Public Purpose: Kelo v. New London and Neoliberal Paternalism

23 05 2011

In 2005, an eminent domain case became the unlikely focus of a fiery national debate on the seemingly ever-increasing power of the government to interfere with private citizens. What was interesting about the Supreme Court’s Kelo decision was that it exposed an uncomfortable reality that America’s petit liberals and statist conservatives try hard to deny: that ultimately, they differ mostly rhetorically, and substantively only on details rather than fundamental principles. At the same time, the libertarian right decried the decision in direct confrontation to the John Galts of the world–the economy’s most powerful actors.

Now, six years later, the facts have shaken out, and the Kelo decision is even more starkly and profoundly wrong. How the situation has actually played out in New London reveals just how deeply the neoliberal consensus has undermined basic principles of economic and personal freedom and perverted even jurisprudence.

The Case

Kelo v. New London started as a very picayune matter. If you were to take a random sample of medium-sized communities across the fifty states and looked at the minutes of their zoning boards or economic development committees over the last five years, there’s no doubt that you would find scores of potential Kelos.

Desperate to boost a sagging local economy, a quasi-governmental development entity, the New London Development Corporation, reactivated and endeavored to lure businesses while smoothing the permitting process and regulatory regime. Such entities are very common; they connect private sector leaders to government, front them with community boosters, and thus reduce transaction costs and risk for investors considering moving into a certain area. The plan NLDC finally settled on was to redevelop 90 acres of the Fort Trumbull area. The area was a “victim” of demilitarization after the Cold War; 32 of the 90 acres had once been a naval facility. The plan the NLDC came up with will be familiar to anybody who has ever lived or traveled anywhere in America ever: it was to have an “urban village,” in other words a facsimile of Boston’s Charleston neighborhood mated with a Frank Capra small town; a waterfront conference hotel; a pedestrian riverwalk; and some park space.

All of this was based on the expansion of a Pfizer pharmaceuticals research facility in Fort Trumbull. Pfizer, a major regional employer and powerful business institution, was essentially the engine for the entire plan: they were going to need property to expand into and attendant amenities. One of the parcels of land (“Parcel 3”) was specifically to be for Pfizer’s use. The city of New London gave permission to the NLDC–a private corporation–to “take” the property through eminent domain to effectuate the plan.

The NLDC was successful in simply buying most of the property. However, a group of homeowners held out, and the NLDC initiated “condemnation proceedings” (the eminent domain process) to take the property. Condemnation proceedings are legal proceedings, and so as the property owners challenged the NLDC’s actions, the court cases resulted.

The Law

Governments have the power to “condemn” and “take” private property under a variety of doctrines; the eminent domain clause of the Fifth Amendment to the Constitution implicitly suggests this power is inherent in government, but subject to limitations (for state and local governments, the police power provides this authority; for Congress, the power must be statutory). The Fifth Amendment is most known to us for its self-incrimination clause (“taking the Fifth”) but it’s a pretty action-packed amendment. It includes the requirement of a grand jury for serious crimes, the stricture against double jeopardy, the necessity of due process, as well as the eminent domain clause, which reads:

…[N]or shall private property be taken for public use, without just compensation.

This is typically called the “takings clause,” thus the different sense of the word “take” in this context. The NLDC on authority of the City, moved to “take” the property, but had to prove that the taking was for a public use and that the compensation they were offering was just (typically, some amount calibrated to market price).

Traditionally, the takings clause was used for things like railroad or highway right-of-ways, military bases, airports, parks, and the like. The “public use” was pretty literal; if the government was going to take private property, it had to be for something that the public was going to use–railroad right-of-ways, state universities, parks, military bases. Moreover, they had to offer “just” compensation, which could potentially be above and beyond the fair market value of the property (see for example United States v. Sioux Nation, or US v. Peewee Coal).

What was extraordinary about the Kelo case was that the “public use” was not at all obvious. The City argued that the “public use” was something we’ve heard more and more as the economy has tanked: “job creation.”

