11.14.2009

Old Post: On Eminent Domain (2)

[Originally posted December 2005]

In a recent issue, The Economist reported that 90% of Americans disapprove of the kinds of property seizures allowed by the recent Supreme Court ruling in Kelo v. New London. As a practitioner in the field of economic development (albeit still a naïve one), count me among the 10%. What makes the case so relevant is that it gets at the vital questions facing us in the field: what is economic development, what does success look like, and how do we achieve it?

Through a non-profit agency called the New London Development Corporation, the City of New London in Connecticut sought to redevelop its Fort Trumbull area in response to decades of economic decline caused by dying industries. It created a comprehensive plan for the area, which included a state park, retail, and 80 new residences, as well as infrastructure in support of a Pfizer research facility next to the development area. After passing through the appropriate review channels at the city and state level, it initiated condemnation of the properties of owners who refused to voluntarily sell. These owners filed suit, claiming such seizures violated the “public use” restriction in the Constitution. The case made it all the way to the Supreme Court, where in a 5-4 decision, the Court held that New London’s intentions qualified as “public use.”

But any win by the city and those in favor of eminent domain has come at the cost of heated public outcry against this expansion of government power. The Economist suggests that the Kelo case will galvanize property-rights activists like Roe v. Wade did for the anti-abortion movement some thirty years ago. Several states have already passed “anti-Kelo” legislation, limiting funding for municipalities who use eminent domain. And New London and NLDC, the “victors” in the case, have had to play defense as the media portrays the ruling as enabling governments to conspire with big business to bulldoze historic homes and displace the poor.

As with any political issue, different interest groups have different agendas based on their different viewpoints. After all, as I learned at Fels, “where you stand depends on where you sit.” So I could dissect the Kelo case from a number of perspectives. If I’m fighting a similar battle with my locality, like the residents of Ardmore who would be affected by a transit-oriented development proposed by the township, I’d be upset that the expanded definition of “public use” has opened the door for governments to wield eminent domain in more situations. If I’m a legal scholar, I could pore over Justice Stevens’ opinion and the briefs filed by Justices Kennedy (for), O’Connor (against), and Thomas (against), and weigh the city’s actions against legal precedent and constitutional interpretation. Or I could consider the perspective of the private developers, whose job has been made simultaneously easier by the streamlined approach to land assemblage and harder by the backlash against public/private eminent domain actions.

But my perspective is as an economic development practitioner, one employed by the City of New London. And the Kelo case informs my answers to those three questions I asked earlier:

1. What is economic development? At its best, a political intervention to redistribute and expand the economic pie. I’m glad I took that Politics, Technology, and Economic Development course at Fels, because economic development has everything to do with politics and technology. Any time you redistribute existing resources, you’re going to have to get political. And if you want to grow new resources, technology can provide the tools to increase productivity (i.e. output per capita). So any economic development strategy must be political and technological. In a paper published after the Kelo ruling, NLDC delineated an economic strategy that was both political (reasoned appeals on the importance of creating high-end jobs and expanding tax base) and technological (positioning New London for competitive advantage, particularly in biotech and pharmaceuticals) in nature.

2. What does success look like? A fair and growing allocation of resources. A good political strategy ensures that there is a fair and open review process so that those who have a stake in any economic development plan have a say in if and how it is implemented. And a good technology strategy ensures that citizens are improving their productivity by supporting processes and industries that create value. Eminent domain, if exercised with intelligence in terms of politics (safeguarding the poor from under-reviewed and unwanted seizures of property) and technology (creating well-paying jobs in high-end businesses in fast-growth industries) is not just about relocating existing innovation. Instead, it can make possible the kinds of coordinated projects and dynamic settings that attract outside innovators and sharpen homegrown innovators, creating a critical mass of innovation for future growth.

3. How do we achieve it? Be nimble and make sure the market works. In his World Bank survey, Economic Growth in Latin America and the Caribbean, Norman Loayza applauds Chile for its efforts to deal with external shocks and deepen market reforms. New London is struggling because it did not respond nimbly to industry shifts. The city, and the state whose laws circumscribe it, understand the importance of creating jobs and expanding its tax base, particularly given the hurdles it faces: aging infrastructure and dying industries, decaying urban neighborhoods, and nearby competition for businesses and residences. Eminent domain, when exercised prudently, gives it greater agility to work with the private sector to make New London a place of innovation and of economic growth. In contrast, allowing the narrow interests of a few dissenters to take precedent over the city’s broader prospects is an unhelpful deterrent to economic growth, for it slows New London’s ability to respond to external opportunities and threats, and thus from its ability to provide fertile ground for human capital to take root and innovation to flourish.


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