Eminent Remains: The Buried Legacy of the Original Ground Zero

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:

Symbols for whom?
Symbols of what?
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, Frédéric 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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