Tag: Property rights

  • Eminent domain reserved for use in Wichita

    As part of the plan for the future of downtown Wichita, the city council was asked to formally disavow the use of eminent domain to take private property for the purpose of economic development. The council would not agree to this restriction.

    Susan Estes noted that the legislative agenda that the city council passed earlier in the meeting supported “home rule and local control as the most valid solution for recurring legislative issues.” High on the list of these issues is eminent domain.

    Estes asked that the city adopt a statement that the city will not use eminent domain to take property for someone else’s use.

    Answering her, Mayor Carl Brewer said it is the council’s record not to use eminent domain. “But,” he said, the city needs that opportunity and flexibility. He said that the city has been asked by developers to use eminent domain, but they’ve resisted. Nonetheless, he described it as one of the tools that is available to the city.

    Council member Janet Miller said that the Kansas legislature has placed restrictions on eminent domain, which she characterized as a prohibition.

    While Miller is correct — the Kansas legislature would have to pass a statute authorizing specific use of eminent domain, and the law is now more in favor of property owners than in the past — that protection, in my opinion, is weak.

    We can easily imagine a scenario where a developer — promising a grand development — wants a large tract of land, perhaps a city block or more. The mayor and others will travel to Topeka and testify that the city desperately needs the jobs and tax revenue the development will create. (Forgetting the fact that the development will probably be in a tax increment financing district and therefore not contributing increased tax revenue to the city’s general government.) The city’s lobbyist will work the halls, a case of a taxpayer-paid lobbyist working against the interest of taxpayers. The case will be made to other lawmakers that if they ever want to use eminent domain in their home towns, they’d better vote for Wichita’s request. Other forms of legislative logrolling will be in full behind-the-scenes use.

    So now property owners, instead of having to contest the city’s lawyers before a judge, have to lobby the entire legislature. The case — instead of being heard in a forum where the rule of law is respected — will be contested in a political body which in many cases has shown us that it cares little for private property rights.

    This was a moment in time where the city council could have taken leadership in protecting property owners from eminent domain abuse. The city — particularly Mayor Brewer and Council Member Miller — failed to grasp the importance of protecting this form of liberty and economic freedom.

  • Kansas and Wichita quick takes: Tuesday December 7, 2010

    Political pretense vs. market performance. What is the difference between markets and politics or government? “There is a large gap between the performance of markets and the public’s approval of markets. Despite the clear superiority of free markets over other economic arrangements at protecting liberty, promoting social cooperation and creating general prosperity, they have always been subject to pervasive doubts and, often, outright hostility. Of course, many people are also skeptical about government. Yet when problems arise that can even remotely be blamed on markets, the strong tendency is to ‘correct’ the ‘market failures’ by substituting more government control for market incentives.” The article is The Political Economy of Morality: Political Pretense vs. Market Performance by Dwight R. Lee. Lee explains the difference between “magnanimous morality” (helping people) and “mundane morality” (obeying the generally accepted rules or norms of conduct). Markets operate under mundane morality, which is not as emotionally appealing as as magnanimous morality. But it’s important, as it is markets — not government — that have provided economic progress. There’s much more to appreciate in this article, which ends this way: “The rhetoric dominating the public statements of politicians and their special-interest supplicants is successful at convincing people that magnanimous morality requires substituting political action for market incentives, even though the former generates outcomes that are less efficient and moral than does the latter. The reality is that political behavior is as motivated by self-interest as market behavior is. … As long as there are people who cannot resist the appeal of morality on the cheap, the political process will continue to serve up cheap morality. And the result will continue to be neither moral nor cheap.”

