Local Government, "Blight", and Legal Plunder

In The Law, Frédéric Bastiat writes on the dangerous idea of "legal plunder", saying...

"Under the pretense of organization, regulation, protection, or encouragement, the law takes property from one person and gives it to another; the law takes the wealth of all and gives it to a few — whether farmers, manufacturers, ship owners, artists, or comedians."

This definition of "legal plunder", taking property from one to give to another, encompasses all sorts of government activity. At a local level, it's easy for a municipal government to wave its hands and claim that policies of legal plunder - where property and wealth is taken from one group of individuals and given to another - is really in the common interest of all. 

One example is the idea of urban "blight". Originally a biological term referring to dying plants, the term has been appropriated by governments to mean some sort of decrepit or decaying building. To combat this blight, local governments seek to demolish or other renovate these buildings (often with taxpayer funds). Justifications for this include: higher property values (and thus, higher tax revenues for the municipality), public safety concerns, and economic development. 

Pictured: Blight (?)

To use a local example, the city of Hillsdale recently voted to demolish three structures deemed "blighted". One such structure, the remains of a burned-down house, was on the property of a local woman. She protested the move heavily, but the city council voted to demolish it all the same.

The councilors had a host of justifications for their vote, including the public safety risk that a child might fall into a basement and be injured. Mind you, this has yet to happen, but we must be vigilant all the same!

The cash-strapped city government may have been partially motivated by the promise of a $24,275 grant from the state of Michigan, meant to cover the costs of demolishing blighted property. Who benefits in this scenario? Certainly not the taxpayers as a whole. Taxpayers in the city of Hillsdale pay state taxes, which the state then sends back to the city of Hillsdale to tear down houses. The rise in the value of their property from less nearby blight is likely to be negligible, and probably not even cover the taxes they had to pay for the pleasure. 

Some property owners may benefit, if they were planning on demolishing the property regardless (as is often the case). Only now, the taxpayers are footing the bill. The city is happy if the move generates slightly more tax revenue, years down the line, due to marginal increases in property value.

Would the city of Hillsdale be a little bit nicer if these plans go through? Probably. Is it worth perpetuating a system of legal plunder that transfers wealth from many taxpayers to a few beneficiaries? Probably not. 

Hillsdale students should oppose local corporate welfare

[This piece first appeared in the Hillsdale Collegian (3.31.2016)]

Cor­porate welfare is alive and well, even here in Hillsdale.

The Michigan Economic Devel­opment Cor­po­ration is the insti­tution responsible for orga­nizing and directing cor­porate welfare in the state of Michigan. According to their website, the MEDC offers “business assistance services and capital programs for business attraction and accel­eration.” In practice, this amounts to allo­cating tax dollars as direct sub­sidies to busi­nesses, often coupled with special tax breaks.

The MEDC recently funded two projects in Hillsdale. The first was an $82,865 subsidy to Mar-Vo Mineral Company to purchase the old FW Stock and Sons Mill (“Mar-Vo moves in, ‘breathes life’ into abandoned mill,” Sep­tember 17, 2015). The second was the heftier $785,000 “com­munity devel­opment block grant” for the purposes of ren­o­vating an old factory into apartments (“Former fur factory fitted for flats,” March 17, 2016).

Pro­ponents trotted out familiar arguments to justify the taxpayer subsidy of private enterprise, noting that the projects would revi­talize downtown Hillsdale, as well as create jobs and housing. While these are cer­tainly benefits, the arguments ignore the costs. For one, similar arguments are made across the state to justify cor­porate welfare, resulting in almost $600 million doled out in “grants, programs, and projects” in 2015.

Orga­ni­zations like the MEDC are an affront to the free market, and little more than a vehicle for crony cap­i­talism. Unlike a private investor, the MEDC can only get funds through taxation. So tax­payers from across the state of Michigan, from Houghton to Detroit, are obligated to sub­sidize busi­nesses to the tune of hundreds of millions of dollars a year. Despite the gross injustice of being forced to sub­sidize projects that most receive no benefits from, cor­porate welfare persists. Why?

The answer is simple. Busi­nesses and private indi­viduals realize that, rather than trying to succeed or fail in the market, it is easier to get help from the state. Under the guise of “economic devel­opment,” or “jobs,” or “revi­tal­ization,” they can earn sub­sidies from the MEDC, and stick Michigan tax­payers with the bill. The benefits are con­cen­trated to busi­nesses and politically-connected indi­viduals, while the costs are dis­persed over millions of Michiganders.

Frederic Bastiat, a 19th-century French political economist, noted that eco­nomics involves looking at the seen and the unseen. In terms of cor­porate welfare, the seen effects are the projects they fund. New apartment buildings, bustling fac­tories, and so on. The unseen is more complicated.

Think of what $600 million could have done in the hands of Michigan res­idents, rather than in the hands of gov­ernment bureaucrats fun­neling the money to special interests. Private indi­viduals, working in the free market, fund projects they think will be prof­itable, and decline those which seem likely to fail. In this system, busi­nesses only profit by pro­viding what the con­sumers want, and not by lobbying the gov­ernment for subsidy. All of these potential oppor­tu­nities are nec­es­sarily unseen, because they never came to be. Instead, tax­payers are stuck with a bill of almost a million dollars to build apartments in a small, out-of-the-way city in southern Michigan.

Students of Hillsdale College, an insti­tution that stands for defending liberty, should oppose this great injustice. The MEDC is nothing more than dressed-up cor­porate welfare, existing to benefit special interests at the expense of the state as a whole, and the tax­payers that have to foot the bill.