Land Value Capture as Social Restitution

Originally posted in Syncretic Politics on November 2019

Sources: Torn From the Land, Chicago Tribune, Citymetric, Victimizing the Vulnerable: The Demographics of Eminent Domain Abuse, Eminent Domain and African Americans, The Loss and Persistence of Black-Owned Farms and Farmland

I originally wrote this in response to the reparations proposal circulating around the 2020 Democratic primaries. Of course, I support land value capture on principle in lieu of taxes on wages and capital and not because I believe it will benefit one demographic more than the other or lead to material equality (which is not possible as long as there are individual and group differences in knowledge, skills, intelligence, and time preference). I've always maintained that equality of liberty is the only equality worth pursuing. While material equality isn't feasible, trying to achieve it by imposing higher costs on production and distribution will always make material inequality greater

The 2020 Democratic primaries has brought social justice into the mainstream and one of the common issues appears to be racial disparities in wealth, especially the wealth gap between black and white Americans. The consensus on the left is that the wealth gap between white and black Americans is wholly a result of the legacy of slavery and Jim crow. Their ready made remedy of course is reparations. While the democrat’s proposal to pay Black Americans reparations for slavery appears absurd on its face and is based on the false premise that white Americans today financially benefit from an institution that was abolished 150 year ago it does contain, like Marxism, a modicum of truth. While all of the wealth appropriated through slavery was destroyed during the civil war, other unlawful institutions were erected to give whites an economic advantage over blacks. Several of the post civil war black codes restricted former slaves from working in certain occupations, freely traveling, conducting business or owning property all which are essential to build wealth. However, like slavery, these too are long gone and have very little barring on the wealth created today. A more cogent answer is to be found in how land and its rents have been redistributed throughout American history. As I explained in The Myth of Original Appropriation, the basis for land tenure in the United States, and the rest of Western world, is the doctrine of discovery; in a nutshell, the federal government extinguished aboriginal title, a power they still possess, and claimed the land for white settlers moving west. However, American Indians are not the only minority group that was dispossessed of land. Land has also been taken from black families and communities and redistributed to white families and communities in the past, through a combination of mob violence, crooked judicial proceedings, forced partition sales, property tax foreclosures and eminent domain seizures. Some of the wealth gap between white and black Americans is actually due to the appreciation in land values (which is not technically wealth). The case for reparations isn’t to be found in the legacy of slavery or Jim crow, both of which are dubious, but in the legacy of land theft. Unlike those two institutions, private land ownership is still around and has a clear and measurable value.

Dispossession of Rural land

In 1910, Black Americans owned 15 million acres of agricultural farmland in the south. Today black Americans own only 1.1 million acres of farmland and partially own another million. In 2001, the Associated Press investigated 107 documented land takings in 13 southern states. The investigation, combing through thousands of public records and interviews, discovered that 406 black landowners had been dispossessed of 24,000 acres of farm and timberland as well as 85 stores and city lots since reconstruction. These properties have since been transferred to white landowners or corporations. In some instances, black families were driven off their own property by violent mobs or the Klan. The full extent of black land ownership may never be known as some deeds have been lost in courthouse fires. In many instances, black families were dispossessed by state courts in rigged proceedings. Most black families held their land under a tenancy in common wherein each heir had an undivided ownership over the entire property. This ownership arrangement often led to forced land sales either because a non-family member bought a share and forced a partition sale or for unpaid property taxes. White landowners often used forced partition sales to assume ownership over the adjacent parcels of black families. Since no individual heir had a clear title to the land they could not use it as collateral to secure a loan, which made it difficult and often impossible to efficiently develop the land and raise enough income from it to pay their county’s property taxes. When heirs could not pay the property tax, the country foreclosed on their property and sold it to pay off their tax debt. These problems were compounded by the fact that black farmers were often precluded from USDA programs or received less money from them than their white counterparts. In 1997, the civil rights action team within the USDA found a consistent pattern of discriminatory behavior against black farmers such as loans arriving after planting season, arbitrary reductions in loan amounts requested, and a much higher rejection rate for loans than white applicants. Discriminatory implementation of USDA programs often stems from the fact that black farmers are not represented on the local committees that implement them.

