When Americans debate the merits of Wal-Mart, the discussions often become contentious, centering on whether this megaretailer is a corporate predator that drives wages down and Main Street businesses into ruin or is a corporate good guy because it offers decent jobs to the jobless and low prices to consumers.

Whatever one’s opinion of Wal-Mart, there should be no contention on one simple point: Wal-Mart, Costco, Home Depot, and other big-box stores should not leverage their political power to convince cities to use eminent domain to drive property owners off their land to make way for the newest superstore.  Nor should these retailers receive taxpayer-funded subsidies to finance the construction or operation of these stores.

Yet such abuses are common practice today, made even more common since 1981, when General Motors convinced the city of Detroit to obliterate an entire neighborhood, Poletown, so that it could build a Cadillac assembly plant.

Poletown was a humble but nice working-class ethnic neighborhood with more than 1,000 homes, 600 businesses, several churches, and a hospital.  When GM wanted the neighborhood cleared, local officials argued that Poletown had to be sacrificed to boost the entire region’s economic viability.

The homeowners and merchants were being selfish for trying to defend their close-knit neighborhood, the plan’s supporters said.  The good of the few had to be sacrificed for the good of the many.  The case was a departure from earlier eminent-domain actions; officials did not contend, for instance, that the neighborhood was a dire slum in need of destruction for the good of the residents.  Instead, they made a regional economic argument: Detroit’s future hinged on GM’s ability to build the Poletown plant.

The Michigan Supreme Court ruled in favor of GM and the local officials, and thousands of people were driven out of one the city’s most settled and decent neighborhoods.  “The power of eminent domain is to be used in this instance primarily to accomplish the essential public purposes of alleviating unemployment and revitalizing the economic base of the community,” the court opined in 1981.  “The benefit to a private interest is merely incidental. . . . If the public benefit was not so clear and significant, we would hesitate to sanction approval of such a project.”

That decision, although applying only to Michigan cities, was watched closely nationwide.  It gave the green light to other cities to begin arguing that economic development was sufficient justification for the use of eminent domain to transfer properties from one private owner to another.

Never mind that GM’s promises never materialized; the plant never offered the jobs and economic uplift that GM used to sell the project.

Following the Michigan Supreme Court’s ruling against Poletown, many other courts upheld similar aggressive takings.  “In 1998, the Kansas Supreme Court held that taking the homes of 150 families to make way for the privately owned Kansas Speedway . . . was a public purpose,” reported the Wichita Eagle, in a fairly typical government action and court ruling.

Every day, small property owners lose their properties without a fight or a mention in the newspaper.  According to the Institute for Justice, a Washington public-interest law firm that represents property owners, localities have used or threatened to use eminent domain to benefit other private parties 10,000 times over the past five years.

The threat is as ominous as the actual use of eminent domain.  When a mugger puts a gun to someone’s head, he rarely has to pull the trigger.  Most people hand over their wallets.  Likewise, when cities “negotiate” for a property when they have the power of eminent domain behind them, most owners simply cave in and sell at unfavorable terms.

Fortunately, in July 2004, the Michigan Supreme Court overturned the 1981 Poletown decision.  It was 23 years too late for the original residents of that community, but the recent ruling will slow the abuses in Michigan, and it is likely to be considered by other courts in other states, as legal challenges continue.

The decision was reviewed because it was used as justification for other takings, including Wayne County’s attempt to take private land to build a technology park.  The current justices called the original decision

a radical departure from fundamental constitutional principles. . . . [I]f one’s ownership of private property is forever subject to the government’s determination that another private party would put one’s land to better use, then the ownership of real property is perpetually threatened by the expansion plans of any large discount retailer, “megastore,” or the like.

In 1981, in his dissenting opinion, Justice James L. Ryan argued that,

With regard to highways, railroads, canals, and other instrumentalities of commerce, it takes little imagination to recognize that without eminent domain these essential improvements, all of which require particular configurations of property—narrow and generally straight ribbons of land—would be “otherwise impracticable”; . . . [I]t could hardly be contended that the existence of the automotive industry or the construction of a new General Motors assembly plant requires the use of eminent domain.

In 2004, the court referred to Ryan’s sensible arguments.

