The Grasping Hand: Kelo v. City of New London

The Grasping Hand, written by our GMU-law colleague, Ilya Somin, is an excellent read and the definitive treatment of eminent domain and the Kelo case. As you might expect, Somin discusses the legal issues with aplomb. So much so that the book is endorsed by both of Kelo’s opposing counsel! In addition to the law and economics, Somin offers what for me was an eye-opening investigation of the history behind many of the major cases.

graspingIn the famous Poletown case, for example, GM and the cities of Detroit and Hamtramck used eminent domain to forcibly remove 4,200 people, 1300-1,400 homes, 140-600 businesses, 6 churches and one hospital in order to build a factory. The primary argument for the expropriation was the economic benefits that GM and the mayor promised would flow from the creation of at least 6,000 GM jobs.

Even though the entire case hung on the number of jobs to be created this number was simply cheap talk. In the marketplace, if GM says that this 100 tons of aluminium is worth more building cars than it is building airplanes they have to demonstrate their belief by outbidding Boeing and all the other users of aluminium. In politics GM need only voice an assertion and with the right lobbying the political system will make the transfer for them. Neither GM nor the city were under any requirement to guarantee new jobs but the majority judges simply accepted the numbers as given to them.

…many judges may have an unjustified faith in the efficacy of the political process and thus may be willing to allow the executive and legislative branches of government to control oversight of development projects. For example, the Poletown majority emphasized that courts should defer to legislative judgments of “public purpose.” Whatever the general merits of such confidence in the political process, it is misplaced in situations in which politically powerful interest groups can employ the powers of government at the expense of the relatively weak.

So what happened?

The GM plant opened two years late; and by 1988— seven years after the Poletown condemnations— it employed no more than 2,500 workers.

Moreover, as Somin continues, it gets much worse because not only were the benefits overstated the costs weren’t stated at all.

An especially striking aspect of the Poletown decision was the majority’s failure to even mention the costs imposed by condemnation on the people of Poletown or the city of Detroit as a whole.

According to estimates prepared at the time, “public cost of preparing a site agreeable to . . . General Motors [was] over $200 million,” yet GM paid the city only $8 million to acquire the property. Eventually, public expenditures on the condemnation rose to some $250 million. In addition, we must add to the costs borne by the city’s taxpayers, the economic damage inflicted by the destruction of up to six hundred businesses and fourteen hundred residential properties. Although we have no reliable statistics on the number of people employed by the businesses destroyed as a result of the Poletown condemnation, it is quite possible
that more workers lost than gained jobs as a result of the decision.

Comments

But, as a Black Mayor and a Democrat, we must assume he meant well.

why on earth is his skin color relevant ?

have you ever heard of the solid waste to energy debacle in the lily white suburbs of long island NY ?
shame on you

A shocking failure of democracy there. It reminds me of the old "You have two cows" joke about how different economies work. I guess this one would go:
You have two cows. A business successfully lobbies a local government that they can use your cows better than you can. The cows are taken away from you, then slaughtered and left to rot in the field.

Orwell: "Reflections on Gandhi"

" . . . poltics, which of their nature are inseparable from coercion and fraud."

The story about the two cows is not a joke!

Yes, it IS a joke...it's just a VERY BAD (and expensive) joke...

I don't know if it's a failure of democracy or a failure of the concept of democracy. It's not that the population of Detroit just wasn't sufficiently informed to vote the right way. It shows that individuals cannot expect majority rule to protect their rights. They must rely on something that may actually impede the pure workings of democracy to protect themselves.

I think Depeche Mode said it best: https://www.youtube.com/watch?v=gVXADH_spOY

"The grabbing hands, grab all they can..."

The book couldn't have come at a better time !
the Indian Parliament is debating a pro-business land reforms bill.
An extremely controversial law in a country where estimated 60% are dependent on agriculture and have limited skills to work in the industries which are supposed to come up on the acquired land

More important, look at what conservatives are saying should be done in California: take away the water owned by farmers and fishermen!

