip mall. Pull up the town on your favorite map site, the town is
> only 2km across, a suburb of nowhere, they are not short of land.
> If this goes the right way (and I really dont see how the court could
> not) this could finally stop Walmart. Rich folks aren't going to let a
> Walmart be built near their homes and the businesses they work at, to
> put them out of a job ;)
> It will bring even more sprawl however as malls need to find more indian
> burial grounds to open on top of, and many MANY more "mysterious deaths"
> when people try to fight developers who offer them 1/4 what the property
> is worth.
> --
> Adam L. Beberg
> http://www.mithral.com/~beberg/
> -------------------------------------------
> http://www.usatoday.com/news/nation/2005-02-20-eminent-domain_x.htm
> Conn. residents fight for homes
> By Joan Biskupic, USA TODAY
> NEW LONDON, Conn. — Susette Kelo continues to touch up the paint on her
> clapboard house that overlooks the Thames River. She still tends to her
> garden. During a recent walk around the house, she noticed a few early
> flowers poking through the dirt.
> She knows, however, that the 1893 Victorian cottage she bought eight
> years ago might not be standing much longer — and that its fate is in
> the hands of the U.S. Supreme Court.
> On Tuesday, the court will hear an appeal from Kelo and about a dozen
> other holdout owners of property near Fort Trumbull State Park. They are
> trying to prevent the city of New London from seizing their land to
> clear the way for a private development project that would include a
> hotel, a conference center and offices. The city has argued that
> redeveloping 90 acres along the river and near a new Pfizer research
> plant would give a much-needed economic boost to the city of about
> 26,000 people, where the unemployment rate of 7.6% is about twice the
> state's rate.
> The dispute marks the first time the high court will rule on whether
> local governments have the power to condemn land for private enterprises
> aimed at boosting local tax revenue — rather than for traditional public
> projects such as bridges, roads and parks.
> The Constitution's Fifth Amendment allows governments to seize private
> property in a process called eminent domain, as long as the owners
> receive "just compensation" and the property is for "public use." Kelo
> and the other property owners involved in the case say the city's plan
> does not represent a "public use" for the land. The city disagrees and
> says all the town's residents would benefit from the project.
> Connecticut's Supreme Court ruled last year in favor of New London. It
> noted that the city's plan "is projected to create in excess of 1,000
> jobs, to increase tax and other revenues and to revitalize an
> economically distressed city."
> Mark Perry, a Washington lawyer and former clerk to Justice Sandra Day
> O'Connor, says state courts have been inconsistent in their
> interpretations of what constitutes a "public use."
> A ruling in the New London case could have "ramifications for property
> owners and governments across the country," says Perry, who submitted a
> "friend of the court" brief for a California-based libertarian group,
> the Reason Foundation, that sides with Kelo.
> New ground for high court
> Governments have used eminent domain for private developments in recent
> years — in New York City's Times Square and at Baltimore's Inner Harbor,
> for example. But never has the Supreme Court, faced with an appeal from
> property owners, agreed to resolve the question of whether property can
> be transferred to private developers to boost tax revenue.
> Those backing Kelo include the NAACP and AARP, which say the social harm
> can outweigh the public benefits when governments take property for
> private economic development. The groups say government efforts to lure
> business and spur greater revenue can disproportionately hurt the poor,
> the elderly and racial minorities.
> Those backing New London include the National League of Cities and the
> National Conference of State Legislatures. They say cities should have
> wide latitude to take land to boost their economies and that money
> generated by redevelopment can help public agencies such as police and
> fire units.
> In its ruling, the Connecticut Supreme Court emphasized that judges
> should give broad deference to local lawmakers. It noted that New
> London's development plan initially was approved by New London's City
> Council in 1998.
> The state court cited two U.S. Supreme Court rulings, from 1954 and
> 1984. In the 1954 ruling, U.S. justices upheld the power of eminent
> domain for urban renewal in parts of Washington, D.C. Thirty years
> later, the high court allowed Hawaii's Legislature to condemn large
> tracts concentrated among a few owners — a vestige of the feudal system
> of the state's original Polynesian settlers — for distribution to many
> residents.
> No amount of cash will do
> In their appeal, attorneys for Kelo and the other New London property
> owners say the state Supreme Court "incorrectly equated 'public use'
> with the ordinary 'public' benefits — taxes and jobs — that typically
> flow from private businesses' enterprises."
> Scott Bullock, an attorney for the property owners, wrote that they "do
> not want money or damages. They only seek to hold on to their most
> sacred and important of possessions: their homes."
> Most owners of the 115 tracts that would be affected by the New London
> project took the money offered for their homes and moved.
> Attorneys for the city and New London Development, a private, non-profit
> group established in 1978 to assist the city, said New London is
> "desperate for economic rejuvenation."
> Wesley Horton, who will argue the case for New London, painted a bleak
> economic picture in his filing to the justices. He noted that the city's
> population has declined almost a third from about 34,000 in 1960. He
> also cited the city's high unemployment rate and said the area lost
> about 1,500 jobs when the federal government closed the U.S. Naval
> Undersea Warfare Center here in 1996.
> In an interview, Edward O'Connell, an attorney for New London
> Development, said Kelo was offered $123,000 from the city, roughly fair
> market value for her property.
> Kelo, 48, said she simply does not want to move. The nurse and mother of
> five grown boys said that when developers first approached her, "I had
> just bought the place. I never even wanted to negotiate."
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