I would like to thank Professor John Mogk for his response to my most recent post on the Michigan Supreme Court’s overruling of Poletown in the recent case of County of Wayne v. Hathcock. Under normal circumstances, I would hesitate to renew a debate like this such a long time after it began. However, Hathcock’s reversal of Poletown is one of the most important property rights cases of the modern era, and it deserves the additional discussion.
Readers may recall that Poletown was the notorious 1981 decision in which the Court had upheld the city of Detroit’s decision to condemn the homes of over 4200 people in order to transfer the property to General Motors so that it could build a new factory. The Hathcock decision overruled Poletown and held that private property could not be condemned for transfer to other private interests so long as the sole rationale for doing so was “economic development.” The Hathcock Court rightlyconcluded that this rationale places property rights in grave danger because it could be used to justify virtually any condemnation that transferred property to a private business.
In my earlier criticism of Mogk’s argument [see here, and in the posts linked to there], I cited decisions by Illinois, California, and Florida supreme courts that concluded that economic development was not an adequate rationale to justify takings that transfer property to private interests. These cases undermine Professor Mogk’s claim that Detroit is now the only city among the nation’s 25 largest without the power to condemn private property solely for “economic development.” I also pointed out that Professor Mogk incorrectly claimed that the Poletown condemnation created 6000 jobs at the new GM factory, and explained several serious dangers caused by allowing condemnations of property for the sole purpose of allegedly creating “economic development.” Far too often, such condemnations are used to confiscate property for the use of politically powerful private interests such as General Motors, rather than create any real benefits for the public.Professor Mogk’s most recent post fails to refute these points. He continues to overestimate the benefits of the Poletown decision and others like it, while ignoring the many costs and injustices they created. He also continues to be mistaken in his interpretation of eminent domain cases from other states.
I am glad that Professor Mogk now admits that the Poletown decision did not really create 6000 jobs at the new GM factory. Although the City of Detroit and GM claimed that 6000 jobs would be created there, in reality it has never employed anywhere near that many, with employment peaking at about 3600 during the late 1990s. This fact illustrates one of the main flaws of economic development takings: that the new owners are not legally required to actually provide the economic “benefits” that were used to justify the condemnation in the first place. As a result, powerful private interests such as GM can persuade local governments to condemn property for their use on the basis of dubious predictions of public benefit that they do not have to live up to once the legal proceedings are over.
Professor Mogk suggests that the figure of 6000 was merely an estimate of ” the number to be moved out of the City, if the Poletown plant were not built.” In reality, the Chairman of GM specifically promised the City that “General Motors Corporation will . . . cause an automotive assembly plant . . . employing approximately 6,000 people, to be built upon this site.” Letter from GM Chairman Thomas Murphy to Detroit Mayor Coleman Young, Oct. 8, 1980. For those interested, Murphy’s letter is reprinted in the Poletown decision itself. Poletown Neighborhood Council v. City of Detroit, 410 Mich. 616, 652 n.6 (Michigan, 1981) (Ryan, J., dissenting). The fact that GM got away with disregarding this widely publicized commitment says a great deal about the true nature of economic development condemnations.
Professor Mogk also argues that Poletown may have created many more jobs through a “multiplier effect” by means of which the GM factory may have increased employment at other local businesses. Unfortunately, this claim ignores the fact that the 4200 residents’ homes, 400 businesses, 16 churches, and several hospitals and schools wiped out by the Poletown condemnation also probably created numerous jobs in the community beyond those held by the people they directly employed. The $200 million that the City of Detroit spent to “prepare” the site for GM could also no doubt have created numerous jobs and promoted development in other ways. Like the Poletown Court itself, Professor Mogk accepts all claims that the GM condemnation created benefits, while ignoring its grievous costs.
Furthermore, Professor Mogk’s estimate of the size of the “multiplier effect” is based on a study of the impact of a Mercedes plant built in an “open field” in Alabama in the 1990s, circumstances considerably different from 1981 Detroit, to say the least. Economists recognize that estimating multiplier effects is a chancy business under the best of circumstances. Estimating them on the basis of evidence from a very different situation is even more problematic.
Professor Mogk is also unpersuasive in his attempt to make use of the fact that some of the Poletown property owners were eager to leave and willing to accept the terms offered by the City of Detroit. This ignores the reality that thousands were not willing to sell and considered the City’s offer grossly inadequate. See, for example, the detailed history of the case in Jeannie Wylie’s book, Poletown: A Community Betrayed (Univ. of Illinois Press, 1989). The resistance of numerous Poletown residents to the condemnation of their property is why the Poletown case ended up in court in the first place. No one objects to GM or the City buying property from willing sellers. The wrong the City committed was its callous decision to confiscate the homes, churches, and businesses of thousands of unwilling victims.
Professor Mogk’s claim that economic development projects cannot be established without the use of eminent domain is contradicted by the obvious fact that numerous factories, shopping malls, and other projects are constructed without it every day. In his previous post, he partly took note of this fact when he conceded that condemnations are “not needed to further economic development where the market is strong and growth is occurring.” Obviously, it should be easier, not harder, for developers to buy the land they need in a depressed area where property values are likely to be low and owners eager to sell.
In defending his claim that Hathcock is a unique aberration, Professor Mogk argues that the recent Supreme Court of Illinois decision in Southwestern Illinois Development Authority v. National City Environmental did not forbid “economic development” condemnations because it ruled that the condemning authority in that case was improperly seeking to advance a private interest. The Illinois Court did indeed hold that there was an illegal motive present. But that did not prevent it from also concluding that a “contribu[tion] to economic growth in the region” by the new owner of the property cannot be a legitimate ground for condemnation because “incidentally, every lawful business does this.” Southwestern Illinois Development Authority (SWIDA) v. National City Environmental, LLC, 768 N.E.2d 1, 9 (Illinois 2002). A court can have more than one justification for a decision. And, as noted in my previous post, its reason for rejecting the economic development rationale was almost identical to that of the Michigan court in Hathcock. The other points Mogk makes about SWIDA are likewise unpersuasive, because they all sidestep the plain fact that the Court specifically considered the economic development rationale and rejected it.
I have gone on for too long. The bottom line is that there is little reason to believe that “economic development” takings actually benefit the general public, and much evidence showing that they primarily serve the interests of politically connected corporations and developers, usually at the expense of the poor and politically weak. Poletown was only the most notorious example of this trend. A society committed to private property rights should not allow such flagrant abuse of power to continue.
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