Conservatives are asking for the water owners to be allowed to sell their water.

Given your politics, I can see why you'd assume transfer means coercion.

'Conservatives are asking for the water owners to be allowed to sell their water.'

Water owners have already been selling in their water - in part from the fear that it will be taken away from them otherwise.

'The rice industry in the Sacramento Valley is taking a hard hit with the drought. Some farmers are skipping out on their fields this year, because they are cashing in on their water rights.

Many fields will stay dry because farmers will be doing what was once considered unthinkable: selling their water to Southern California.

“In the long term, if we don’t make it available we’re afraid they’ll just take it,” said Charlie Mathews, a fourth generation rice farmer with senior rights to Yuba River water.' http://sanfrancisco.cbslocal.com/2015/03/17/drought-some-northern-california-farmers-not-planting-sell-water-rights-los-angeles/

A major reason for that fear is all the talk from 'conservatives ' about how water rights are not property that should be respected, but instead should just be changed so as to benefit those who currently do not have rights to water. Such redistribution, with putative profit for those who would be able to play a role as middlemen, is what makes such 'conservatives' distinctive.

"This is why we need to keep money out of politics."
Politicians sell government power because they have it.

"We need the government to halt unbridled capitalism to ensure the economy works for everyone."
Kelo famously stood empty.

Eminent domain is the worst example of American fatal conceit. Cue leftists defending their sacred cow, even as it bulldozes poor neighborhoods for campaign (and charitable foundation) donations.

Everyone saying private water should be taken and sold by the government to better allocate water by selling it to the highest bidders in the West, and other areas with water shortages, are leftists?

And I see lots of articles written about how there are housing shortages in California because leftist's won't let corporations build on land they don't own which is vacant because the landowners want the land to be left to "nature". Are those people attacking leftist policies leftist because they want government to let corporations take the land for profit building real estate?

What do you mean by "private water"?

If my grandfather was allocated a portion of the Colorado river based on his economically unviable cotton farm, does that mean I get to keep these water rights forever?

I might consider this to be my property but it's a tenuous claim in times of drought.

There should be an expiration date on these water rights.

There is-first come first served; use it or lose it. All western water law.

And is this a system worth protecting?

There should, but there isn't.

Michigan is the best example against eminent domain; but Michigan is also the best example against devolution, as it is the local government that is the most susceptible to capture and corruption by special interests. Many local governments in Michigan have given away the tax base to GM and the other car companies, which use the threat of relocation to extract tax concessions (mostly for property taxes) from the local government. Not only do the local governments supply credit to the car companies for expansion, but the local government also agree not to tax the expansion, a classic double dip. Placing blame, however, isn't easy: is it the car companies that demand the concessions as blackmail for not relocating, or is the local governments for acceding to the demand? The devil made me do it!

Michigan is also one of the best examples of eminent domain reform. The state supreme court overturned the Poletown decision a couple of years before Kelo was decided:

http://www.indianalawblog.com/mt/archives/2004/07/000844.html

Isn't part of the problem that for years that people have assiduously defended mega corps like this in the name of the free market, allowing them to grow in power and inevitably take over the political process with such power.

Do you expect eminent domain to suddenly get overturned because a nasty book got written? Or do you expect things to be much the same.

Kelo is an interesting case, its what got me reading constitutional law and it riles my blood up like anyone else. However, it also made me realize that power is power and the constitution was just words on paper. If you think words on paper can protect you from power you just don't have the material evidence at your back. Your own power protects you from other people's power, and agreements between parties like the constitution are the result of a balance of power.

If that balance is broken its inevitable that the political process will get hijacked. Who isn't going to use power when they have it? Certainly not the kind of people ruthless enough to acquire it in the first place.

Aren't most of these deals and taxes assessed at the local level, across the nation? My home city, Chicago, is quite notorious for the sizable TIF exemptions. We even have a tool for finding all the TIF districts! http://cookviewer1.cookcountyil.gov/tifViewer/ There is no Great Stagnation in government transparency.