There is still an enormous way to go before the abuses stop.  Eminent domain is a dangerous tool for any use, and it has been abused over the years for the benefit of the railroads and by the builders of the Interstate Highway System.  It is unconscionable to use it for the purpose of benefiting corporate America at the expense of average home-owners, farmers, and small-business owners.

Wal-Mart and other firms love to talk about the American way of free enterprise and competition, yet they embrace Soviet-style land-clearing policies whenever it suits their bottom line.  Some cities are so eager to gain the tax revenues that the large retailers produce that they will use any power available to them to secure these stores.

In Cypress, California, in 2002, the city council condemned a property owned by the Cottonwood Christian Center, which was planning to develop a campus-like worship center and church.  The city intended to sell the land at a cut rate to Costco.  Costco even began marketing restaurant pads on the site before it owned the land.  The city was frank about its rationale: Churches don’t pay many taxes, but Costcos pay oodles of taxes.  Boosting a city’s revenues is a “public use,” which justifies the taking.

After a long and costly fight, a federal judge granted a preliminary junction that eventually postponed the action and forced the city to craft a compromise plan with the church.  In the decision, the judge argued that, if Cypress’s actions are the standard for property rights in America, then property rights no longer exist.

In Lakewood, Ohio, the city voted to condemn an entire park-front neighborhood, declaring that the historic, beautifully kept homes were actually blighted because they lack air conditioning (near Lake Erie!) and attached garages.  The goal was to move the middle-class residents out of the area and to replace the homes with fancy condos and restaurants geared toward an upscale clientele.  A grassroots campaign that included a referendum and a mayoral recall stopped that plan.

Too often, eminent domain is used by the rich and powerful to steal from the poor and the middle class.  The movers and shakers in Lakewood rallied behind the condo developers, just as the movers and shakers backed GM when it coveted the Poletown neighborhood.  The Wall Street Journal’s John Fund uses the term LOOT to refer to Leaders Of Our Town, which is a sad commentary on how Main Street businesses and middle-class homeowners are forced to fend for themselves when eminent domain is threatened.  The media typically print civic-booster stories about the Great New Project, ignoring the plight of property owners who must face eviction by government force.  Without courage and resources, homeowners get bulldozed.

Eminent domain had been abused in the past on behalf of railroad companies.  Many rail lines meander in a manner similar to congressional districts, as railroad companies, which were granted the power on behalf of the government, sometimes took convoluted routes so they could grab as much land as possible.

Despite that exception, the courts generally insisted that the Fifth Amendment hold firm: Public use meant things that are genuinely public.  Thinking changed dramatically in 1954, when the Warren Court offered its ruling in Berman v. Parker, a case regarding a redevelopment plan in Washington, D.C., that transferred property from one private owner to another.  In a decision that reads like a sociology textbook rather than an explanation of constitutional reasoning, Justice William O. Douglas wrote for the majority:

If those who govern the District of Columbia decide that the nation’s capital should be beautiful as well as sanitary, there is nothing in the Fifth Amendment that stands in the way. . . . If owner after owner were permitted to resist these redevelopment programs on the ground that his particular property was not being used against the public interest, integrated plans for redevelopment would suffer greatly.

The area at issue in the District of Columbia was genuinely blighted, by most standards.  Other cities, however, kept pushing the envelope, and, by 1981, any excuse would serve the greedy interests of city officials and corporate raiders who gladly use political muscle rather than the market to achieve their ends.

The overturning of Poletown is a major step in the right direction.  Other cases, including the injunction in the Cypress case, have pushed the pendulum back in a constitutional direction.  On March 1, 2004, the Colorado Supreme Court rejected the Arvada Urban Renewal Authority’s attempt to use eminent domain to take a private lake from its owners so that a portion of it could be filled in to support a Wal-Mart.

Earlier this year, the Connecticut Supreme Court decided to allow New London to condemn an historic waterfront area of homes, many of which had been in families for generations, so that condos and stores could be built to service a new Pfizer headquarters.  Fortunately, the U.S. Supreme Court agreed in September to review the case.

This review is the most promising news yet.  If the Supreme Court follows the lead of Michigan and Colorado, the Fifth Amendment will be upheld, and Wal-Mart, Costco, and other eminent-domain-abusing companies will have to do business by dealing with willing sellers rather than relying on government force.