Eminent Remains: The Buried Legacy of the Original Ground Zero

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Which looks
proper to you: “twin towers” or “Twin Towers”? For most people,
“Twin Towers” looks proper. We rarely see “twin towers” in uncapitalized
mode. That was what was wrong with the Twin Towers from day one.

We read
of “Ground Zero.” That phrase, too, is capitalized. The empty
space where the Twin Towers once stood has become a symbol of
lawless destruction, as indeed it is. Some people speak of Ground
Zero as sacred space or holy ground. I am not one of them.

What I have
never seen written is what should be obvious to anyone who defends
the free market as an outworking of the idea of private property:
the Twin Towers were conceived in sin and leased in iniquity.

The Twin
Towers stood as of emblem of what has long been a great weakness
of British common law: the law of eminent domain. That law is
an outworking of what I, as follower of John Calvin, identify
as the modified eighth commandment: “Thou shalt not steal, except
by majority vote.” Catholics and Lutherans would identify it as
the modified seventh commandment. However men number that commandment,
it is the modification which condemns them.

The Twin
Towers began with acts of legalized theft.

A
ROCKEFELLER PROJECT

The Twin
Towers were the product of many factors, but the sine qua non
were the Rockefeller brothers, David and Nelson. The Rockefeller
family had long become interested in real estate development in
New York City. There is even a book based on a 1986 middle-of-the-night
bicycle tour of Rockefeller-related properties, Rockefeller New
York
.

John D.,
Jr. in 1946 donated $8.5 million to the United Nations to buy
property for its headquarters. The land was then turned over to
the member nations as sovereign property. This removed the land
from the jurisdiction of the United States. It was a symbolic
gesture.

Symbols
have always meant a great deal to the Rockefellers, as they do
to everyone else. The key questions are:

  1. Symbols for whom?

  2. Symbols
    of what?
  3. Symbols
    managed by whom?

The Twin
Towers project was a combination of four crucial factors: (1)
David Rockefeller’s desire to raise property values in lower Manhattan;
(2) Gov. Nelson Rockefeller’s appointees, who controlled the Board
of the Port Authority; (3) taxpayers’ credit, which was used to
underwrite bonds to build the Twin Towers; (4) exemption from
all New York City building codes and taxes. Brian C. Anderson
provided a good summary in the November, 2001 issue of City Journal.
This story is known to very few Americans, let alone Islamic terrorists.
I quote it at some length.

It’s
cruelly ironic that the terrorists who attacked New York on September
11 targeted the World Trade Center as a symbol of American capitalism.
For, from the moment it opened its doors in the early 1970s, the
center, owned and operated by the publicly funded Port Authority
of New York and New Jersey, was really a grandiose monument to
the ills of state capitalism, where government substitutes its
bureaucratic and politically motivated thinking for the wisdom
of the free market’s invisible hand. Indeed, the WTC offers a
case study in why government should not be in the business of
developing and managing commercial property. As New York state
and city officials move toward setting up a new public entity
to oversee the rebuilding of lower Manhattan, the center’s history
provides a cautionary tale for everyone involved — starting
with Governor George Pataki. . . .

The idea
for the World Trade Center first took form in the late 1950s,
as a group of well-connected businessmen — led by Governor
Rockefeller’s brother David, CEO of Chase Manhattan Bank —
sought some governmental means of pumping economic life into
a lower Manhattan that had been in steady decline since the
Depression. A government-created and government-run state-of-the-art
office complex, they felt, would attract tenants from the world
of international trade to replace the financial firms that had
left lower Manhattan, and thus it would spur additional economic
development throughout the neighborhood and give a boost to
the area’s struggling ports. The complex would also boost downtown
development at a time when the Rockefeller family was making
a big financial bet on the area with the construction of Chase
Plaza.

Enlisting
Governor Rockefeller’s help, the group turned to the Port Authority
to own, develop, and manage the property. Three reasons made
the bi-state agency attractive: it was bursting with money and
had the ability to float bonds; it already owned some of the
land in the neighborhood; and the governor controlled half of
its board. The authority was enthusiastic from the outset. Its
powerful director, Austin Tobin, wanted to expand the agency’s
reach beyond its traditional, profitable bailiwick of managing
the area’s ports, airports, bridges, and tunnels. Here was the
perfect opportunity: the Port Authority could now get into the
real-estate business.

Virtually
every important consideration in developing the World Trade
Center had nothing to do with business and everything to do
with politics. Costs, which the public would ultimately have
to pay, mounted rapidly. To get New Jersey’s backing for the
project, for example, the Port Authority agreed to take over
the financially strapped Hudson tubes that brought many New
Jersey rail commuters into Manhattan (today, it’s called the
Port Authority Trans-Hudson, or PATH, train). The World Trade
Center development thus extended the agency’s state-capitalist
reach beyond real estate into mass transit. The final cost of
the twin towers, as usually happens with publicly financed projects,
swelled far beyond initial estimates. Supporters of the development
had low-balled those estimates to win public support.