I cant speak for everyone else, but in so far as i have ever defended mega corps, its for the same reason i defend Susette Kelo, because its wrong to have the government take someones property/money/rights away just because you are convinced that they dont deserve it/you can use it better then them/its for the "greater good".

How is that stance working out for you? Do these mega corporations respect Sussette Kelo simply because she respects them? Or is life a power struggle in which people take what they can when they can, and playing by the rules you've outlined while the other side skirts them has led to decades of your position losing ground.

The game theory here just doesn't work out. You have no effective enforcement mechanism besides abstract principles. The other side defects because at the end of the day the only thing your going to do about it is bitch and then move on with your life.

Real life means power, political coalitions, etc. If your principled stand isn't actually resulting in your principles getting implemented maybe you ought to re-evaluate the real world effectiveness of your principles. Get consequentialist and evidence based.

-1. This is gibberish

It's not gibberish. asdf is mocking MOFO for defending corporations, attacking this as naiveté because the corporation will never return the favor. To asdf, the world is one big prisoner's dilemma, where it's defect or be betrayed, and the only entity with enough power to fear are corporations.

Yeah, -1 for not noticing which entity wields the guns and tanks.

Ill pass on your intellectual nihilism, thank you very much. For your sake, i hope you are never at the mercy of someone who believes what you believe.

I and everyone else are already at their mercy. Sussed Kelo got an up close look at whose mercy she is at.

Eminent domain has three prongs of support: the government which sells it, the people who buy it, and the people who support it ideologically, economic leftists and government authoritarians. Unless you are suggesting the elimination of anyone capable of purchasing any property (.gov could just e.d. everything from everyone!), e.d. will continue. Bearuacrats gotta sell something.

The people defending mega-corporations in the name of the free market are NOT the same people as the ones defending eminent domain. Libertarians have complained about eminent domain over the past 40 years with at least equal vigor as they have defended the rights of mega-corporations to participate in a free market along with anyone else.

No. It is an example of the big business, big labor big government trifecta that is the basis for machine Democrat politics. A mayor that seems to have been beyond reproach except for bankrupting the city and stealing anything that wasn't bolted down. A labor union that played the power game quite well until their host shrunk away, and big business who ultimately generates the cash to pay for the gravy train.

Lets call this what it is. A failure of the big money political machine politics practiced by Democrat municipal politicians for a century and a half.

There are always corrupt politicians and ugly power games stealing from whomever and wherever. The scale of these ones is what is shocking.

The presumptive nominee for the Democrats next presidential election has expanded the game to include money from all over the world in exchange for influence.

In the case of the Poletown plant, I don't think anyone made out like bandits. GM would probably have been better served with a greenfield site in the boonies (which is where new auto plants were going by 1980). The residents, obviously, would have been better off not being evicted and being forced to sell below market value, and the city would have been better off saving the money for other pressing uses. This was a woefully misguided attempt by Detroit to preserve its industrial base and arrest its decline by clearing space for a sprawling, single-story plant within the city boundaries. It worked about as well as other big Detroit projects of the era (the RenCen, the People Mover, Joe Louis Arena) -- which is to say, very poorly.

Borrowing from Milton Friedman, there are four ways to allocate property. The Poletown case is one where the courts allocated Someone Else's property on behalf of yet Other People ("the public"). In this case, we expect the courts to be neither judicious in how much property to take nor very wise in how the property gets used. Sadly, the courts lived up to expectations.

Alex's comment about GM vs. Boeing raises a good point. Even if we accept that economic development is a legitimate use of eminent domain, at the very least the property should be auctioned off to the highest bidder. GM should not have been granted exclusivity simply because they proposed the seizure. An auction of the entire parcel of land would serve two purposes: (1) it would allow the property owners to receive "fair value" and (2) it would allow the property to be allocated to its maximum economic benefit. That's what someone allocating one's own property for one's own benefit would do.