The area is depressed. New jobs will reinvigorate it and improve the quality of life for all residents. Most importantly, employers need to be incentivized to create jobs. The development of this area requires incentives in the form of government intervention to ameliorate risk and cost. Therefore, the taking is for the public use.

The Court upheld the taking basically for these reasons. Because improving the economic atmosphere was desirable for the public as a whole, and the “comprehensive character” of the plan required taking of all the subject property, the Court held that the taking was for the public use, and went as far as to say that forbidding transfer of private property to another private individual would constitute an “artificial restriction” on the concept of public use. In its own words:

“Those who govern [New London] were not confronted with the need to remove blight in the Fort Trumbull area, but their determination that the area was sufficiently distressed to justify a program of economic rejuvenation is entitled to our deference. The City has carefully formulated an economic development plan that it believes will provide appreciable benefits to the community, including–but by no means limited to–new jobs and increased tax revenue. As with other exercises in urban planning and development, the City is endeavoring to coordinate a variety of commercial, residential, and recreational uses of land, with the hope that they will form a whole greater than the sum of its parts.”

The public purpose was economic development of the most paternal nature; and the plan had been carefully formulated by experts, and that was a sufficient substitute for the plainly obvious public uses entailed in a park or a railroad.

If a picture is starting to emerge of the worst type of liberal paternalism–the type favored by liberals who are certain that if the experts are allowed to set the policy unencumbered by the masses, a thousand flowers will bloom–that’s because Kelo is a purely distilled form of it. It is precisely the expertise of the NLDC in crafting a plan that the Supreme Court relied on to define the “public purpose,” and those experts were experts because they came from the private sector, or were academics hand-picked by private sector leaders.

Justice Stevens, writing for the 5-4 majority, tried to couch the reasoning as deference to local government, saying that they know better than the Supreme Court whether or not a taking is necessary to improve a blighted area. It was an interesting and politic tack, but more than a little troubling when you consider that the question at hand was a fundamental right guaranteed by the Bill of the Rights. Surely, local governments could argue that they know better how to handle specific, local racial animosities through restrictive covenants, but the Supreme Court should not simply defer to those judgments.

The reasoning was tortured and invidious. That it was the Supreme Court’s “liberal bloc” that employed it is telling; and the conservative reaction perhaps more so.

Neoliberal Foundations

History proved the Court’s reasoning absurd. None of the economic development results predicted by the “considered judgments” of the NLDC experts materialized. Fort Trumbull is still abandoned. Pfizer simply did not choose to expand their facility, the cornerstone of the plan. So, the government took somebody’s property–in each case, a home–transferred it to a wealthier and more powerful (corporate) individual, for what turned about to be no reason whatsoever.

The Court’s reasoning relied on ideas of economic efficiency and wealth creation rooted in the neoliberal consensus, in other words, that only “freer” (not “free”) markets can create wealth, and freer markets are defined by limitless agency on the side of capital. So Pfizer can motivate the taking of private property for its benefit because it may create jobs, but is not bound to do so–because any such binding would not be a “freer” market.

The dissent in the case wasn’t particularly profound, and the conservative and libertarian opposition to the Kelo decision was immensely confused. They railed in general against the increase in state power, where the issue was clearly the increase of corporate domination of state power. New London did not take the property in a vacuum and leave it on Pfizer’s doorstep as a gift. Pfizer and other property developers were integral; and the NLDC itself was a private institution intertwined with government, using the state’s coercive power to enrich private actors and (thus, according to neoliberal orthodoxy) benefit the public.

Had the government, say, used eminent domain to take private property because individual homeowners were refusing to sell to minorities, then we would have a case of liberal social engineering abusing state power; but the Kelo case was the exact opposite. It was prima facie evidence that wealth will seek to control the mechanisms of the state to benefit and protect itself, and even basic restraints will not encumber it.

The takings clause is not like the right to privacy that the Court inferred from various elements of the Constitution; it is an explicit right protected by the Bill of Rights. Only the most doctrinaire libertarians dispute the right of the state to use eminent domain. After all, even the strictest of the “strict constructionist” of the Constitution would have to admit that the Constitutional Framers intended for the state to have the power to take private property through coercion under the parameters of the takings clause. This was not some Great Society statute. Its abuse was not socialistic or populist; it was corporate, and it was on a fundamental level.

