Do Businesses Have a Social Responsibility to Defend Property Rights?

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Here's an interesting development in the post-Kelo backlash against eminent domain abuse: Today BB&T Corp. announced it "will not lend to commercial developers that plan to build condominiums, shopping malls and other private projects on land taken from private citizens by government entities using eminent domain." BB&T Chairman and CEO John Allison says:

The idea that a citizen's property can be taken by the government solely for private use is extremely misguided, in fact it's just plain wrong….One of the most basic rights of every citizen is to keep what they own. As an institution dedicated to helping our clients achieve economic success and financial security, we won't help any entity or company that would undermine that mission and threaten the hard-earned American dream of property ownership.

Is this an attempt to improve BB&T's image among home buyers looking for mortgage lenders, or a plain, old-fashioned stand on principle? Maybe a little of both. If BB&T is doing well by doing good, it could hardly be faulted by shareholders. But what if it actually stands to lose more money by turning down developers' business than it gains by taking a stand in defense of property rights? I wonder what Milton Friedman would say.

[Thanks to John Kramer at the Institute for Justice for the tip.]

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  1. Mr. Sullum, why do you love pollution?

  2. Uncle Miltie would say that ethics are irrelevant. As long as it is legal and profitable, a corporate action would be socially responsible.

  3. Uncle Miltie would say that ethics are irrelevant. As long as it is legal and profitable, a corporate action would be socially responsible.

    Agreed. “Social Responsibility” is just another form of advertising. If it isn’t profitable, the company will drop it like a hot potato (remember Levi Strauss’ “Living Wage” factory?)

    My wife is a big fan of “Extreme Makeover”. She gets kinda upset when I point out that the show exists primarily to make money, not to help people. If it didn’t get decent ratings, Ty and his buddies would be out of a job faster than you could say “Goooood Morning, unemployment line!”

  4. I develope land. I am an evil poluting land developer. It was fun when all my lefty friends started yelling at me for the kelo disision. I simply pointed out that it was 4 conservative judges who opposed the decision and i have always been a staunch advicate of property rights.

    It is fun to see the kind of crazy ideas that get into the left’s heads. Yeah it was the developers fault that properety rights are almost non-existant in this country.

  5. That should be “Extreme Makeover: Home Edition”.

    But I think everyone probably guessed that already.

  6. There’s a third potential explanation: mortgage lenders don’t want the hassle of having their collateral seized by the government.

  7. I don’t know about the +/- of the money involved. But obviously it’s good PR.

    There was also a very recent high profile ED case in Durham, NC where a 57 year old business owner that might have got the attention of the heavily NC-based banking world. Much public backlash and media coverage ensued. Basically the guy was having his business taken — govt offered $216,000. Problem is, he had a $370,000 note out (which incidentally, his bank had appraised to be the value of the property), with the business as security.

    Guess what the government offered? Yep. $ 216,000.

    So that means he’s (a) got no business, and (b) 150k in the hole on that note. Not to mention, the “rent” the government charges him for being on his property while he fights it.

    So how’s he gonna pay off that $370,000 he owes the bank? He’s not.

    Hello, bankruptcy!

    Hello, bank-that’s-not-going-to-get-paid-on-the-note!

    See how that works? That’s probably why BB&T figures it has something of a vested interest in seeing that all those people who took out mortgages will actually be able to use the property in a way the bank forecasted when it granted the mortgage.

  8. Or, what KipEsq beat me to the punch and said!

  9. I’d be interested in seeing BB&T’s pre-Kelo position on E.D.
    Ethical business or opinion-poll opportunist?
    I’d like to think it’s the former, but…

  10. IW–Did the government back down in the Durham case?

  11. BB&T CEO John Allison speaks at Objectivist conferences and donated money to the University of South Carolina for a business ethics program that includes the study of Ayn Rand’s works. If you look at BB&T’s company philosophy, (yes, it has one) it’s clearly influenced by Rand.

