By Fred Foldvary
On June 23, 2005, the Supreme Court of the USA voided private property rights. I mean it literally. Americans no longer have private property rights. On June 23, in the case of Susette Kelo, et al v. City of New London, et al, argued on February 22, the US Supreme Court ruled that governments may seize private property and transfer the property to other private parties if the purpose is to promote the good of society. In this case, the “greater good” was economic development.
In the City of New London, Connecticut, 15 homeowners had refused to sell their property to a private developer. The city then used eminent domain to force them to sell. The city’s excuse is that the development will generate more economic activity and more tax revenues than the current usage.
In a strong dissent from the 5 to 4 ruling, Justice Sandra Day O’Connor wrote that this ruling would give “disproportionate influence and power” to governments and to the special interests which influence officials. The US Constitution’s Fifth Amendment states, “nor shall private property be taken for public use, without just compensation.” The Constitution authorizes government to forcibly take private property, with compensation for its market value, for a “public use.” A “public use” has historically meant a use for the “public sector,” meaning the government sector. Thus, a house may be demolished, with compensation, if the location is needed for a government-operated highway or airport.
But if a private developer wants to build a casino or hotel or office building and some property owners do not wish to sell, this is not a governmental use, and so should not be considered a public use, but rather a private-property use, use by another private property owner. However, the ruling of June 23, overturned that ancient and logical principle.
In her dissent, Justice O’Connor cited the case of Calder v. Bull, 3 Dall. 386, 388 (1798): “law that takes property from A and gives it to B ... is against all reason and justice; and, therefore, it cannot be presumed that they have done it" in the Fifth Amendment. Justice O’Connor added, “Today the Court abandons this long-held, basic limitation on government power.” The effect of the ruling is “to wash out any distinction between private and public use of property--and thereby effectively to delete the words ‘for public use’ from the Takings Clause of the Fifth Amendment.” Justice Thomas, in his dissent, added, “Today's decision is simply the latest in a string of our cases construing the Public Use Clause to be a virtual nullity.”
The core of liberty is private property. Private property means that the owner may control the use and transfer of the property. The forced taking of property from the rightful owner is theft, an evil act which government should outlaw, not perpetrate. Just because the thief does something good with the stolen loot does not make the theft right. This principle applies equally to private theft and theft by government. The excuse for government is the protection and security of persons and their property. Government not only commits an evil act by forcibly taking property, but also delegitimizes itself.
The prime moral principle of a free market is, “To the creator belongs the creation.” In a free society, each individual is a sovereign self-owner, with full control of his body, his labor, and the income and products of his labor, or what he obtains by voluntary transfer. Any forced takings, whether by eminent domain, by regulation, or by taxation, is a violation of human rights and morality.
Government may properly obtain its revenues from voluntary user fees, from compensations for harming society as with pollution, or from tapping the economic benefit, the geo-rent, of land, as property not created by human action, or as a return of economic rent and site value generated by governmental public works.
Rather than extend eminent domain to anything the government considers to be the “public good,” we should go in the other direction. We should eliminate eminent domain entirely. It’s a matter of giving the weeds a tiny portion of the yard; they soon take it all. An absolute prohibition of eminent domain would prevent its perversion into an anything-goes takings policy. Ironically, at the same time as the Supreme Court said government could take private property for the good of society, the government in Zimbabwe has been busy demolishing thousands of homes with the excuse that it is fighting crime. Over a quarter million poverty-stricken people in Zimbabwe now have no homes because of the eminent domain action of the government. The Zimbabwe chief can now point to the US Supreme Court for justification.
If geo-rent is used for government revenue, eminent domain is no longer needed. If a governmental or private developer wishes to, say, build an airport, and a landowner refuses to sell, then that property would become much more highly valued. The geo-rent, the market rent that would be paid by the highest bidder, would rise. The title holder would have the choice of paying a high geo-rent to the governing agency, or else selling out. The geo-rent payment would compensate society for not being able to build the airport.
The greatest enemy of liberty is the concept of the “greater good” or “common good” or the “public good.” The evils committed by Nazis, totalitarian communists, fascists, and other evil governments have been in the name of the greater good. It is the ultimate in the end justifying the means. Evil in the name of good ignores a fundamental moral principle: good never offsets evil. A thief who benefits society with his loot still commits an evil act.
Moreover, there is no “greater good” other than liberty. What is good is subjective, and there is no logical way to measure conflicting subjective values. With liberty, each person may pursue his own subjective valuation of what is good. The concept of “good” is meaningless when applied to society or to anything other than the subjectively held good of an individual being. Society does not think or feel; only individual persons do so, and so “good” is strictly individual.
If a government truly seeks to promote economic development, it can do this more effectively and without violating property rights by eliminating the barriers it places on economic activity. Eliminate all restrictions on voluntary human action, and replace its market-hampering taxes with market-friendly user fees, pollution charges, and geo-rent payments.
It may seem today like nothing has changed, since you can still sleep in your house and drive you car as before. But the ruling of June 23 is a tipping point. Your house, car, and any property you have title to is no longer truly your own, but is now ultimately owned by the government, which permits you use it, subject to all sorts of restrictions. They can take it away from you at any time in the name of the public good. That is why liberty died in America on June 23, 2005. Without truly private property, liberty is as good as dead. May it not rest in peace.
This article first appeared in the Progress Report, www.progress.org. Reprinted with permission.
Dr. Fred Foldvary teaches economics at Santa Clara University and is the author of several books: The Soul of Liberty, Public Goods and Private Communities, and the Dictionary of Free-Market Economics.