    Begging for Billionaires. The documentary film Begging for Billionaires will be shown in Wichita next week. The film’s synopsis is this: “In 2005, a divided U.S. Supreme Court gave city governments the authority to take private homes and businesses by eminent domain and transfer ownership to private developers for the purpose of building things like shopping centers, corporate office towers and professional sports arenas. According to the court, the community economic development benefits of such private projects qualified them as being for ‘public use’ under the 5th Amendment’s ‘takings clause.’ The Court’s ruling immediately sparked public outrage and was broadly criticized as a gross misinterpretation of the constitution. Through a mix of guerrilla journalism, expert interviews, and the stories of victims; Begging For Billionaires reveals the fallout of the Kelo case, exposing how city governments brazenly seize property after property from the powerless and give it to the powerful for the pettiest of non-essential ‘economic development’ projects, many of which are subsidized with taxpayer money. Meanwhile, poor and disadvantaged families are forced from their homes. Everyday citizens watch helplessly as their family histories are bulldozed to smithereens. In some cases, homeowners scramble to save their life’s possessions as demolition crews pulverize the walls around them, and Centuries-old neighborhoods are wiped from existence despite rich histories and beautifully maintained homes. Begging for Billionaires begs the question: are we losing sight of the balance between individual property rights and those of the community?” The movie, sponsored by Americans for Prosperity, will be shown on Monday, December 13 from 7:00 pm to 8:30 pm at the Lionel D. Alford Library located at 3447 S. Meridian in Wichita. The library is just north of the I-235 exit on Meridian. For more information on this event contact John Todd at john@johntodd.net or 316-312-7335, or Susan Estes, AFP Field Director at sestes@afphq.org or 316-681-4415.

    O’Toole on urban planning. As Wichita considers approving a plan for the revitalization of downtown Wichita, we should consider the wisdom of Randal O’Toole: “Urban planners want to shape our cities. And they want our cities to shape you. That’s the conclusion of Cato Institute Senior Fellow Randal O’Toole. He argues that the rationales for most urban planning collapses upon examination.” O’Toole visited Wichita earlier this year. Click here to view a short video of him speaking on urban planning.

    Kansas House of Representatives leaders elected. “House Speaker Mike O’Neal, R-Hutchinson and Rep. Arlen Siegfreid, R-Olathe, will hold pivotal leadership positions in the Kansas House after voting Monday among GOP members who re-elected O’Neal to the chamber’s top job and selected Siegfreid as the new House majority leader.” More from Tim Carpenter in the Topeka Capital-Journal.

    School lessons learned. Joel Klein, Chancellor of New York City public schools, writing in the Wall Street Journal: “Over the past eight years, I’ve been privileged to serve as chancellor of the New York City Department of Education, the nation’s largest school district. Working with a mayor who courageously took responsibility for our schools, our department has made significant changes and progress. Along the way, I’ve learned some important lessons about what works in public education, what doesn’t, and what (and who) are the biggest obstacles to the transformative changes we still need. … Traditional proposals for improving education — more money, better curriculum, smaller classes, etc. — aren’t going to get the job done. … Bureaucrats, unions and politicians had their way, and they blamed poor results on students and their families. … The people with the loudest and best-funded voices are committed to maintaining a status quo that protects their needs even if it doesn’t work for children. … As I leave the best job I’ve ever had, I know that more progress is possible despite the inevitable resistance to change. To prevail, the public and, most importantly, parents must insist on a single standard: Every school has to be one to which we’d send our own kids. We are not remotely close to that today. We know how to fix public education. The question is whether we have the political will to do it.” This is more evidence of how far behind the rest of the states is Kansas.

  • Kansas and Wichita quick takes: Sunday November 7, 2010

    Wichita City Council this week. Spirit AeroSystems asks for $7.5 million in Industrial Revenue Bonds (IRB). IRBs are not loans made by the city. In fact, in this case the bonds will be purchased by Spirit itself, says the agenda report: “Spirit AeroSystems, Inc. intends to purchase the bonds itself, through direct placement, and the bonds will not be reoffered for sale to the public.” The reason for the bonds is the property tax exemption on property purchased with the bond proceeds. Additionally, Spirit may not have to pay sales tax on the purchases. This is a public hearing designed to solicit citizen input on this matter. … Then POET Ethanol, Inc. asks for an additional five years of property tax exemption. Five years ago POET — then known as Ethanol Products, LLC — received a “five-plus-five-year” exemption, meaning that exemptions were granted for five years, with a review to take place to see if the company met the goals it agreed to as a condition of receiving the exemption. At this five year review, city staff says POET has met the goals and recommends that the property tax exemptions be granted for another five years. … The Finance Department will also present a quarterly financial report. The agenda and accompanying material is at Wichita City Council Meeting, November 9, 2010.

    The election means something. “Elections have consequences,” writes Burdett Loomis, professor of Political Science at the University of Kansas in an Insight Kansas editorial available at State of the State KS. He writes: “The broad and deep GOP set of victories means that conservatives have the opportunity to put forward an agenda of social, fiscal, and tax issues that have been built up over the past two decades. Unquestionably, many of those items will quickly find their way into law.” But Loomis thinks things are pretty good already in Kansas: “In general, things may need some tinkering, but there’s very little that’s broken in Kansas. Governor Brownback should understand his power, and the need to act responsibly as he works on behalf of all Kansans to better their health, education, and quality of life.”

