Donald Trump and the Anatomy of Cronyism

Donald Trump’s “straight talk” has once again created a minor controversy, at least among many commentators on the right. Trump recently told Fox News’s Bret Baier that he thinks the use of eminent domain is “a wonderful thing.” His comments give us more insight (if we needed it) into the kind of politician Trump would be. (A question for Trump supporters: is “straight talk” really admirable when what a candidate has to say is scary? But I digress.) But the subject of eminent domain and Trump’s past role in projects that use the power are just as important for what they tell us about modern government today. Trump may be an anomaly as a politician, but his participation in schemes involving eminent domain and his embrace of the power shouldn’t surprise us at all. When government possesses the kind of arbitrary power ours does today — and eminent domain is only one example — the Trumps and other cronies like him are inevitably going to take advantage of it.

To see why, let’s start with a representative quote from the interview:

I think eminent domain for massive projects, for instance, you’re going to create thousands of jobs, and you have somebody that’s in the way, and you pay that person far more — don’t forget, eminent domain, they get a lot of money, and you need a house in a certain location, because you’re going to build this massive development that’s going to employ thousands of people, or you’re going to build a factory, that without this little house, you can’t build the factory — I think eminent domain is fine.

My quick translation of Trump’s remarks: if a project is “important” enough to the “public” then using government to force someone to sell their property is fine, even laudable. We can’t let one property owner hold up a big project that might benefit the public, and, in any event, those subject to eminent domain have nothing to complain about, as they typically receive far more for their property than it’s worth. 

Ilya Somin deals with this latter claim in a post at the Volokh Conspiracy, pointing out that, in fact, property owners subject to eminent domain typically receive far less than their homes are worth and they are never compensated for the value they themselves place on a home in which they chose to live. After all, if they really wanted to sell, they would do so before anyone proposed forcing them out. So Trump’s claim that the use of eminent domain is somehow just or is not really a “taking” (as he claimed in the interview) is nonsense. Forcing someone to sell property he doesn’t want to sell or to sell it for less than he thinks it’s worth is stealing.

Most of Trump’s critics have focused their complaints on the use of eminent domain to transfer property from one private owner to another, in violation of the “public use” restriction in the takings clause (the takings clause reads “nor shall private property be taken for public use without just compensation”). That was the subject of the Supreme Court’s infamous Kelo case, in which the Court upheld the taking of a number of homes and properties in New London, CT so they could be handed over to developers for condos and an office building for Pfizer.

I certainly agree that eminent domain should not be used for private uses, but I would go farther and (ahem) condemn the whole takings clause. The power of eminent domain is unjust and inconsistent with the powers that any free government should possess regardless of whether government takes land for an alleged public or private purpose. If government wants land, it should have to buy it like everyone else. As I’ll explain below, when it possesses the power to force a “sale” — i.e., the power to steal — it is inevitable that people like Trump will convince local governments to use the power to benefit them.

That’s been happening since at least the mid-19th century, when governments used eminent domain on behalf of railroads. And it’s what Trump tried to do in Atlantic City in the mid-1990s to Vera Coking. He wanted her land for a casino parking lot. She didn’t want to sell. So he convinced a city redevelopment agency to use eminent domain against her. Fortunately, Coking ended up keeping her home, thanks to the efforts of my former colleagues at the Institute for Justice. Alas, Susette Kelo and her neighbors were not so lucky, and because of the Kelo decision and a few others from the Supreme Court, as a constitutional matter, land can be taken for almost any purpose today. “Public use” in the takings clause has essentially been interpreted to mean “public benefit,” which ends up meaning pretty much whatever the electorate or a legislature says it means.

The logical result of this power in the hands of government is that people clamor to become the beneficiaries of the government’s power to transfer property to “the public” rather than the victims, which leads to pressure group warfare, influence peddling, and money in politics. I’ve made that point before, but I haven’t delved into the mechanics of how it all works, so even though that will make this post a bit long, it’s worth going into because a lot of people misunderstand cronyism. Most people get that it has something to do with well-connected interests like Trump getting “favors” or privileges from government, but it’s not terribly clear why that happens. Most people on the right blame “big government,” which is not entirely wrong, but it’s not very clear, either. The problem is not the size of government, per se, but the principle that defines its authority and its purpose. Limit government’s power to doing the right things in principle, as the Founders in essence did, and your government will function as free of cronyism and corruption as is possible. Get it wrong, and corruption will end up becoming the rule, rather than the exception. 