Since
the World Trade Center originated as government’s idea of what
lower Manhattan needed, rather than as what the market really
called for, it’s no surprise that it misfired commercially.
Tobin yearned to build the world’s tallest building, whether
the market needed two 110-story behemoths or not, and his twin
towers proved a perfect embodiment of the rationalist bureaucratic
mind in their icy, featureless, and symmetrical inhumanity that,
like Governor Rockefeller’s Albany Mall, seemed designed to
make the individual seem a powerless nonentity, the state an
omnipotent colossus. When finished, the towers seemed to drain
more life out of downtown than they added. When the trade center’s
initial 10 million square feet of office space first hit the
market in the early 1970s, the result was such a glut of office
space that lower Manhattan real-estate values sank at a time
when the city was economically struggling and could least afford
it.

Rather
than attracting new firms to New York, as its planners thought
it would, it drew tenants from other lower Manhattan offices,
driving up vacancy rates throughout the area. With the towers
still unfilled, New York State moved nearly all its Gotham offices
into them, becoming the center’s biggest tenant. Similarly,
the Port Authority moved many of its own offices there.

He went
on to describe the vast pool of patronage that the project made
possible.

Such
deal-making, with the public footing the bill, guarantees inefficiency,
since there’s no free market in place that — by rewarding
good work and disciplining bad — would pressure administrators
to hire the right people for the right jobs and make sure they
worked hard. . . .

Rather
than trying to sell the World Trade Center, Governor Carey’s
less fiscally responsible successor, Mario Cuomo, decided to
use it as a cash machine. In the 1990s, he got the Port Authority,
using its own budget (which is separate from the state budget
and includes, of course, New Jersey funds), to pay New York
State a premium for having moved its offices out of the twin
towers, and then he utilized the money — about $200 million
— to plug gaping holes in the state’s operating budget.
The onetime boost in revenues was typical of the chicanery Cuomo
employed during the early 1990s to balance the state budget
temporarily rather than to slash state spending in tandem with
declining revenues. . . .

Yet, even
though New York’s 1990s economic boom had by then nearly filled
the twin towers with tenants, making it the best time imaginable
to sell the complex, the Port Authority bureaucracy still wouldn’t
give up the goose that laid the golden eggs and get out of the
state-capitalist business for good. Instead of selling the trade
center outright, the authority reasoned that it could make more
money by leasing the center, since under continued Port Authority
ownership, its exemption from property taxes and other government
perks would still be attached, making it more valuable.

The author
then described the deal made by the Port Authority and Silverstein
Properties, just seven weeks before the planes struck the towers.
The company, along with Westfield America, agreed to lease the
towers and surrounding Port Authority properties for $3.2 billion
over 99 years, with $616 million paid up front. (This $3.2 billion
was, according to the actuaries, present discounted market value.)

Larry
Silverstein would only have to pay the city $25 million yearly
in an in-lieu-of-taxes agreement, about $75 million less than
what the property taxes would actually be. In addition, the towers
could continue to tap low-cost taxpayer-subsidized electricity
from the New York Power Authority, saving Silverstein millions
a year over what he would pay if he had to buy electricity from
Con Ed at market rates. The Port Authority also agreed to use
public funds to pay any property taxes in excess of $25 million
that Silverstein might incur in the future if New York City ever
succeeded in putting the trade center on the property-tax rolls.

THE
BULLDOZER

In a superb
documentary on the Twin Towers, produced by Ken Burns, which has
been broadcast by PBS this week, we learn of the power of eminent
domain. The documentary provides photos of the resistance made
by small local business owners in the mid-1960′s to keep their
property from being confiscated by the Port Authority. Theirs
was a losing effort.

This was
the era of the great urban land confiscations: urban renewal.
In 1963, Martin Anderson’s book appeared, The
Federal Bulldozer
, which was published by M.I.T. Press.
In that era, there were few academic defenses of private property.
Anderson’s book was a watershed. What he described was a macrocosm
nationally of the microcosm that the Port Authority was beginning
to impose at the same time.

This was
also the era in which Jane Jacobs began writing her books that
defended urban neighborhoods. She warned against the use of eminent
domain to evict residents and small businesses that had grown
up over decades or even centuries. No one in authority paid any
attention to her at the time.

This was
the era of Robert Moses, the visionary destroyer of neighborhoods
in the state of New York. Robert Caro’s biography, The
Power Broker
, shows that Moses was a bureaucratic version
of Lyndon Johnson, the subject of Caro’s multi-volume biography.

Burns’ documentary
shows the plight of those removed from their businesses and their
dreams. They operated in buildings that were rarely over four
stories tall. They paid property taxes, unlike the Port Authority.
They called on the state and the city to confine the operations
of the Port Authority to its original mandate: operating transportation
centers. Their arguments did not prevail. The courts threw them
out.