Even if we accept that economic development is a legitimate use of eminent domain

And that is highly questionable. People are always too confident about their predictions of economic development. It's always a gamble. The economy is just too complex to know that such and such factory or new development is actually going to be economically viable in 5-10 years. But the people pushing these eminent domain takings always like to pretend that whatever they are planning to put there is going to generate X revenue for Y years and provide Z jobs. Which is nonsense. They at least should put a likelihood factor on all that to account for what happens if there's a recession or a change in technology or some other unforseen event.

Yup, they definitely should factor massive uncertainties into these projections of economic benefit. This doesn't mean that e.d. would never be justified (you could probably justify a hydroelectric dam or something like that), but it'd be much harder to justify than it is now.

Every project can be justified under the basis of "economic development".

If I may quote Hayek, "The curious task of economics is to demonstrate to men how little they really know about what they imagine they can design"

We just don't know how viable any of these projects are going to be so we should be extremely skeptical about violating the rights of individuals for the sake of private businessmen and their Grand Plans.

As with everything in Creation, e.d. can be applied properly or improperly. Proper application would be where the seized property is developed for the benefit of all the people. As in everything having to do with politics (coersion and deceit) and unlimited government, e.d. may be used by graft-seeking politicians to enrich iindividuals or favored segments of the populace at direct expense to the individual prioperty owner and indirect expense to we the people. The "higher tax receipts" argument does not benefit all the people and is a ruse (remember deceit and coersion).

Regarding "money in politics" and "mega-corporations", be sure to include FNMA and FHLMC in the list.

at the very least the property should be auctioned off to the highest bidder

+1. The problem with eminent domain isn't the "taking" part, it's the lack of "just compensation." It's just too easy for governments to play games.

Personally, I'd give the landowners even more options, such as 1) letting them force the government to completely buy them out; and 2) letting them choose between the auction amount or pre-project comparables as the price.

>> "…many judges may have an unjustified faith in the efficacy of the political process and thus may be willing to allow the executive and legislative branches of government to control..."

Judges are politicians. All sitting judges are empowered products of political process.

Thus, judges highly value that political process... and the overall capabilities of their political-process colleagues in the legislative and executive branches. The supposed hard distinctions between judges and other government politicians are illusory, despite the medieval theatrical costuming of judges.

In short, government judges are always inherently biased to the 'government' side of any issue brought before them. "Neutral" government judges can not and do not exist. A major flaw in the concept of representative democracy.

Two comments: The issue of whether an exercise of imminent domain is permissible does not depend on whether the legislature or executive branch is making a good choice; only that at it is permitted to make the choice and follows the legally mandated process in doing so; hence it is not unreasonable for the court to neglect a detailed analysis of the costs and benefits.

Furthermore, it is erroneous to imply that property rights imply freedom; to the contrary, property rights are a government imposed constraint on freedoms. My freedom to even walk on a piece of land is determined by government determination to allow people to make trespassing on the land illegal; the land may be the owners' property only due to government actions over 100 years ago and transactions that occurred before I was born.

This does not mean that property rights are not a valuable tool for organizing and managing society or the ability to acquire and use property rights is a source of fulfillment for many; just don't equate them with freedom.

You're right that we shouldn't confuse legal permissibility with moral justification, but I do with those in the government would see that the two aren't coextensive.

...only that at it is permitted to make the choice and follows the legally mandated process in doing so

Government is only permitted to use eminent domain to take land for public use. The argument that this extends to cases like Kelo works by claiming that the land will generate more taxes and other side benefits. That is, it only counts as a public puprose if it is in fact a good choice.

If you defer to then government's say-so about the cost-benefit anlysis then "permited to take land for public use" just devolves to "permited to take land for any use".

That auto plant has a Jewish cemetery in it.

http://www.usnews.com/news/offbeat/articles/2015/05/12/in-detroit-jewish-cemetery-survives-within-gm-auto-plant

Take the most egregious uses of eminent domain and use it to condemn all eminent domain and democratic government more generally, just as others use the most egregious fraud undertaken by banks and use it to condemn all banks and capitalism more generally.