    Wichita Eagle publisher at Pachyderm. This week’s meeting (November 12) meeting of the Wichita Pachyderm Club features as the presenter William “Skip” Hidlay, President and Publisher of The Wichita Eagle. His topic will be “The Eagle’s transformation in the digital age.” Hidlay is new to Wichita, having started at the Eagle in March after working at newspapers in New Jersey. The public is welcome at Wichita Pachyderm meetings. For more information click on Wichita Pachyderm Club.

    Property rights experiment to be conducted. This Monday Americans for Prosperity, Wichita Chapter, presents “I, City: An Exercise.” Presenters will be John Todd and Susan Estes. Todd says: “You are invited to participate in an experimental exercise involving private property rights, and experience the impact of taxes, regulations, and economic incentive programs mandated by government on those property rights.” Todd says that suggested reading prior to the meeting is “I, Pencil” an essay by Leonard E. Read of the Foundation For Economic Education. You may click here to read this short essay. This event is on Monday November 8, from 7:00 pm to 8:30 pm, at the Lionel D. Alford Library located at 3447 S. Meridian in Wichita. The library is just north of the I-235 exit on Meridian. For more information on this event contact John Todd at john@johntodd.net or 316-312-7335, or Susan Estes, AFP Field Director at sestes@afphq.org or 316-681-4415.

    Kansas taxes in perspective. Governor elect Sam Brownback wants to take a look at the tax structure in Kansas. Possible actions could include eliminating the corporate income tax. Context: The one cent per dollar increase in the statewide sales tax is expected to bring in an additional $300 million per year. According to the Kansas Legislature Briefing Book, in fiscal year 2009 the corporate income tax brought in $294.2 million, just about the same as the increase in the sales tax. Personal income taxes brought in $2,755.3 million. Excise taxes — sales and compensating use taxes, alcohol and cigarette taxes, and severance taxes — brought in $2,286.7 million.

    Huelskamp to Washington. Mark Reagan of the Dodge City Daily Globe interviews Tim Huelskamp, the new congressman for the first district of Kansas. Some of the matters Huelskamp has to deal with include orientation, hiring a staff in Washington and in the home district, his hope to serve on the agriculture committee, and voting for leadership. He notes that the federal government has been borrowing 37 cents of each dollar it spends. … Tim and his wife Angela have four young children, all adopted, some from Haiti. I would imagine a big decision he has to make is whether to travel home each weekend — as did predecessor Jerry Moran — or move his family to Washington. It’s not a quick and simple matter to travel from Washington to his home in Fowler. It usually takes about six hours to fly from Washington to Wichita, and then another three hours to drive to Fowler. That’s a lot of time spent traveling, and most of it is idle, wasted time. … I’ve observed Huelskamp in several debates on the floor of the Kansas Senate. Whoever is selected to fill his remaining term has some big shoes to fill.

    Election was about the economy. Cato Institute executive vice president David Boaz contributes an excellent analysis of the election and a cautionary warning. In GOP Won on Economy, So Focus on It he writes: “The usual pattern is that after the election, voters and the activists go back to their normal lives, but organized interests redouble their efforts to influence policymakers. The people who want something from government hire lobbyists, make political contributions and otherwise do all they can to get their hands on taxpayers’ money. Meanwhile, the average taxpayer cannot be expected to exert influence on each particular spending bill. Tea partiers must change that pattern. They must keep up the pressure on Congress and state legislators. They must demand actual performance, not just promises. To keep momentum going, tea partiers should also insist that Republicans stay focused on the economic agenda that created their winning coalition, and not get bogged down in divisive social issues, which will split the movement and alienate independents.” In Kansas, this may be a problem. While incoming governor Sam Brownback is already exploring ways to cut taxes in Kansas, there are also proposals for various social legislative agendas, such as restrictions on abortion and requiring photo ID for voting. While these measures are important, I believe our state’s fiscal status is very important and must be dealt with.

    Organ recital this Tuesday. This Tuesday German organist Ludger Lohmann visits Wichita to present a recital as part of the Rie Bloomfield Organ Series. The event is at 7:30 pm Tuesday, November 9, at Wiedemann Recital Hall (map) on the campus of Wichita State University. Tickets are $10 with discounts available. For more information call the fine arts box office at 316-978-3233. I’ve not heard Mr. Lohmann live, but I own several of his recordings, and this is a recital that music lovers should not miss.