Ground zero
has therefore appeared twice. The Port Authority, backed by the
states of New York and New Jersey, leveled the buildings occupied
by small capitalists. This was all legal. The civil government’s
power of eminent domain was used to create a pair of uneconomic
technological marvels. Burn’s documentary reports that it was
two decades before the project began turning a subsidized, tax-free
profit.

THE
LOTTERY

What if
the Port Authority, Silverstein Properties, the insurance companies,
and everyone else settled their differences and started from ground
zero, economically speaking? What if the Port Authority then were
to hold a lottery for the property? What if the lottery were open
to anyone with the price of a ticket, anywhere on earth?

Let’s say
that your Aunt Harriet, an inveterate lottery ticket buyer, unlike
you, who understand mathematics, bought you a ticket? It would
be a free gift. You would not want to turn it down, but you also
don’t know anything about secondary markets. So, you keep the
ticket.

What would
you do if you won?

Let’s say
that the tax man won’t come knocking until you sell the property
rights or, if you choose, give them away. What would you do with
the ticket?

If you are
a libertarian, you would probably hold an auction. “Come one,
come all. High bid wins.” This is the essence of the intellectual
case for capitalism as an institutional arrangement that allocates
scarce resources to their most valuable uses, as determined by
consumers. The high bid wins. The economic agents of consumers,
called entrepreneurs, bid on behalf of future consumers.

Would you
sell it to someone who would make Ground Zero into a shrine? A
park? A parking lot? A shopping mall? Would you care what use
the buyer has for the property?

In the free
market, you have the legal right to care. You also have the legal
right not to care. You are allowed to pursue your highest value
by means of your property.

I would
hold an auction, and the high bid would win. As to how I would
structure the ownership of that ticket prior to accepting the
top bid would be between me and lawyers on the Isle of Man.

What we
do not hear in all of the media-covered discussions regarding
what to do with Ground Zero is a discussion of who owns the property.
All talk about parks, shrines, monuments, large towers, no towers,
and all the rest of it leaves out the fundamental issue: Who owns
the land?

The Twin
Towers were conceived in the sin of eminent domain and leased
in the iniquity of state ownership. They became symbols of state
capitalism, towering emblems of technology and tax exemption.
They were targets of hatred by terrorists, and they became retroactive
towers of American power after they were destroyed.

Until Burns’
documentary, no one gave a thought to the careers and dreams toppled
by the Port Authority in the 1960′s. No one shed tears on behalf
of the original victims.

On 9/11,
the Twin Towers became eminent remains. The debris was removed
as efficiently as it had been removed in the 1960′s, when other
men’s eminent dreams had been knocked down in the name of a government-funded
vision of progress.

THE
THING UNSEEN

The devastation
of 9/11 was a continuation of an earlier devastation. The Twin
Towers became targets because they had been symbols of America’s
greatness. But they were never symbols for me of America’s greatness.
I see America’s greatness very differently. For me, the symbols
of American greatness were those little shops in 1960, owned by
little people who were pursuing their own dreams. The Port Authority
stuck a gun in their bellies and said, “Get off our land.”

Capitalism
makes the best use of the property available to it, according
to the competing demands by consumers. The commercial uses in
2001 were spectacular, but they were not the best uses. Those
uses were the result of a terrible cost, a cost ignored by the
defenders of the mixed economy: the cost of forfeited property
rights. When policy-makers impute zero value to the right of a
person to declare “this land is mine,” and to defend it against
invaders, they undermine the free market social order. When they
do this, they impose costs.

The best
use of Ground Zero was not the Twin Towers. The best use was those
little stores run by nobodies. Nobody mourned the nobodies on
9/11, for by then, the collective acts of legalized terrorism
that had driven them off their land were long forgotten.

In the middle
of the nineteenth century, Frdric Bastiat wrote an essay about
a broken window pane. He made the point that men look at the thing
seen, but they neglect the thing unseen. They see the brand-new
window that replaces the broken one, and they marvel at the economic
benefits: more employment, clearer glass. They do not see the
costs: all the other things that the window owner would have done
with the money that the new pane cost him.

There was
nothing spectacular about the shops in 1960 that became Ground
Zero in 2001. The cost of creating the first ground zero (not
capitalized because it was no one’s would-be sacred symbol) was
not limited to lawyers’ fees and “due process of law.” The cost
of the creation of the Twin Towers was the trampling of property
rights, a legacy that binds the dreams of American property owners
today. But because these costs are distributed over hundreds of
millions of people, no one counts them. They cannot be added up,
for they are individually estimated. There is no national felicific
calculus, contrary to Jeremy Bentham.

CONCLUSION

The Twin
Towers rested on a foundation of injustice. Americans do not let
such a thought cross their minds. That this thought does not cross
their minds is a testimony to the widespread acceptance of injustice
that prevails today.

This is
the terrible cost of Ground Zero, for it is with us still.

September
10, 2003

Gary
North is the author of Mises
on Money
. Visit http://www.freebooks.com.
For a free subscription to Gary North’s newsletter on gold, click
here
.

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