With the U.S. Supreme Court’s June decision in Kelo v. New London, the truth of this column’s conceit—that Rockford, Illinois, is a microcosm of America—has never been more clear.  One of the running themes of this column since shortly after it began in 2001 as a “Letter From Rockford” has been the abuse of the power of eminent domain by local government.  Now, the Supreme Court has essentially declared that Winnebago County and the city of Rockford were not guilty of abuse; they were simply ahead of the times.

Kelo has substantially removed state and local eminent-domain proceedings from review by the federal courts.  For this reason, some libertarians have cheered the ruling, seeing in it the beginnings of a reversal of the Incorporation Doctrine by which the restrictions of the Bill of Rights (applied originally only to the federal government) have been extended to the states.

If only it were so simple.  While it is true that the Fifth Amendment prohibition on taking private property “for public use, without just compensation” was never meant to apply to the states, it is also true that the amendment was never meant to serve as a summary of the common-law understanding of eminent domain—which did apply to all levels of government—but merely to ensure that, if eminent domain were exercised on the federal level (something that did not occur until 1876), “just compensation” would be provided.  While it may seem otherwise to latter-day Americans who memorized the Bill of Rights in junior high, it is not self-evident that, if property is to be taken for “public use,” “just compensation” must be provided.  The Framers, however, agreed that this was the right thing to do, and they codified their understanding in the Fifth Amendment.

The Fifth Amendment does point to one important aspect of the common-law understanding of eminent domain that bound all governments in America—local, state, and federal.  Property could be taken only for “public use,” and this is where the foes of the Incorporation Doctrine who have greeted Kelo with enthusiasm are sorely mistaken.  In the process of removing federal-court oversight of state and local eminent-domain proceedings, the Supreme Court has expanded the concept of eminent domain to include circumstances that the common law would have flatly rejected—and, in so doing, has expanded the power of local and state governments to tyrannical levels.  Post-Kelo, every governmental body can redistribute any property within its boundaries as it sees fit—as long as it can argue that the new owner will put it to better economic use than the previous one had.  And who will judge whether the governmental body has proved its argument?  According to Kelo, that judgment is left up to the governmental body itself, not the courts.

While, to many of the readers of Chronicles, taking a 40-acre parking lot from Wal-Mart and breaking it up into eight 5-acre homesteads is self-evidently a better economic use of the property, no local government will ever see it that way.  The quality of the economic use of a property will be based almost entirely upon the aggregate of the monetary transactions that take place on that property—which is simply another way of saying that anyone who can promise that he will generate a greater combination of property taxes and sales taxes than you do automatically has a stronger claim to your property than you have.  To cities such as Rockford, where many residents believe that developers have too much control over local government, the Supreme Court has said, “You ain’t seen nothing yet.”

In small towns and medium-sized cities across the United States, the most expensive block of homes does not come close to generating property taxes comparable to the combination of property taxes and sales taxes that would be generated by a Wal-Mart or a megamall on the same spot.  (And, of course, most houses do not generate any sales taxes.)  On the day that Kelo was handed down, the corporate attorneys in Bentonville, Arkansas, no doubt had to put on waders to protect their fancy cowboy boots from being stained by their drool.

Retiring Justice Sandra Day O’Connor, in a rare moment of clearheadedness, accurately summed up the import of this decision in her dissent: “The beneficiaries are likely to be those citizens with disproportionate influence and power in the political process, large corporations and development firms.”

What is most surprising about the Kelo decision is not that the Supreme Court has redefined eminent domain; it is that the Court took so long to do so.  In 2000, the city of Rockford initiated eminent-domain proceedings against the owners of the Torres Market, a Mexican grocery in the southwest quadrant of the city.  At the time, there were no full-service groceries in the area, and, for several years, the Torreses had met the needs of this economically depressed, largely black and Hispanic neighborhood as best they could.  When a local developer approached the city with a plan to place an IGA on the Torres property, it should have been obvious that he was trying to increase the chance that his proposed store would succeed by eliminating his only significant competition.  (There were plenty of vacant properties on which the IGA could have been built.)

Shortly after then-mayor Charles Box announced that the city intended to take the Torres Market by eminent domain and to hand the property over to the developer of the IGA, I appeared on a local television talk show with the city’s director of community development, Barbara Richardson.  When I pressed her to explain how the city could justify this redistribution of property under the traditional understanding of eminent domain, she replied that, “If you believe that government has any role in economic development, then you must believe that government can do whatever is necessary in order to facilitate economic development.”  At the time, that seemed like a socialist argument; today, it is the law of the land.