  • Kansas and Wichita quick takes: Thursday November 4, 2010

    The future of politics is here, now. After noting how California reached way back to the past to elect a governor, Denis Boyles writes in National Review Online about the future, and how it’s being made right here: “If you want to see the bright and shining politics of the future, you have to go to the country’s heartland, and specifically to Kansas, a place most Democrats only know from Thomas Frank’s liberal folklore. There, the election has yielded two new congressmen — Mike Pompeo and the remarkable Tim Huelskamp — who were not created by the Tea Party movement because their politics were already ahead of that helpful wave. Here‘s a local paper’s coverage. Pompeo is a natural leader, while Huelskamp is something even more — an inspiration, maybe. (He’s briefly sketched in Superior, Nebraska). Mark these guys. Politically, they’re how it’s going to be.”

    Schools hope we won’t notice. Kansas Reporter tells of the new Kansas school funding lawsuit, filed on Election Day. Schools must have hoped that news of the filing would get swamped by election day news, which is what happened. The remedy asked for is more money, which has been shown not to work very well in terms of improving student performance … but it makes the education bureaucracy happy. I would suggest that students sue the Kansas State Department of Education for the inadequate education many have received. For a remedy, ask for things that have been shown to work: charter schools and widespread school choice.

    Kansas House Republicans. Yesterday I reported that Republicans gained 15 seats in the Kansas House of Representatives. Double-checking revealed that I had made a data entry error. The actual number of Republican gains is 16, for a composition of 92 Republicans and 33 Democrats.

    Kansas House Conservatives. In the same article it was noted that since some Kansas House Republicans — the so-called moderates or left-wing Republicans — vote with Democrats more often than not, there was a working caucus of about 55 conservatives. It is thought that conservatives picked up four seats in the August primary, bringing the number to 59. With most of the Republicans who defeated Democrats expected to join the conservative cause, it appears that conservatives now fill over 70 seats, constituting a working majority in the 125-member Kansas House of Representatives. Conservatives do not enjoy a majority of votes in the Kansas Senate, however.

    Local smoking bans still wrong. As noted in today’s Wichita Eagle, there might be a revisiting of the relatively new Kansas statewide smoking ban. Incoming Governor Sam Brownback believes that such decisions should be left to local governments, presumably counties or cities in this case. For those who believe that the proper foundation for making such decisions is unfoundering respect for property rights — plus the belief that free people can make their own decisions — it doesn’t matter much who violates these property rights.

    GOP: Unlock the American Economy Daniel Henninger in the Wall Street Journal on spending and what Congress really needs to do: “It is conventional wisdom that what voters, tea partiers and talkers want the Republican Party to do is cut the spending. … Getting the spending under control matters a lot.” But Henninger says controlling spending is not enough: “The new GOP has to find an identity beyond the Beltway power game, a way to make the nation’s most important activity not what is going on in Washington, as now, but what is done out in the country, among the nation’s daily producers and workers. The simplest way for the Republican Party to free itself and the economy from this unending Beltway hell is by reviving a core belief of one of the country’s most successful presidents: If the government will get out of the way, Ronald Reagan argued, there’s no limit to what the American people can achieve.” Government getting out of the way was one of freshly-minted Congressman Mike Pompeo’s campaign themes. National figures are warning Republicans that they have one chance to get things right in Washington or risk losing the support they won in this election. And Pompeo urged his supporters, more than once, to hold him accountable in Washington. Maybe Raj Goyle might want to linger in Wichita for a few years to see how things work out.

  • Kansas restrictive covenants eased regarding political yard signs

    It’s common for neighborhoods to have restrictive covenants that prohibit homeowners from placing any signs in their yard, except for signs advertising homes for sale. But a 2008 Kansas law overrides these restrictive covenants to allow for the placement of small political yard signs starting 45 days before an election. Still, residents of covenant neighborhoods may want to observe their neighborhood’s restrictions, even though they are not valid.

    The bill was the product of then-Senator Phil Journey of Haysville. Journey is now a judge in the Kansas 18th Judicial District. The bill passed unanimously in both the Kansas House and Senate.

    According to the First Amendment Center, some 50 million people live in neighborhoods with homeowners associations. And laws like the 2008 Kansas law are not without controversy, despite the unanimous vote in the Kansas Legislature.

