Commerce Dpt.: The Destruction of Poletown

When Felix Rohatyn and other corporate leaders wax eloquent about the need for government/business cooperation to solve economic problems, it’s all very abstract and remote. For example, Rohatyn, a Wall Street investment banker and architect of the New York City bailout, complains that the U.S. government looks helpless next to the governments of Japan, West Germany, and France: ‘There, governments do seem to govern. There are direct links between the identification of a problem, a recommendation for action, and public debate, which are then followed by a decision and implementation.’

It all sounds so clinical and tidy. Who could object to identifying problems and implementing recommendations after “public debate”? What the proponents of government industrial policy slyly avoid are concrete descriptions of their programs.

Unfortunately, a perfect illustration of this policy is on display in Detroit. General Motors is closing two outmoded Cadillac and Fisher Body plants there. GM told the city government that if it wants to keep GM in Detroit, it had better come up with a 500-acre site for a new $600 million Cadillac plant. The city government, fearing the loss of GM and tax revenue and expecting 6,000 new jobs at the plant (unemployment is at 18 percent in Detroit), came up with a plan. It would acquire the acreage through eminent domain, improve the roads and rail facilities—all at a cost of more than $200 million, mostly in federal funds and guarantees—and resell the whole shebang to GM for about $8 million. GM said okay.

Most of Detroit applauded this enlightened cooperation between business and government; the news media, organized labor, and the civic and political leaders all beamed with pride. The bastions of business—the Chamber of Commerce and The Wall Street Journal, for example—held their tongues.

There was one hitch, though. Some 3,500 citizens would have to be run out of the many homes, 150 businesses, 16 churches, and one hospital that stand on the 250 acres of an old ethnic neighborhood in northeast Detroit called Poletown. Many of the persons evicted are elderly Polish immigrants and first-generation Americans. About 10 percent of them have refused to take the little money offered by the city and have vowed to fight for their land. So far, they have lost every court battle. Now the bulldozers are rolling over their homes and businesses for the benefit of General Motors.

When the residents organized the Poletown Neighborhood Council to fight condemnation, they called in GM’s traditional foe, Ralph Nader, for help. Nader responded by assigning about a half-dozen of his young followers, full-time, to the cause. They sued the city in the state courts, arguing that eminent domain is improper in this case because it is for private benefit. They conceded the state’s authority to expropriate property for “public use.” Predictably, they lost. The Michigan Supreme Court upheld the taking 5-2, despite eloquent dissents. Two federal suits under the National Environmental Policy and Clean Air acts also failed.

Poletown may be a preview of things to come. As the statist economy runs down, business and government will seek shelter with one another. Many corporations will attempt to socialize costs through the state apparatus: most of the money Detroit spent to acquire and renovate the GM site came from federal grants and loan guarantees, saving GM the trouble of buying the properties at market prices and paying the full costs itself. Governments will eagerly do favors for business in order to maintain or expand their tax bases: even with a 50 percent, 12-year property-tax abatement (in itself unobjectionable), GM will pay $8.1 million a year in taxes. Wage taxes on the new workers will amount to some $1.5 million a year.

One of the shameful things about the Poletown case is that the job of fighting the state has been left largely to Ralph Nader, an unlikely defender of property rights, indeed. (The exception has been the Washington-based, free-market business group with which I am associated, the Council for a Competitive Economy.) With Nader in the fray, the press has interpreted the battle as one between, as The New York Times put it, “little people and corporate power.” But this is precisely what it is not. General Motors has no power of eminent domain, no power to tax, no power to force the taxpayers to guarantee loans. But the Detroit and federal governments have.

The problem, then, is not corporate power (whatever that may be), but political power. For all of GM’s wealth, it has never been able to force anyone to buy its cars. Now, thanks to Detroit’s politicians, it is able to force people to sell their land. This doesn’t make GM less culpable for its crime; it merely locates the source of the crime.

Nader and his group shot at the wrong target. They conceded the authority of the state to seize property under certain conditions, then argued whether those conditions obtained in Poletown. Their objection is that a new plant would benefit GM, not the public. The court’s majority retorted that 6,000 new jobs will benefit the public. “When a legislature speaks,”’ the court said, echoing the U. S. Supreme Court, “the public interest has been declared in terms ‘well-nigh conclusive.”’ Quoting another case, the court said, “When there is such a public need, ‘[t]he abstract right [of an individual] to make use of his own property in his own way is compelled to yield to the general comfort and protection of the community, and to a proper regard to the relative rights in others.”’

Associate Justices John W. Fitzgerald and James L. Ryan dissented, but they accepted the premises of eminent domain. Fitzgerald warned that “no homeowner’s, merchant’s or manufacturer’s property, however productive or valuable to its owner, is immune from condemnation for the benefit of other private interests that will put it to a ‘higher’ use.”’

Justice Ryan quibbled over the difference between “public use”’ and “public benefit”’ in venting his frustration with GM’s orchestration of the project. “Eminent domain is an attribute of sovereignty,”’ Ryan wrote. “When individual citizens are forced to suffer great social dislocation to permit private corporations to construct plants where they deem it most profitable, one is left to wonder who the sovereign is.”’ Implicit here is the fallacy that “the people”’ are sovereign under some other use of eminent domain. But if eminent domain means anything, it is that the people serve the state and its purposes.

Ryan, however, broached the critical issue when he wrote, “The concept of public benefit is indeed protean. It is also nebulous. The state taking clause has now been placed on a spectrum that admits of no principles and therefore no limits.”’

This is the real point. There is no meaningful distinction between public and private. Everything and nothing is a “public purpose.”’ GM’s plant will benefit some people, but so do the shops and homes being bulldozed. On what grounds does only the former win the accolade “public”? No cost-benefit “balancing of interests”’ can provide an answer. The benefits to those who get the jobs cannot offset the misery of the victims of expropriation.

The public/private controversy can be cleared up by realizing that the public is a myth; there are only particular persons. The notion—held by GM, the justices, and Ralph Nader—that individuals may be sacrificed to the public can only mean that some people may be sacrified to other people. State power, then, is always exercised against some for the benefit of others. One cannot legitimately grant the state the power to seize property and then complain that it picks the wrong beneficiaries. That is arbitrary nitpicking.

Poletown is a property rights/civil liberties case. If people are to be secure in their lifestyles, they must be secure in their property. GM has made itself the enemy of both by seeking to profit by state power. Poletown is not a contest between business and people, but rather between people who wish to go about their business peacefully and those who don’t. Nothing much changes in the world.

Systematic property rights/ civil liberties violations underlie all proposals for “reindustrialization.”’ The state cannot direct the economy; it can only regiment people and dictate the use of their property. The Poletowners are tragic symbols of that truth. □

Sheldon Richman is the editor of Competition, the newsletter of the Council for a Competitive Economy. His column, “Commerce,” will appear regularly in The Libertarian Review.