Perform poor accounting: "In addition, we must add to the costs borne by the city’s taxpayers, the economic damage inflicted by the destruction of up to six hundred businesses and fourteen hundred residential properties." Eminent domain to a greater or lesser degree does pay for such costs to businesses and residential properties (and presumably these payments were ultimately paid by GM).

And then blame your favorite bad guy (if you on the left, you blame big business; if you are on the right you blame the unions or the left). In this case, I suspect that both the unions and big business were supporters, but the left probably argued against the GM takeover of the land.

asdf got people riled up but did make a good point. I will try to restate it.

If you do not do anything to restrain the role of corporations (or other powerful entities and people) because doing so would violate their property rights, and you can't violate property rights since that would lead the governments to dispossess homeowners, the corporations will get to the size where they can bribe/ lobby the government to dispossess homeowners. If you want to protect small property owners, you simply can't let other interests get too powerful. Libertarians may have one part of the equation right, but the whole project fails because they can't grasp the other.

This is not an improvement.

In the case at hand corporations did not take anyone's property. They asked a particular level of government to do it for them. You say a better government could have "restrained the role" of etc etc; the others say a better government could have just refused to transfer the property. This triple-bank-shot reasoning of yours is said to reflect some kind of realism, but the problem is then, why stop there? We already know what the real life result is—can't get more realistic than that!

I find it utterly bizarre that so many people can look at flows of money from corporations to legislators and conclude that the corporations have corrupted the legislators and not vice versa. It's mere scapegoating. Businesses that don't want to play the game simply disappear through the wonder of competition. This is democracy. This is what the thing is.

GM was not so powerful it could seize the land it wanted. It had the government do it for them.

Government is too powerful.

What have you done to make government less powerful? Have you had any meaningful successes in the last several decades? Did the Milton Freedmen revolution stop what happened in Kelo? Did the events in Kelo cause a change in the law to stop others Kelo's?

If you want people to respect property rights you need people with a cultural/genetic history of doing so and they actually need to own property such that they have an interest in defending property rights. However, you've all been working hard for decades now to impoverish the middle class (the backbone of pro-property rights constituencies) and importing people from cultures with zero track record of good property rights or the kind of human capital potential to acquire any property. Meantime the politicians running on your pro-markets rhetoric have almost always been major corporatism supporters in practice, and you've had decades to observe this fact out in the open.

Do you people read any history? Do you not see the parallels between this and say the fall of the Roman Republic. Citizen farmer middle class fighting to defend its own property is impoverished by machinations of plutocrats. With no propertied citizens to recruit from they have to start recruiting people with no property. People with no property have no incentive to protect property rights. Strongmen and interest groups take over an ever more corrupt and violent state.

Yes, what have you, fringe party and perhaps 1% of the population, done to affect change? Nothing! You clearly are wrong, then, in your arguments.

It is the nature of power to consolidate and seek more power.

Okay, +1 for this one.

You're confused. I for one have not been working hard to impoverish the middle class. The real culprit on that one is a debauched currency and inflated education/housing/medical services sectors. I'm behind you all the way about the importing people part.

Asdf, you're quite right about propertied citizens, but your concern over "corporatism" is misguided. You're starting to strike me as someone who ought to be a reactionary but isn't quite yet.

I don't agree with a lot of what asdf has written, but his/her response here is exactly right. You cannot just wish for less powerful government. The power is always there. It's a question of who is wielding it.

Maybe, but you can wish for a polity that imposes limits on themselves. The left knows no limits since anything someone else owns was stolen or the result of injustice, so what would stop them on an intellectual level from considering taking property to help the poor or 'economic growth'? This particular situation was implemented by a profoundly awful machine politician who drove away business, and maintained power by giving goodies from the cookie jar to those he needed. He was extraordinarily successful as a politician.

Corruption and abuse of power are endemic, a result of power no matter where no matter by whom. But most consider it wrong. Machine Democrat politicians consider it a way of maintaining power.