    While the U.S. Supreme Court has ruled that governmental entities like cities can’t stop homeowners from displaying political yard signs, a homeowners association is not government. Instead, it is a group that people voluntarily enter.

    Generally, when prospective homeowners purchase a home in a neighborhood with restrictive covenants, they are asked to sign a document pledging to comply with the provisions in the covenants. If those covenants prohibit political yard signs, but a Kansas law says these covenants do not apply, what should a homeowner do?

    In his monumental work For a New Liberty: The Libertarian Manifesto, Murray N. Rothbard argues that the right to free speech is not based on some “vague and wooly” concept that protects the “public interest,” such as prohibition of falsely crying “fire” in a theater. Instead, it should be based on property rights. (page 43)

    In the case of falsely crying “fire” in the theater, Rothbard argues that this act violates the contract between the theater owner and patrons to enjoy the presentation without interruption. It violates their property rights.

    While a homeowner certainly owns the yard in front of his house, he does so based on the voluntary agreements entered into, such as payment of an agreed-upon amount of money to the previous owner. Another agreement entered into is between the new homeowner and all the other homeowners in the neighborhood through the restrictive covenants.

    So if those restrictive covenants prohibit political yard signs, that restriction is something that has been mutually agreed to. It is part of the property rights that homeowners in the neighborhood enjoy. It cannot be violated without violating the property rights of those who bought their homes with the understanding that the covenants are part of the property they purchased.

    Practically: Should you display signs in your yard?

    While Kansas law makes it legal for those living in communities with covenants that prohibit political yard signs, residents may want to observe these convents. Here’s why: If neighbors are not aware of this new Kansas law and therefore still believe that the yard signs are not allowed in your neighborhood, that may cause them to think badly of those with yard signs, and by extension, the candidates that are being promoted.

    Yes, these people who believe the covenants against yard signs are still valid are misinformed, but they vote, too. Whether to display yard signs in a covenant neighborhood is a judgment that each person will have to make for themselves.

    The Kansas statute

    K.S.A. 58-3820. Restrictive covenants; political yard signs; limitations. (a) On and after the effective date of this act, any provision of a restrictive covenant which prohibits the display of political yard signs, which are less than six square feet, during a period commencing 45 days before an election and ending two days after the election is hereby declared to be against public policy and such provision shall be void and unenforceable.

    (b) The provisions of this section shall apply to any restrictive covenant in existence on the effective date of this act.

    Or, as described in the 2008 Summary of Legislation: “The bill invalidates any provision of a restrictive covenant prohibiting the display of political yard signs, which are less than six square feet, 45 days before an election or two days after the election.”

  • ‘The Power of the Poor’ to be shown in Wichita

    On Monday October 11, the video “The Power of the Poor” will be shown in Wichita, with discussion following.

    “The Power of the Poor is a compelling look at the surprising and vital role of inclusive laws and titled property in establishing peace and prosperity. It is also the story of real people with real struggles — all of whom share a commitment to entrepreneurship.”

    “De Soto and his team have proven that, even hobbled by great obstacles, the world’s hard-working poor entrepreneurs have created far more wealth than anyone had ever imagined possible — even with the absence of the legal frameworks people in the rich north take for granted. Prosperity is possible, if only we simplify the rules of the game. That means giving the poor titled property and the legal business tools we in the West enjoy. Such will enable them to harness the power of their considerable assets, as these stories illustrate.”

    The presentation will be at the Lionel D. Alford Library located at 3447 S. Meridian in Wichita. The time is from 7:00 pm to 8:30 pm.

    For more information on this event contact John Todd at john@johntodd.net or 316-312-7335, or Susan Estes, AFP Field Director at sestes@afphq.org or 316-681-4415.

  • Kansas restrictive neighborhood covenants don’t apply to political yard signs

    It’s common for neighborhoods to have restrictive covenants that prohibit homeowners from placing any signs in their yard, except for signs advertising homes for sale. But a 2008 Kansas law overrides these restrictive covenants to allow for the placement of small political yard signs starting 45 days before an election.

    The bill was the product of then-Senator Phil Journey of Haysville. Journey is now a judge in the Kansas 18th Judicial District. The bill passed unanimously in both the Kansas House and Senate.

    According to the First Amendment Center, some 50 million people live in neighborhoods with homeowners associations. And laws like the 2008 Kansas law are not without controversy, despite the unanimous vote in the Kansas Legislature.

