dispatches from the new world of work

Property and Prosperity

Here's this week's offering from Cool Friend Sally Helgesen. We hope to start a lively discussion with Sally's observation, below:

I am a major fan of Hernando De Soto, the Peruvian economist and author of The Mystery of Capital. De Soto's extensive research leads him to believe that poor countries are poor primarily because their laws do not permit ordinary people to have clear title to private property or predictable control over how that property can be used. There's no title insurance, so ownership is always under threat of dispute, and no one can get a mortgage based on a murky title. As a result, working and middle class people can't increase their wealth in the way they have traditionally done in the US—by owning their homes and businesses. Instead, most property is owned provisionally or even illegally, which means that large numbers of people live off the grid, escaping taxes and pilfering their utilities. Meanwhile, government officials and their cronies have an easy time gaining access to properties they believe are desirable (see Zimbabwe!).

I've thought a lot about De Soto in the last week because a few news items make me wonder if we in the US are seeing the traditional source of wealth for ordinary people—clear title to their own property—being chipped away. First, there was the Supreme Court decision that the town of New London, Connecticut, could use its power of eminent domain to condemn 89 owner-occupied houses standing in the way of a private developer's plan (NYT, 6/24). In her dissent, Sandra Day O'Connor warned that this decision meant that no one's property was safe from any government authority that decided the land could be more economically used or exploited by another private owner.

Next came a disturbing piece about Airmont, New York, a rural upstate New York village in which an Orthodox congregation is trying to build a yeshiva, an adult housing complex, and a huge dormitory in the middle of a quiet residential neighborhood that is zoned to remain so (NYT, 6/26). The case does not entail seizing property, but rather brings to light a bizarre law that Congress quietly passed in 2000, which gives any religious organization in the US the right to circumvent local zoning or development statutes on the theory that this is somehow necessary to protect religious liberty. So even if your community is zoned to protect against big box stores, any religious group could build an equivalent structure because the new federal law trumps local ordinances. This law does not put peoples' titles into jeopardy, but certainly undermines their ability to protect their property's value if some religious group has other plans for the neighborhood.

Finally, of course, there is the news that the current administration in Washington is increasing the dispersal of drilling rights to gas 10-fold on private property in the Mountain West (NYT, 6/22). Under the Homesteading Act, the government retained mineral rights to huge swaths of private land. Now, the government is auctioning off the leases at top speed, so both local ranchers and people buying dream ranchettes in pristine Colorado or Wyoming are waking up to gas companies setting up shop on their land, destroying its value and their security—along with their cattle and peace of mind.

All of these cases straddle the conservative/liberal divide. That's one thing that makes them interesting and important. If you follow De Soto, you may be persuaded that clear title to property and the ability to exert controls on how your property is developed and disposed is the root and foundation of the prosperity and security and democracy we have enjoyed in the US. Are we undermining that? Is the whine of the kamikazi being heard in the land?

Sally Helgesen posted this on 06/28/05.

Comments

I was a planning commisioner in Lake Oswego, Oregon when a Church of the Latter Day Saints temple was being constructed. The zoning and planning hearings were contentious, even though the development clearly fit into the existing zoning, with no variances required.

What became clear at that point was that some people wanted to use zoning in order to restrict the ability of the LDS to build anywhere in the community - and that, in my mind was certainly religious discrimination. On the other hand, a Fed law that allows a religious institution to completely change a neighborhood's ambience seems a little too broad a brush.

Posted by Greg Burton at June 28, 2005 12:29 PM

If De Soto's theory regarding private ownership is correct, then doesn't that imply that the Kelo decision will destroy the economic future of the USA. Isn't the Kelo decision tantamount to provisional ownership?

Posted by J. H. Shewmaker at June 28, 2005 12:42 PM

Amen Cathy--right on the money. Writing property rights in pencil does indeed bode poorly for our (or any, as you pointed out) economy. Thanks for posting this.

