De facto eminent domain

Business, Democracy, Vulgar Politics
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Building owner Ricky Wong is being shafted by NYC’s Landmarks Preservation Commission, but it’s his fault because he should have known better than to think that “the land of the free” was anything other than an empty slogan when it comes to property ownership.

As the Real Deal reports:

Five months after the Department of Buildings approved his proposal for renovation, Wong received a letter on June 7 from the [LPC] commission telling him that they wanted to designate his three-story building — a specimen of the early 19th-century Federal style — as a city landmark. That designation would likely prevent Wong from adding four stories, a project he’d been planning since he bought the building in 2003.

The targeted site for LPC destruction

In contrast to the vanilla eminent domain takings, Landmarks is the fullest expression of centralist planners to control and shape the living environment of society to their whim but at your expense. In the standard eminent domain scenario, the owner can at least expect some monetary compensation for the theft forced transfer of his property. On the other hand, when a building is subject to a Landmarks designation, the legal owner ?remains, but in reality he is reduced to the role of an unpaid property custodian for the city government.

He may no longer do whatever he feels is the best and highest use of his property. Any minor renovation or visible alterations to the exterior will have to wait for a committee hearing with all the requisite filing fees, architectural drawings and paperwork filings in the meanwhile. Potential business lessees that may have an interest in the retail space will have to file proposals with Landmarks which include architectural renderings of the intended build-out in order to obtain approvals that certify that their usage and signage is in conformity with Landmarks’ tailored material and color lists, often with attached samples of awning fabrics or paint colors. None of this comes cheap of course. Many potential businesses balk at the steep barrier of entry and seek less prohibitive locations.

Like any city with zoning restrictions, the sales price of a building is determined not only by the existing structure, but what can be built given the zoning envelope. It is reprehensible enough that zoning regulations are the norm, but it’s a lot worse when someone purchased something with the reasonable expectation that they would be able to profit by maximizing the structure within the proscribed limits and find themselves in a situation quite beyond their control in which not only will they not profit, but stand to lose based on how much they will have overpaid for that property.

The NY Observer notes that:

In the months since January, Mr. Wong hired an architect and gutted the structure, knocking down all interior partitions. But then, on June 7, the LPC sent a letter.

“I spent all the money already,” Mr. Wong said. “And now they turn it into a landmark. I have no idea how they want me to do it. Of course, I don’t want it to be a landmark building. Then all my money is gone.”

Mr. Wong bought the building with the expectation of adding on additional stories. He was willing to pay the price based on this assumption, a quite normal one. But when some overly-nosy neighbors got wind of his plans, they contacted the commission in the hope of stopping the project, one they did not desire in their neighborhood among a number of others.

If the building is ultimately designated a landmark, Mr. Wong will have lost much his invested money and time, something which should trouble anyone who stands for private property rights.

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More economic pain coming

(Austrian) Economics, Business, Corporatism
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In the chart below, provided by chartoftheday.com, one can see how grim the job situation has become. The long term-trend experienced since 1961 has been abandoned for what can only be described as stagnation in job creation. As jobs remain flat, of course, the size of the job force will continue to grow as more young people graduate from college and secondary school.  This is partly why unemployment among teens and twentysomethings is now about 25 percent.

According to chartoftheday.com:

Today, the Labor Department reported that nonfarm payrolls increased by 431,000 in May. It is worth noting that a large majority of last month’s gain in payrolls was due to the hiring of temporary workers for the 2010 census. Today’s chart provides some perspective on the US job market. Note how the number of jobs steadily increased from 1961 to 2001 (top chart). During the last economic recovery, however, job growth was unable to get back up to its long-term trend (first time since 1961). More recently, nonfarm payrolls have pulled away from its 40-year trend (1961-2001) by a record percentage (bottom chart). In fact, the number of US jobs is currently at level first reached in early 2000.

So far, the current “recovery” has produced a net loss of 133,000 jobs. During the same point in the last recovery (2003), the economy was adding 200,000 to 300,000 jobs per month. Calling the current situation a recovery is risible to anyone who is out looking for a job right now, especially since workers are now experiencing the longest periods of joblessness experienced in decades.

We can add to this the fact that the debt crisis in Europe has now spread to Hungary.  So now, Greece, Portugal, Ireland, Italy, Spain and Hungary are all now facing serious debt crises and even risk of default. The European economy is in disarray, and investors were not pleased as the Dow plunged more than 300 points to below 10,000.