    While the U.S. Supreme Court has ruled that governmental entities like cities can’t stop homeowners from displaying political yard signs, a homeowners association is not government. Instead, it is a group that people voluntarily enter.

    Generally, when prospective homeowners purchase a home in a neighborhood with restrictive covenants, they are asked to sign a document pledging to comply with the provisions in the covenants. If those covenants prohibit political yard signs, but a Kansas law says these covenants do not apply, what should a homeowner do?

    In his monumental work For a New Liberty: The Libertarian Manifesto, Murray N. Rothbard argues that the right to free speech is not based on some “vague and wooly” concept that protects the “public interest,” such as prohibition of falsely crying “fire” in a theater. Instead, it should be based on property rights. (page 43)

    In the case of falsely crying “fire” in the theater, Rothbard argues that this act violates the contract between the theater owner and patrons to enjoy the presentation without interruption. It violates their property rights.

    While a homeowner certainly owns the yard in front of his house, he does so based on the voluntary agreements entered into, such as payment of an agreed-upon amount of money to the previous owner. Another agreement entered into is between the new homeowner and all the other homeowners in the neighborhood through the restrictive covenants.

    So if those restrictive covenants prohibit political yard signs, that restriction is something that has been mutually agreed to. It is part of the property rights that homeowners in the neighborhood enjoy. It cannot be violated without violating the property rights of those who bought their homes with the understanding that the covenants are part of the property they purchased.

    The Kansas statute

    K.S.A. 58-3820. Restrictive covenants; political yard signs; limitations. (a) On and after the effective date of this act, any provision of a restrictive covenant which prohibits the display of political yard signs, which are less than six square feet, during a period commencing 45 days before an election and ending two days after the election is hereby declared to be against public policy and such provision shall be void and unenforceable.

    (b) The provisions of this section shall apply to any restrictive covenant in existence on the effective date of this act.

    Or, as described in the 2008 Summary of Legislation: “The bill invalidates any provision of a restrictive covenant prohibiting the display of political yard signs, which are less than six square feet, 45 days before an election or two days after the election.”

    For the August 3rd primary election, the first day for signs in restricted neighborhoods is June 19th.

    For the general election on November 2, the first day for signs is September 18th.

  • Letters on Wichita Bowllagio

    Letters recently appeared in the Wichita Eagle regarding the proposed Bowllagio project, a west side entertainment destination. Bowllagio is planned to have a bowling and entertainment center, a boutique hotel, and a restaurant owned by a celebrity television chef.

    The developers of this project propose to make use of $13 million in STAR bond financing. STAR bonds are issued for the immediate benefit of the developers, with the sales tax collected in the district used to pay off the bonds. The project also proposes to be a Community Improvement District, which allows an additional two cents per dollar to be collected in sales tax, again for the benefit of the district.

    —-
    Property rights

    Imagine paying your mortgage and taxes for many years, only to get a knock on your door one day. A real estate developer tells you he wants your land.

    That’s what happened to a couple on South Maize Road in the boundaries of the proposed Bowllagio sales-tax-and-revenue (STAR) bonds district. They were offered the county-appraised value, plus 10 percent, for their home. But they don’t want to move, as they couldn’t find a comparable property for what the developer offered.

    Now the homeowners are concerned they may be forced out of their home through the process of eminent domain. This forceful taking of property by government is one of the worst possible violations of private property rights.

    Wichita Mayor Carl Brewer said that the city does not intend to use eminent domain for the proposed Bowllagio entertainment complex.

    That’s good news. The city can and should affirm this promise by writing it into the Bowllagio authorizing ordinance. Supporting private property rights is essential; the use of public funds for private projects is bad policy.

    Susan Oliver Estes
    Wichita

    —-
    Let developer fill funding gap

    Bowllagio’s representative told the Wichita City Council last week that the developer needed $13 million in public money to fill the projected funding shortfall for the project to be economically feasible. I believe the developer needs to dig deeper into his own pocket to fill this funding gap, or seek private venture capital.

    As an experienced real estate practitioner, I am aggrieved that the Wichita mayor and City Council members lack the necessary experience to properly evaluate these projects. They have proved to be little match in protecting the public treasury against sophisticated developers accustomed to using the public purse as part of their real estate funding formulas.

    The investment of public money in bowling alleys, restaurants, shops and hotels that compete with existing businesses that offer the same services is not a proper role for government to play and is wrong. It creates an unlevel playing field for those businesses that compete in the same market using their own money.