To see that, let’s start with the common description of cronyism. Most commentators describe it as well-connected interests, typically businesses, influencing government to obtain special favors or privileges for themselves and at the expense of others. Examples include subsidies, restrictions on competitors, and, of course, the use of eminent domain for things like casino parking lots.

As I’ve written before, this description is far too vague and tame. Among other things, it fails to explain the nature of the “privileges” that are being sought. The answer, to be blunt, is the privilege of using the force government possesses to take money and property from those who own it or otherwise to violate their rights. A better term for cronyism would be legal plunder, which is the term Frederic Bastiat used. (Ayn Rand used the term “political pull” to designate those who use political connections to take from those who produce.)

I think it’s helpful to think of a government that possesses this sort of power as akin to a mobster. No one would whitewash what a mobster does by claiming that he offers “privileges” to special interests who “influence” him. We recognize that what he offers is threats and force, and when someone procures his services, we call them both criminals. We also recognize that there’s a big difference between these criminals and their victims. If their victims were to pay the criminals protection money to save their property or their lives, we certainly wouldn’t treat them as equivalent to the mobster or claim they were “corrupting” him by paying him off. We’d say they were engaged in self-defense.

Those who complain about money in politics, and even many on the right who complain about cronyism, miss this distinction entirely. There’s a big difference between trying to influence government to, say, prevent regulators from destroying your business or to repeal protectionist laws, on the one hand, and trying to influence it to use those laws to steal from others, on the other. The Koch brothers are examples of the former — people who spend a lot of money trying to influence government to prevent it from being able to engage in plunder, by limiting its power. Trump (who has had the audacity to criticize the Koch brothers) is an example of the latter — someone who influences government to engage in legal plunder.

None of this is to say that government has to operate like a mobster. Although most governments in history have — feudalism, for example, operates like a gigantic protection racket in which the king plunders his subjects in exchange for protection from even worse plunderers — America shows that plunder and cronyism don’t have to be the rule.   

But for government to protect rather than to plunder, the key principle it must follow is individual rights. Protecting individual rights provides both the proper moral purpose of government and the proper limiting principle for its power. To see that, it’s essential always to remember that the power government possesses is the power of physical force. It’s the power to compel. Force can really only be used for one thing: to stop. You can’t force someone to do the thinking necessary to produce, trade, run businesses, and the like. You can dominate them, steal from them, stop them from functioning, or kill them, but none of these things gets you anything other than self-destruction if the objects of your use of force are productive, peaceful people. These virtues, and the people who embody them, are necessary for us to live. We should all be productive, peaceful people if want to live good lives and be happy. Using force to threaten or steal from good people is counterproductive, immoral, and, well, crazy. Force is only a value to sensible, rational people if it’s used to stop criminals.

Rights are the principles that ensure that the force government possesses is used to defend rather than to plunder and destroy. In the words of the Declaration of Independence, governments are instituted to protect the rights to life, liberty, and the pursuit of happiness. Put slightly differently, your life is yours and you have the right to take the actions necessary to sustain it, keep what you produce, trade with others, and pursue whatever makes you happy as long as you respect the rights of others. Respecting rights means refraining from initiating force against others. In essence, it means engaging with people peacefully and based on mutual respect and cooperation or walking away. We create governments to deal with people who don’t follow these principles by initiating force against others — that is, criminals. 

But when government uses its power beyond the protection of rights it necessarily ends up violating them. It acts like a mobster, initiating force against innocent men, rather than using it to defend them. It takes income from those who earned it and redistributes it to those who did not, whether in the form of welfare for the poor or welfare for corporations. It forces taxpayers to subsidize loans to foreign buyers of American exports (the Export/Import Bank). It violates the right to contract by preventing us from hiring service providers who have not satisfied someone else’s standards (occupational licensing laws, such as those that have been threatening Uber in every city) or by hiring workers at a mutually-agreed upon wage (minimum wage laws). It forces people to sell property they don’t want to sell at the price offered (eminent domain). There are countless other examples of power used in this manner by government today.

Rights provide a clear, objective principle for the use of government power, because the touchstone of their violation is the initiation of force. If you want to see how this works in practice, you can peruse the core principles of criminal, tort, contract, and property law, which have defined the violations of rights in in terms of force for generations.