The homebuyer tax credits are gone, the stimulus is beginning to wear off, and there is nothing left that the feds can do to stave off another crisis since interest rates are already effectively zero and the federal government is more more broke than ever. State and local governments are in even worse shape.

Needless to say, this does not bode well for the “recovery.”

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What’s the Real Message from Those GM Ads?

Business, Democracy, Humor, Immigration, Nanny Statism
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“Whatever the State saith is a lie; whatever it hath is a theft.”
~ Nietzsche

There is no shortage of reporting about GM CEO Ed Whitacre’s recent series of TV ads touting GM’s ostensible early repayment of federal loan money.  Fox News, or as I like to refer to it, Faux News, is all over it.  A website known as Video Café – Crooks and Liars has posted a very good review of the coverage, along with a YouTube video of the actual ad, for those who have not seen it.

Here’s what shocks me about the ad:  Nothing.

It strikes me as pretty obvious that GM had to expect that someone would find out about their using loan money to repay loan money at some point.  Did Whiteacre, clearly a man with intelligence, credentials, and connections, think nobody would put 2-and-2 together?  Of course not.  He didn’t care.  He knows it doesn’t matter.

Indulge me as I recount one of my favorite jokes to begin illustrating why.

A burned-out executive moves to the hills to escape the rat race.  He moves into an old cabin in what he believes to be sparsely-populated woods and starts his new life.  He hopes to decompress and recharge and maybe re-connect with the fast-paced life he once knew at some later point.

One day, he hears a knock on his door.  In walks a man wearing nothing but a pair of tattered overalls, some old work boots, and a broad smile.  “Hey there, neighbor!” exclaims the man.  “My name is Enoch and I’m your neighbor!”

Initially taken aback, the executive-turned-hillbilly gathers himself and extends his hand.  “Pleased to meet you, Enoch.  My name is, Bill Exeter.  I just moved here from the Big City.”  Bill figures it is about time he got more acquainted with his new environment anyway.

Enoch begins, “Well, Bill, I just wanted to invite you to a little gathering at my house on Friday.”  What great timing!  Bill can relax a little and meet some of his neighbors too.  Sensing Bill might be a little uneasy about coming to a strange neighbor’s house, Enoch begins to pitch the party.

“Listen Bill, I need to warn you.  My parties tend to get a little wild.”  Bill smiles, feeling better about his new neighborhood.  Enoch continues, “I can almost guarantee that there will be massive consumption of homebrew alcohol.”

Bill thinks, “Sounds good!” and responds, “Enoch, I can hold my liquor!”

Enoch continues, “Well then, I should probably also mention that this consumption of alcohol tends to make my guests a little bawdy.  As a matter of fact, things got bad enough last time that there was wild sex during the party!  I expect this one to be more of the same.”

Bill has been away from the rat race for long enough that the possibility of sex sounds good.  “Well, Enoch, I’m no virgin, if I must say so myself.”

Enoch continues, “OK.  I should also probably mention that fights tend to break out in the aftermath of many of my gatherings, especially after the sex.”

Bill, still happily pondering the possibility of sex, confidently says, “Hey Enoch, I can handle myself.”

Enoch ends with, “Excellent!  I’ll look for you around 8:00 this Friday then.”  Enoch turns to leave the house.

Just before Enoch closes the door behind himself, Bill yells, “Hey Enoch!  What should I wear?”

Enoch shrugs his shoulders and says, “It don’t much matter.  It’s just going to be the two of us.”

<Rim Shot>

The key point—the understanding that is manifested over and over in U.S. politics—is contained in that punch line:  It doesn’t much matter anyway.  GM received the TARP money, even though it is not a financial firm.  One might argue that since GM used to own GMAC—its erstwhile lending mechanism—it qualifies as a financial firm.  That strikes me as a stretch, but that does appear to be the partial mechanism GM used to get the cash.  Certainly, the TARP money was specifically for financial firms.  According to Wiki:

The Troubled Asset Relief Program, commonly referred to as TARP, is a program of the United States government to purchase assets and equity from financial institutions to strengthen its financial sector. It is the largest component of the government’s measures in 2008 to address the subprime mortgage crisis.

