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home : most recent : statewide implications August 16, 2017


4/9/2017 4:37:00 PM
COMMENTARY: Property is important in Bloomington, Indiana, or in Gurgaon, India

Craig Ladwig, Editor of the Indiana Policy Review. His column appears in Indiana newspapers.

Some Indiana mayors got together this week to congratulate themselves on thinking big, that is, thinking globally. The takeaway was that if municipal government could turn its attention away from the small-mindedness of Main Street, progress would come, that property free of government encumbrance is an outdated notion, and so forth.

The panel, made up of the mayors of South Bend, Bloomington and La Porte, speaking at something called the "America's Role in the World" conference at Indiana University, reduced the discussion of jobs and investment to arranging public-private partnerships, the more distant and corporate the better.

Their plans were familiar to the point of mundane: "My community deeply values the connectivity with the world economy," said the Bloomington mayor. "The fewer doors we close to people the better we are, the stronger we are."

OK, let's open some doors. Let's look at success stories around the world, starting with some places that are more challenged than even South Bend, the home of the $10 minimum wage and ranked 13th in the state by city-data.com in the percentage of people (21.7 percent) who say they "feel badly about themselves."

There is a city in India, for example, that has gone literally from rags to riches without any comparable governmental help. In Gurgaon, called "the private city of India," public services including transportation, utilities, fire-fighting and law enforcement are funded and operated privately. The minimum wage is zero. It now has the nation's third-highest per-capita income.

During the last 30 years when Gurgaon was growing from about the size of South Bend to 2 million people, the economies of our mayors' cities were relatively stagnate despite tax-increment financing, rebates, regional cities grants, redistribution programs and other economic-development contortions.

Interestingly, the change began in Gurgaon when restrictions on the purchase of land were inadvertently omitted during a governmental reorganization. The city was allowed to operate without planning and zoning functions. The result, according to Shruti Rajagopalan and Alexander Tabarrok of George Mason University, is that today nearly half of the Fortune 500 companies operate in Gurgaon, including American Express, General Electric, Motorola, Dell, Microsoft, IBM and Google. The city has 43 shopping malls, including the Mall of India — one of the largest malls in the world — many luxurious apartment towers, gleaming skyscrapers, seven golf courses, and at least half a dozen large five-star hotels.

How many jobs in Indiana do you suppose were killed in those last 30 years by land restrictions and building permits — jobs killed when either the investors abandoned projects because they could not afford the expense of a more favorable zoning designation or decided to locate somewhere else where property was less restricted?

While you mull that over, here is another example, or more exactly a contrast. The new leaders of South Africa, not unlike the mayors on our panel, have never been convinced of the inviolability of private property, dismissing it as a colonial contraption. Most recently, over the protests of even the old anti-Apartheid leaders, the government put in place plans to expropriate land without compensation.

Multi-racial Singapore, on the other hand, another nation subjected to colonialism, a country once owned outright by the merciless East India Company, institutionalized private property regardless.

Our Indiana University panel might want to know how that is working out. The average income of a South African kept pace with that of a Singaporean until about 1969. Today, the average income in South Africa is 16 per cent of that in Singapore. Between 1950 and 2016, incomes in South Africa rose by 101 per cent. In Singapore they rose 1,344 per cent. To underscore that this is not merely a policy preferences but a matter of life and death, the gap in life expectancy also has grown between the two.

Haiti is a country for which the globalist Clinton Foundation raised $30 million. Our Dr. Norman Van Cott has spent some time wondering where that money went — that and why earthquakes of roughly the same strength barely damage southern California but lay waste to Haiti, another life-and-death distinction.

Van Cott asks a question by way of explanation: "If you were building a house for which you had no legal title, how interested would you be in building a durable structure? Not very. Certainly, you would be less interested compared with having clear title. After all, you’re unsure about someone coming along and taking 'your' house, and you’re unsure about your ability to sell the house in the future. The resulting shabby construction won’t cause earthquakes, but it’ll make earthquake-related damages more extensive, even fatal."

That is the argument of the Peruvian economist Hernando de Soto in his celebrated book “The Mystery of Capital.” He estimates that 68 percent of Haitian city-dwellers and 97 percent of their rural counterparts live in housing for which no one has clear legal title. For Haitians to settle legally on government land, they must first lease it for five years. Finalizing a lease requires 65 bureaucratic steps, taking two years on the average. Subsequent purchase requires another 111 bureaucratic steps, taking 12 more years — a total of 19 years of red tape and paperwork in a country where, to compound the problem, illiteracy is pervasive.

Would it have taken $30 million to change the zoning and permit laws of Haiti — or South Bend, or Bloomington or La Porte?

It is a reach to apply faraway economic examples from widely varying cultures to Indiana. It is not a reach, though, to reject the gauzy vision of Hoosier mayors checking the "economic development" box of their campaign promises with plans for magical global partnerships.

If the mayors truly value that "connectivity with the world economy" they should start by learning how it works.






Editor, John C. DePrez Jr.; Executive Editor, Carol Rogers; Publishers: IBRC and IAR


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