But what is the principle that determines the use of government power when rights are not the standard? How does anyone decide whose wealth should be confiscated, whose businesses should be restricted and how, or whose property should be taken? The mobster’s way is to offer his power to the highest bidder. The result is a bidding war between those, like Trump, who wish to use that power to plunder, and those, like the Kelos and the Cokings, who wish to protect themselves. Is this not in essence what people are doing when they try to influence politics through campaign contributions and lobbying — attempting to influence those who hold power over them, either to plunder others or to defend themselves? Isn’t it entirely predictable that the Trumps of the world will try to use that power and entirely defensible that the Cokings and the Kelos will try to prevent it from being used against them?

The common response — which Trump relies on in discussing eminent domain — is that government should use its power to achieve “the public good.” This is worse than the mobster’s solution, because it puts an ethical gloss on an unjust and immoral action. The “public good” is a meaningless idea unless it is used to refer, literally, to what is good for 100 percent of the people who compose the public. It never is. Ideas like the “public good” or the “welfare of society” are only ever used to justify sacrificing some people’s interests — the Kelos and the Cokings — to others like Donald Trump. You can see the idea of sacrifice built right into Trump’s (and everyone else’s) explanation of why eminent domain must be used: some people are in the way. They are “hold outs” who refuse to sell at a “reasonable” price, so we need to force them out. 

In fairness to the Donald, there’s no reason to think his idea of what counts as the public good is any worse than anyone else’s. Why, for instance, is a public park or even a road in the public’s interest but not a casino parking lot? Do the people who use casinos or who are employed to build their parking lots count for less than those who use public parks or certain roads? My guess is far more people use casinos than public parks. (In this connection, Peter Schwartz’s book In Defense of Selfishness is well worth a read, especially his chapter on the myth of the public interest, in which he points out that many more people use Disneyland annually than Yellowstone, yet only the latter is considered a “public good.”) My point is not to embrace eminent domain (or similar uses of government power) for business purposes rather than parks, but to show that there is no rational calculus by which we can determine when something is a “public good” as that term is generally used.

In “The Pull Peddlers,” Ayn Rand described government power that is used in this way as inherently arbitrary:

The worst aspect of it is not that such a power can be used dishonestly, but that it cannot be used honestly. The wisest man in the world, with the purest integrity, cannot find a criterion for the just, equitable, rational application of an unjust, inequitable, irrational principle. The best that an honest official can do is to accept no material bribe for his arbitrary decision; but this does not make his decision and its consequences more just or less calamitous.

The calculus of the public good amounts to little more than wetting one’s finger to the political winds. If enough people say something is in the public’s interest, then it is, by definition — at least according to the prevailing view. As the Supreme Court once put it, “when the legislature has spoken, the public interest has been declared in terms well-nigh conclusive.”

The practical result of the legalized use of force in this manner is pressure group warfare, as everyone must join some interest group and clamor, either before the legislature or the electorate, to be considered the “public,” and thus the beneficiary of government largesse, rather than the victim. Better to be a Trump, under this system, than a Kelo or a Coking if you want to keep you hard earned money and property.

Is it any wonder, then, that people contribute to candidates, that they pour millions into super PACs, and lobby politicians? We tell them each election season that this is the proper way the “game” is played. Vote for me and I will increase your social security benefits (by taxing the middle class, of course). Vote for me and I will forgive your student loans (by taxing everyone else, of course). Vote for me and I will provide universal education for college students, as Bernie Sanders says (which, again, will come predominantly from the middle class). Vote for me and I will regulate corporations, or tax them, or prevent them from moving abroad to avoid high taxes here or find some other way to punish them for their success. Donald Trump recently said that if he is elected, he’ll impose confiscatory taxes on companies that move their manufacturing plants abroad as Ford recently did. What choice does Ford or any company have under a regime like this but to kiss The Donald’s ring and hope that he deigns to allow them to continue operating? (That Trump doesn’t seem to realize he’ll need to enlist Congress to accomplish this tells us even more about his knowledge of how our government functions, but it doesn’t change the basic point. The need to sometimes kiss 535 rings is in part what campaign contributions are for.)

The nerve of people like Trump — and most of his fellow candidates — is that they complain about cronyism and money in politics when their own views and actions cause this sort of corruption in government. Many people referred to Trump as a “bully” for using eminent domain as he has. It’s true, but let’s not forget that we gave him that power and that our government exercises it in myriad ways beyond eminent domain every day. If we really want to get serious about eliminating legal plunder and the cronyism that inevitably goes with it, there’s only one choice: limit the power of government to its originally intended scope — limit it to the protection of rights.

For more on this subject, see my talks here and here, and another post on cronyism here.

“Donald Trump Signs The Pledge 12.jpg” by Michael Vadon via Wikimedia Commons used under CC BY-SA 4.0 / Cropped from original