If corporate power could be exerted and justified on such a fundamental level–the mutating of a constitutional provision to benefit itself without any correlated responsibility–then outcry over “big government” is misguided, if not disingenuous.

The Wall Street Journal and its fellow-traveling critics of the Kelo decision decried the government overreach and ignored the fact that it happened because of generations of insistence on the need to rain privelege on wealth in order to spur development. In this case, private interests operated the machinery of the state

The same logic that rests on the premise that “economic development” (wealth creation) relies solely on the benificence or wisdom of the wealthy and elite will always permit these kinds of abuses of state power for their own benefit. And it wasn’t some new-fangled Keynesian statute they abused, but a clause of the Constitution ratified in the 18th Century, within living memory of the Constitutional Convention. This wasn’t some populist revanchism grabbing wealth for redistribution.

Kelo provides such a perfect example of the subservience of the state to economic elites. The seven councilors of New London do not represent “big government.” The entire process of development was wholly facilitated by an ad hoc “public-private partnership,” a private development entity facilitating the needs of big business. The development plan was made in conjunction with private interests with largely unidirectional public forums. What happened was a bald transfer of wealth upwards resting on the entrenched premise that only by favoring extant wealth can more wealth be created.

What’s worse, it all rested on a faulty premise that has become gospel. Justice Stevens’ majority opinion is packed with the sort of abstract, conceptual thinking that divorces policy from material reality, that reifies ideological constructs and turns them into concrete evidence. When that happens, absurd results are more than likely.

The liberal position is obvious: the property interests of a few homeowners needed to be weighed against the greater interest of the community, which desperately needed the jobs. Why should Pfizer be hemmed in merely because some homeowners want to keep their property? But this argument relies again on the wisdom of the plan’s architects. There is no reason to assume that the only way jobs could be brought in would be by condemning and taking these properties. Instead, that is simply what Pfizer and the property developers claimed; they were doing what corporations have been doing around the country for decades, which is holding communities hostage for benefits. Why couldn’t the plan be implemented piecemeal? Was there really no economic incentive that could have dislodged the homeowners voluntarily? Or no plan that could have incorporated them? The plan was designed to be as convenient as possible for those with the most ability to sustain inconvenience; it was a classic race-to-the-bottom situation, with New London desperate to demonstrate its fealty to wealth in order to squeeze some favor out of it.

Meanwhile, none of the developers, nor Pfizer, was bound to any responsibility themselves. Even after all the expense, their agency could not be infringed upon. They simply decided not to build there, and New London was left with nothing. (And certainly, it isn’t as though Pfizer was on the margin of profit and loss; they’re one of the most profitable pharmaceutical companies on the planet).

Walking a Mile

Put yourself in the position of those New London homeowners. A private company comes to you and offers to buy you out. Unlike the vast majority of your neighbors, you decline, despite the economic and social pressure. Your home must mean a lot to you. The next thing you know, the government–not a party to the original offer–comes along and condemns your property, with the intent to force you off of it. You file a lawsuit, again under economic and social pressure, and pursue it all the way to the Supreme Court.

The highest court in the land tells you that you have to give up your property for “the public good,” which can only be served if a comprehensive plan involving your property and based on “considered judgments” of absolute experts is implemented. You have no recourse. You sell and move.

Not even three years later, the entire plan is kaput. No benefit has accrued to the public. What was it all for? Why did you lose your home, endure the stress and expense, dislocate your family, possible even sever your social connections? Because of the best guess of some experts? Because a mighty multinational corporation could not afford to create jobs without your property?

It’s an outrage.

Every policy proposal of the American left gets drowned in this same brackish pool. No regulation, no tax, no program is justifiable if it imposes in any way on the agency of the already wealthy, the already powerful, because they are self-evidently the best, the most wise, the most capable of “creating jobs,” and of creating wealth.


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