GM mismanaged and underperformed its way into a deep financial hole.  It didn’t much matter.  The responsibility for GM’s problems rested with GM.  It didn’t much matter.  In the aftermath of all that underperforming, GM had the gall to ask the government for some cash, a huge wad of cash, and acquired that money for both GM and GMAC.

The overwhelming majority of Americans did not think any firm should be bailed out.  It didn’t much matter.  Congress gave money ostensibly aimed at saving the financial sector from the subprime mortgage crisis to a troubled automobile manufacturer with a management and sales crisis.

The American taxpayer was under no obligation to GM, its shareholders, or its employees. It didn’t much matter.  GM got the cash.  They have now paid back some of the early money with some of the later money, and have gone on TV to brag about it, despite the fact that such an obvious ruse should be found out.  It didn’t much matter.

While some of this behavior initially upset me, looking back on it—particularly in context with the normal behavior of the State—I see that my anger was misplaced.  The State generally and its agents in particular spew forth all manner of unmitigated, easily-identifiable equine feces on a routine basis.  Think not?   Here’s a recent sampling of talking points that have, inexplicably yet inexorably, fallen from the mouths of our leaders:

“They hate us for our freedoms.”  (This phrase is generally uttered in regard to Islamic terrorists wanting to attack the U.S.  Somehow the fact that other equally-free countries are not being similarly attacked gets obscured.  Some have argued, persuasively, that such a designation as “free” for the U.S. is a little dicey anyway.)

“… too big to fail.”  (What does this even mean?  Can a firm be too small to fail as well?  Can a firm be too big to succeed?  Can a firm be too small to succeed?  What does size have to do with the economic realities of losing money at business?)

“You’re either with us or you’re with the terrorists.”  (That a reasonably-intelligent representative of the species Homo sapiens could say something this insipid and not be placed in a padded room—wearing a straitjacket and a mouth guard—speaks to the awesome power of patriotism, and stupidity, but maybe not in that order.)

“Illegal immigration represents a danger to the future of the U.S.”  (The U.S. didn’t even have a comprehensive set of regulations on immigration until 1952.  The Constitution doesn’t even mention immigration in those terms.  Hell, damned-near everyone in the U.S. except for the people who were already here when America was “discovered” is an immigrant or descended from one anyway.  Here’s my question:  When does an immigrant become a visitor or a guest?)

“We fight them over there so we don’t have to fight them here.”  (C’mon.  Does anyone think the U.S. was in danger of being invaded by terrorists?  Really?  The truth of the matter is this:  The U.S. military murders innocents abroad.  Call me touchy, but that might upset me too.)

So Ed Whiteacre went on television, in an ad ironically entitled “Trust” and bragged about GM “putting people back to work” and how GM had “repaid their loan in full, 5 years ahead of schedule.”  Don’t hate the playa!  He was only doing what politicians do to the American public on a regular schedule:  lie for specific gains, to an audience who wants to hear the lies, while knowing that even if the lie is found out, it won’t matter that much anyway.  Consider:  Since anyone who was seriously considering buying a GM car probably didn’t care about the bailout, what’s the downside of trying to rope in a few other suckers via bogus advertising?  Moral hazard epitomized.

Is GM going to stop getting government bail-out money?  Nope.  Will any subsequent event preclude the next chronically mismanaged firm from getting a boatload of statist cash?  Not likely. Will the skilled propagandists who do their best to lead rank-and-file Americans around by the nose change their tactics?  Absolutely not.

It doesn’t much matter.  It’s just them and our money—taken at gunpoint—anyway.

(Cross-posted at LRC.)

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What Do the Montgomery Bus Boycotts and Trash Collection in San Francisco Have in Common?

(Austrian) Economics, Anti-Statism, Business, Police Statism, Racism
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“Dr. King did not make the boycott, the boycott made Dr. King.”

~ Veterans of the Civil Rights Movement

The lessons of the past keep being repeated, over and over and over, and…

Blogger Mike “Mish” Shedlock posted a fascinating story on his website regarding a situation in San Francisco.  In “Trash Collecting Entrepreneur Squashed In San Francisco” he cites one of his respondents, known simply as Michael, who relates a story about trash collection.  One of the customers of the local trash collection service—a contractor referred to as Joe—got fed up with paying $37 per trash can, per week, for garbage removal.  He and his neighbor began to take their own trash for disposal at a local dump, using “Joe’s” truck.  Shortly, other neighbors joined their informal garbage disposal network, opting to pay the contractor $10 a week for more service than they were getting from the city union.  Soon, after their little business had begun to unexpectedly take off, their competitors decided to call in the big guns.