    If the Bowllagio development venture is an economically feasible project, the private developer will find the private money he needs to fund it.

    John R. Todd
    Wichita

  • Sweatshops best alternative for workers in many countries

    While sweatshops are not the place most Americans would choose to work, they are often the best alternative available to workers in some countries. Pay is low compared to U.S. standards because worker productivity is low, and the process of economic development will lead to increases in productivity and pay. But most policies promoted to help the purported plight of sweatshop workers actually lead to harm.

    That’s the message of Benjamin Powell, who spoke to a group of university students and citizens last night in Emporia on the topic “In Praise of Sweatshops.” Powell is a professor of economics at Suffolk University in Boston and is affiliated with The Beacon Hill Institute. His appearance was part of the Emporia State University “Lectures on Liberty” series.

    “Often when people say there’s something wrong with sweatshops, implicitly what they’re saying is ‘while this is bad, the alternative must be better.’ Often the alternatives in these countries are much, much worse.” The alternatives are often subsistence agriculture and working in farm fields, Powell said.

    A sweatshop, according to Powell, is a workplace with low wages (compared to U.S. standards), and poor, possibly unsafe, working conditions and benefits, again compared to U.S. standards. The sweatshops that Powell is defending are those where people voluntarily choose to work. Sweatshops where workers are forced to work under the threat of violence constitute slave labor, which cannot be defended. These are not better than the alternatives available to the forced workers, the evidence being that the workers are forced to work in these sweatshops.

    As evidence of non-sweatshop working conditions is some countries, Powell mentioned the case of a Cambodian girl and her working conditions, as reported by Nicholas D. Kristof in the New York Times in 2004:

    Nhep Chanda is a 17-year-old girl who is one of hundreds of Cambodians who toil all day, every day, picking through the dump for plastic bags, metal cans and bits of food. The stench clogs the nostrils, and parts of the dump are burning, producing acrid smoke that blinds the eyes.

    The scavengers are chased by swarms of flies and biting insects, their hands are caked with filth, and those who are barefoot cut their feet on glass. Some are small children.

    Nhep Chanda averages 75 cents a day for her efforts. For her, the idea of being exploited in a garment factory — working only six days a week, inside instead of in the broiling sun, for up to $2 a day — is a dream.

    Generally, sweatshop workers are paid much more than most other workers in the country, and their working conditions are much better. Powell mentioned that working inside — rather than outside — is very desirable in most countries. The fact that sweatshops pay higher wages and have better working conditions than the workers’ alternatives is important to remember.

    Powell explained the factors that determine how much workers are paid. The upper bound that employers are willing to pay workers is based on the amount of value that a worker can create. In economic terms, this is called the marginal productivity of labor.

    The lower bound, the minimum employers can pay, is the value of workers’ next best alternative.

    If we want to increase the earnings of sweatshop workers, we have to create policies that raise both the upper and lower bounds, Powell said, adding that about three-fourths of the variation in earnings across countries is explained by the upper bound. This points to the importance of increasing worker productivity.

    In one debate, Powell said his opponent wanted to take the question of sweatshop wages off the table, admitting that pay is higher in sweatshops. Instead, she wanted to focus on worker health and safety. But it’s important to remember, Powell told the audience, that working conditions, even those related to health and safety, are part of a total compensation package. Wages and working conditions are interconnected and can’t be separated.

    Sometimes people ask why apparel companies — the largest users of sweatshops — can’t simply pay the workers more, pointing to large profits and highly paid executives at these companies. But Powell said that apparel companies usually aren’t excessively profitable.

    Additionally, businesses are not charities. Forcing them to pay workers more means that companies will begin to look at ways to reduce the amount of labor they use. They may replace workers with machines, or use more productive workers in other countries. The result is sweatshop workers will lose their jobs.

    Powell reminded the audience that it’s important to remember that in most countries where sweatshops are used, these jobs are much better — both in terms of pay and working conditions — than what the workers face as alternatives. Anything that causes companies to shut down sweatshops or employ fewer workers, then, means that workers lose these better jobs and return to harder work at lower wages, or perhaps no work at all.

    In discussing the anti-sweatshop movement, Powell said that some groups sincerely want to help sweatshop workers, but don’t understand the economic realities in sweatshop-using countries. But labor unions such as UNITE do understand economics. The policies they advocate to help sweatshop workers — international labor standards and minimum or “living” wages, for example — increase the cost of sweatshop labor, causing companies to use less of it. It also makes unionized garment workers more attractive, and may lead to more employment in developed countries like the United States.