Posted by Tom O'Neill at June 28, 2005 3:02 PM

Unlike some of the SCOTUS cases to which there is no appeal, this is a political problem with political solutions. Write your city council, governor, and state representatives today to get your city and state to pass a law that economic development DOES NOT EQUAL "public use" for purposes of eminent domain.

Get a grip. The potential has been this bad since Berman v. Parker in 1954. I blogged this June 24-27: it's is a blessing in disguise. Now people understand that there is a danger and can change it.

Posted by dilys at June 28, 2005 3:38 PM

The USA is free enterprise wise with 70% owing their own homes [plus many with business ownership]. Less than ownership creates the instability that some Islamofascist clerics promote/export in their 3rd world low class fiefdoms.

Posted by Sean at June 28, 2005 4:25 PM

I think everybody should read an excellent book on this subject titled "Saving Capitalism from the Capitalists" by professors Raghuram Rajan and Luigi Zingales. It is a VERY BIG eye opener for many people of my age who had got brainwashed in school about socialist rhetoric. I urge all of you to read it, it will present many of todays problems in a new light and it also shows the pitfalls ahead.
Also TOM, I urge you to read this!

Posted by Mandar at June 28, 2005 8:52 PM

You got it, Shrewmaker. It's been posted here before, let the people who live in the community determine the makeup of that community, which means the people own the property and do with it what is best. The Supes just legitimized the power grab of government, when the Constitution aims to limit the govt's grab. If city or county governments start grabbing houses to replace them with their version of Utopia, bye bye economic prosperity.

Which brings up a question to anyone who lives near San Jose and reads this: Did East Palo Alto pull a New London to get the swanky office buildings and big-box shopping centers that replaced a "blighted" community?

Posted by Ron at June 29, 2005 8:54 AM

The eco-nomic terrorist may be the Supreme court.
http://www.castlecoalition.org/index.asp

Get involved.

Posted by Gary Fox at June 29, 2005 9:41 AM

Sorry to post two in a row, but I just read this plan in New Hampshire:

Using the new Supreme Court ruling to bring prosperity to Weare NH by building a luxury hotel on the property that now has the home of . . . Justice David Souter.

http://www.freestarmedia.com/hotellostliberty2.html

Posted by Ron at June 29, 2005 9:54 AM

prescription free viagra

Ron; I just read the article and love it as a parody and would love to see an actual battle ensue over a real life parody.

Posted by Gary Fox at June 29, 2005 11:22 AM

Cathy, if you liked Hernando de Soto's "The Mystery of Capital", you have to read C.K. Prahalad's "Fortune at The Bottom of The Pyramid". According to The Economist, it's "...The best book on capitalism and the poor since Hernando de Soto's "The Mystery of Capital". It calls on big business to regard the world's poor as potential customers, and argues that both firms and the poor will win if it does.
"Fortune at The Bottom of The Pyramid" was named number one business book of 2004 by Fastcompany, Forbes, Economist, Amazon, BN, etc.

Posted by Manny at June 30, 2005 9:37 AM

My wife comes from Zamboanga City, Mindanao, in the Philippines. There, two different insurgent groups create sporadic violence, while the 'rich' (which we would call middle class) live behind walls, travel with armed bodyguards, etc. One of the biggest problems is the threat of kidnap for ransom comes as much from the local police and army forces, seeking to supplement their incomes, as it does from the insurgents, who kidnap for money, not to buy arms, as world press reports would have it, but to buy food and clothing.

The point is that even though Philippine law respects property rights on paper, in practice, a person's hold on it is tenuous and requires the payment of protection money to two or three competing bands of thugs. De jure rights of property are not enough; de facto rights must be there as well for there to be stability and growth. The problems of Iraq, Russia, and much of Africa all stem from the lack of law enforcement as much as anything else.

Posted by Kevin Bertsch at July 8, 2005 3:16 PM