When the local garbage company and its union found out about “Joe” they complained to the city. Within a year a law was passed stating that garbage service was now mandatory for all residents at the price the city’s monopoly charged, which was shortly raised.  And “Joe”?  For a while he still took our recyclables until he was fined $4000, even though he had our permission.

None of this is really that surprising.  The State often passes laws to prevent competition.  For example, Lysander Spooner’s attempts to compete with the post office led to the passing of laws specifically designed to prevent competition in delivery of first class mail.  Recalling my Southern pig farming roots, I’d offer this metaphor.  When a hog is sucking the teat, he tends to fight to keep his place in line.  He cares not about his siblings and their hunger.  Nor does he care that he is full.  He cares about one thing:  maintaining vapor lock on that teat.  With apologies to any unionist garbage men in our studio audience, the garbage collection unions employed by the city of San Francisco are comparable to government teat suckers, so their reaction to some random guy actually providing service and “stealing” their business is no surprise.  What I find ironic is this.  Not only does this situation in San Francisco compare to Spooner’s mail delivery business, it also reflects the scenario during the Montgomery Bus Boycotts.

Consider:  When the Montgomery Bus Boycotts began, black people immediately tried to find alternative means of transportation.  This was a classic market response.  Some of the local taxis, specifically the ones driven by other black people, began to offer reduced-price rides. They charged a fare equal to the cost of a bus ride.  How did the City of Montgomery respond?  The city began to fine taxis for charging reduced fares.  They made it against the law to charge whatever you wanted for the service you sold to customers who voluntarily sought you out.  (Sound familiar?)  Not to be outdone (and using techniques from similar boycotts in other places), the black citizens organized extensive carpool options.  These were people attempting to use their own resources—pieces of private property known as automobiles—to provide a voluntary service for people who needed rides.  How did the City of Montgomery respond?  The city forced insurance carriers to drop coverage for any such car.  Note that this was a struggle between citizens of Montgomery who happened to be black and the City of Montgomery—an arm of the government.

Any competent student of U.S. history knows how all this played out.  The boycott lasted for a very long time, much longer than comparable ones in other cities.  The federal government eventually rode to the rescue, passing legislation that required the bus company to treat all passengers equally.  What is generally not known is this.  The bus company, losing money hand over fist early in the boycott, was actually considering a way to acquiesce to the citizens’ demands early in the boycott, since a large percentage of the bus company’s ridership was black people.  (They say the way to a man’s heart is through his stomach.  I say the way to a racist’s heart is through his wallet.)  Furthermore, the business community of Montgomery, also feeling the burn of less black spending, formed a group called the Men of Montgomery with the express purpose of finding a way to end the boycott.  One could argue that it was only because the city blocked alternative travel options and outside financiers “spotted” the bus company money that the whole thing wasn’t over in a few weeks.

One arm of the State ostensibly stopping another arm of the State from infringing on black folks is an example of the irony of coercion.  One would be wise to learn from the words of Laurence J. Peter, “A man convinced against his will is of the same opinion still.”  The initial statist actions—of the City of Montgomery—had the effect of forcing those who did not want to pay for poor service to walk, and for much longer than the market would have otherwise allowed.  The secondary statist actions—the laws passed to supposedly protect black bus riders in Montgomery—gave those against whom the law was enforced an excuse to remain upset for years to come.  Would the owners and operators of the bus company have eventually given in, faced with bankruptcy?  We’ll never know, but I bet it’s a lot harder to be mad at a paying customer who is not the beneficiary of statist action.  (As an aside, Rosa Parks was not the first black person to refuse to move from her seat, but that’s probably another essay.)  Certainly one has to admire the tenacity of those who risked so much for a privilege for which they should not have even had to ask.  The courage of those on the front lines in Montgomery cannot be overstated!  Still, it would have been nice to see if Montgomery would have become the epicenter of a black-owned bus and taxi company movement.

Either way, we’ll never know.  The rest is history, and it keeps repeating itself.

(Cross-posted at LRC.)

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