    “So unions advocate this not out of love for third world workers. They do it quite maliciously, actually, to unemploy third world workers for the benefit of already relatively wealthy union members in the United States and Western Europe countries.”

    The worst thing that advocates for sweatshop workers can do is to call for boycotts of products produced in sweatshops. If a boycott decreases demand for a product, the company must reduce its price, and the upper bound of what sweatshop workers can earn goes down. Then workers either have their wages reduced, or they lose their jobs.

    Powell presented the results of his research examining sweatshop wages. In many countries that use sweatshops, wages are very low, compared to U.S. wages. But that isn’t the appropriate comparison. Instead, when comparing the wages of sweatshop workers to the average income in the workers’ own country, we find that sweatshop workers do very well, often earning from two to seven times as much as the average worker in each country.

    Powell said that “ethical branding” is an idea that might help sweatshop workers. This is a marketing strategy where a company uses the fact that products are produced in sweatshops as a way to increase demand and prices. This, in turn, would increase the demand for sweatshop workers and increase their wages. But this has to be a voluntary strategy, Powell said. Companies must see this as a business success. If it is not successful in increasing demand but companies are forced to implement this strategy, it will lead to less sweatshop employment.

    Also, demand — in terms of the number of units sold — must not fall. This is a problem with “fair trade” coffee, where people purchase less of the more expensive fair trade coffee.

    The real solution for improving sweatshop wages and working conditions, Powell said, is the process of economic development. Sweatshops existed in Great Britain and the United States at one time. As capital is accumulated, better technologies are developed, and workers become more educated, workers become more productive and earn more, both in income and better working conditions.

    This process took over a century in the U.S., but countries like Hong Kong, Singapore, and South Korea, which were sweatshop countries in the 1950s and 1960s, made very rapid improvements in wages and working conditions. Capital and technology is available from abroad, Powell said, and this process can be repeated. But anti-sweatshop policies risk stalling this development, resulting in a permanent sweatshop country with low incomes.

    The real question, Powell said, is not why some countries are poor, but why some countries are rich. Rule of law, respect for property rights, and respect for individual liberty and economic freedom are policies that promote rapid economic growth. Countries that do not have these stagnate and do not increase their standard of living.

    In conclusion, Powell said that sweatshop wages and working conditions are better than what many workers face as alternatives, and that’s why people voluntarily choose to work in them. While wages are low compared to developed countries, this is because productivity is low. The process of economic development is the way to raise productivity and wages. Much of the work of anti-sweatshop groups risks undermining the economic development processes that will raise living standards.

    A question from the audience asked about the proliferation of sweatshops abroad leading to the loss of American jobs. Powell replied that sweatshops lead to the decline of the American apparel industry. But it is in the interest of America, he said, to get garments at lower cost overseas, freeing up high-skilled U.S. labor and capital to do what we’re relatively better at. This increases the wealth of America.

    Another question referred to the human costs of sweatshop labor, contrasting those workers to Nike executives who earn millions. What is the cost in terms of damage to human dignity? Powell replied that businesses are not charities, and they don’t pay executives high salaries simply because they want to. The extremely high pay of the top executive serves as an incentive for underlings to work harder in jobs that are hard to observe quality of effort. Most people do not understand this, Powell said.

    He also said that if we’re concerned about the dignity of sweatshop workers in third world countries, we should be even more concerned about those who don’t have sweatshop jobs. These people either have no jobs, or jobs with much lower pay and worse working conditions than sweatshop workers.

    Another question asked if it would help the economies of third world countries if we simply raised the wages of sweatshop workers, referring to companies that are making millions in profits. Powell said that laws mandating higher wages will change the behavior of sweatshop companies, resulting in a loss of sweatshop jobs. But voluntary programs like ethical branding could work.

    Related material on this topic by Powell includes a Christian Science Monitor op-ed Don’t get into a lather over sweatshops, a working paper titled Sweatshops and Third World Living Standards: Are the Jobs Worth the Sweat?, and an article In Defense of “Sweatshops.”

    The ESU Lectures on Liberty was conceived by Greg Schneider, professor of History at Emporia State University, to bring in important academics who support the idea of research and scholarship on critical issues regarding liberty in American history. The lecture series is underwritten by the Fred C. and Mary R. Koch Foundation in Wichita.