Dispossession of Urban land

Even in the present, Black Americans are disproportionately stripped of their homes, businesses and communities through eminent domain takings. Perhaps the most infamous case is the creation of Central Park in New York City, which was the location of Seneca Village prior to the mid 19th century. The majority of the inhabitants were freemen of color, half of whom owned land within the village. In the 1850’s the city condemned their property and razed their community to provide a public space for affluent white families to have picnics. In the mid 20th century, urban renewal, authorized by the Federal Housing Act of 1949, displaced one million people in almost a thousand cities over the course of 24 years (1949-1973). Two-thirds of those displaced and dispossessed of homes and businesses were Black Americans who were confined to the “blighted neighborhoods” targeted by urban planners through previous redlining, exclusionary zoning and other instruments of New Deal racial segregation. Urban renewal projects razed 400,000 housing units and replaced them with only 10,760 housing units that the residents of the condemned properties could afford. Instead of affordable housing, the condemned “blighted properties” were replaced with structures that catered to the wealthy upper class, what is called “higher uses” such as luxury condos and shopping malls. Eminent domain seizures of businesses were rarely followed with fair compensation that covered total losses incurred such as relocation costs and profit losses. Of course, they didn’t just lose land and buildings; they also lost a community and without the community that had supported them most of these businesses failed in new locations. The loss of community didn’t just affect businesses either; many former residents of condemned neighborhoods found it difficult to cope with the loss of their community. With very few affordable housing options, most were crammed into subpar public housing that was eventually torn down.

The eminent domain abuse that redistributes land from the poor minority communities to the wealthy majority white communities did not end in 1973. The Supreme Court’s decision in the 1954 case Berman v. Parker set a precedent for allowing cities to use eminent domain for private development by perverting the doctrine of public use into “public purpose.” The Court’s decision in the 2005 case of Kelo v. City of New London put the final nail in the coffin of property rights interpreting public purpose to now mean “public benefit” which could be any purported financial windfall such as increased tax revenue or claims of job creation. Even in contemporary times, eminent domain is disproportionately used against lower class and minority homeowners. The Institute for Justice conducted a demographic survey of 184 communities where eminent domain was used to take property for private development and found that 58% of the residents in these communities are minorities (non-white), half of the residents earn less than $19,000 annually, 25% of the residents live at or below the federal poverty line and typically have less than a high school education. In comparison, only 45% of the residents in surrounding communities not targeted for condemnation are minorities, half of residents make more than $23,000 annually, only 16% live below the federal poverty line, and a greater percentage of residents have a high school diploma and some college education. While we cannot read the minds of city officials and private developers who collude to rob people of their property it is easy to understand why they disportionately target poor and minority communities. Like any other predator, predatory government preys on the weak and vulnerable. Not only is the land cheaper in these communities, the people who reside there have little means to defend themselves in civil court much less get a fair price for their property. Private developers can easily buy up the land and low ball the property owners knowing they probably can’t afford an attorney to fight for fair market value. As I’ve noted in a previous post on eminent domain, what courts determine to be “just compensation” is completely subjective and more often than not depends on whether a property owner can afford to litigate. Given the fact that minority communities tend to have less wealth and lower incomes than white communities it is not surprising that eminent domain for private development would have an adverse impact on them.

Reparations Wrongly Done

The left’s insistence on cash transfer programs as a stop gap for inequality belies their claimed end to reduce inequality. The limit of cash is that it can only be spent on whatever is available for sale at any given time and location. Any cash transfer to people with high time preference will only ever result in conspicuous consumption that simply pads corporate profits and provides little benefit beyond the lifespan of the goods or services they purchase. The wealth gap would continue to widen regardless of how much cash is transferred because division is linear while wealth creation is exponential. The fact that 70% of jackpot winners go broke and 30% declare bankruptcy within seven years demonstrates that wealth is earned, even if it is done dishonestly, not given.