I've seen two instances where conservative parties that went beyond the pale were destroyed electorally, and one where a leftist party received the same fate. Mulroney Progressive Conservatives, BC NDP, Alberta Conservatives last week. The Federal Liberals faced almost the same fate but it took more than a decade. The more ideologically comfortable with taking from some to give to others the more the tendency to build political machines that depend on egregious seizure to keep it fed.

First, people don't operate "on an intellectual level." If you studied actual psychology, sociology, neurology, or just studied history you'd know how weak abstract ideals are if you try to build a whole society on them. Isn't that one of the most basic criticisms of leftist intellectuals, seems libertarians should learn from their own critiques. That's the thing though, a lot of libertarians are "high on the spectrum" spergish nerds that don't really get how people or societies work. They have terrible social intuitions.

For all their vaunted logic they are awfully bad at basic game theory. Even an amateur would understand that property rights tend to be defended by those with property, so if your society is one where few people have property worth having its going to be one in which few people fight to protect property rights.

I get the sense from comments that the Republicans in Congress and in Texas, and other Western governments are leftists who have been taking private property by eminent domain for private profit in something is likely to be proven to be a mistake:

The Keystone XL pipeline.

I damn Bill McKibben for turning a property tights issue into a stupid attempt to convince people to stop burning fossil fuels by raising the price of gasoline by 0.1 cents and then making it possible for Republicans to be nakedly anti-property rights and pro-corporate power and make the Tea Party rabidly support for eminent domain in the same way as Kelo and Poletown.

AlexT hits another home run! He's becoming the comment king lately.

I've never met an actual liberal in person who favored the use of eminent domain to seize property for the use of private corporations to build factories. It's sometimes acceptable, with compensation of at least market value and probably more, to build critical infrastructure for power, transit, and vital services for a very dense region when there's truly no other choice.

The problem with libertarians is not that they oppose kicking people out of houses, i.e. involuntary coercion, which liberals also hate, but that they don't oppose situations that are hypothetically 'voluntary', because you sign a piece of paper saying you agree to your horrible exploitation, because you have the hypothetical alternative of refusing and starving to death, but not voluntary in practice, because of the severe (but voluntary!) consequences you suffer for failing to agree and the lack of meaningful alternatives.

Your not having met liberals who love takings doesn't erase the reality that so many of these takings are by liberal politicians.

Just to be clear, and contrary to Justice O'Connor's dissenting opinion, nothing about the SCOTUS ruling in Kelo,/i> was novel. The entire history of eminent domain jurisprudence in the US, including states allowing "favored industries," including railroads, mining interests, and agriculture, to exercise its eminent domain power, supported the majority's decision.

Moreover, Kelo is very nearly on all fours with the Court's 1956 decision in Berman v. Parker. The only, legally insignificant difference, is that the Washington, D.C. neighborhood condemned in Berman was declared to be "blighted," while the City of New London was only declared (by the State of Connecticut) to be a "distressed municipality." That is an awfully thin reed for distinguishing the two cases. In fact, I once asked Richard Epstein (author of the influential 1985 book, Takings whether there was an principled basis for distinguishing Kelo from Berman. His response: "Principled basis? No."

Many Property and Constitutional Law scholars (including no doubt Ilya Somin) would like to see the Berman decision overturned (personally, I'm ambivalent). But only Justice Thomas, on the Court that decided Kelo, was prepared to do that. Not even Justice Scalia signed Thomas's separate dissent (but he did join Justice O'Connor's hyperbolic, unprincipled dissent that would have ruled against the City of New London in Kelo without overruling Berman.

Finally, it's also worth noting that, following Kelo, many (but by no means all) state legislatures engaged in meaningful eminent domain reform. That is to say, they expressly limited their exercise of their own eminent domain power. The presumption that political processes only, or even more often than not, operate against property owners (as if they were some kind of "discrete and insular minority), is misplaced. Overall, propertied interests do quite well in political processes - even in places such as the UK, where property rights receive no constitutional protection against the sovereignty of Parliament.

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