  12. Charles beat me to it, but, yes, BB&T has been revered by Randians for years now…I doubt very much that this viewpoint came from nowhere or from financial opportunism: they know that the only way to be successful in the long run is to be honest and open.

  13. Jennifer, I think the battle is just starting to ramp up. The latest story I saw on this was from earlier in the month.

    http://www.newsobserver.com/145/story/385041.html

    It could all end up being a moot point if the state amends its constitution to prevent these kinds of takings, which they have considered “fast-tracking” before any more political ill-will blows anyone’s way.

  14. I’m not sure if this can be really called “Social Responsibility”. That term usual refers to companies setting aside resources to pursue some policy that’s not really related to their main line of business. It’s a positive act.

    BB&T on the other hand is merely refusing act as an accessory to what it considers theft. This is a negative act. It’s also an area directly related to their business dealings; it’s impossible for them to be uninvolved in the issue. One way or the other they will be taking a side.

  15. PS – In case it’s not obvious I wasn’t using ‘positive’ and ‘negative’ in the sense of ‘good’ or ‘bad’.

  16. Actually, I’m interested in Mr. Sullums suggestion. If I read it right, he suggests that if something “may” be profitable in the short run, it may be “ethically” mandatory to do it. Sort of like the behaviour of a termite mound. Preferences be damned apparently.

    So, If China were to offer a profitable contract to IBM to manage soylent green chambers at some future date, IBM must undertake that in order to comply with this “mandatory” profit motive?

    Interesting.

  17. In terms of construction lending, not mortgage lending, this shouldn’t affect their profits. The vast majority of development that goes on isn’t on land taken by ED. By choosing not to lend to ED projects, they aren’t really cutting away much of their potential business.

  18. Actually, I’m interested in Mr. Sullums suggestion. If I read it right, he suggests that if something “may” be profitable in the short run, it may be “ethically” mandatory to do it. Sort of like the behaviour of a termite mound. Preferences be damned apparently.

    Short run has nothing to do with it.

    So, If China were to offer a profitable contract to IBM to manage soylent green chambers at some future date, IBM must undertake that in order to comply with this “mandatory” profit motive?

    If IBM could turn a profit at making people food, then yes. But don’t forget, turning a profit includes not offending your customers.

  19. Delightful MP, Thank you.

  20. Pretty much all land in America was seized from somebody else, so I guess BB&T will be closing down their mortgage business altogether.

  21. Dan T. – someone the other day tried to use, “Well, all land in the US was stolen from the indians, so how does that work in your libertarian belief in the importance of property rights?” schtick.

    Well, you’ve got to draw the line somewhere. Are you willing, Dan T., to give back any money you’ve made from property that was stolen from the indians or, indeed, if you own any land of your own, are you willing to give that up as well?

    I’m not saying the hose-job the US gave to the indians is a good thing, but at some point you’ve got to move on. The indians lost. Many tribes are now turning it around and making lots of money due to a loophole in how they’re able to use their land (loophole in some people’s eyes, I don’t necessarily see it as a bad thing).

    What would your solution be, or were you just being glib?

  22. “The indians lost. Many tribes are now turning it around and making lots of money due to a loophole in how they’re able to use their land (loophole in some people’s eyes, I don’t necessarily see it as a bad thing).”

    Gambling, the white man’s fire water.

  23. cliff – oh, I’m sure that Crazy Horse is still spinning in his grave, as are many ancestors of the indians due to their “selling out” and embracing a corrupting thing like gambling to pull themselves out of the doldrums. I don’t even know if disagree with that sentiment, either.

    But at the same time, if you can’t beat ’em, join ’em I guess, eh?

  24. >Pretty much all land in America was seized from
    >somebody else, so I guess BB&T will be closing
    >down their mortgage business altogether.

    Since the indians had never mixed their labor with the land, I’m not sure how you can say they were owners.

  25. I expect at least a part of this is that the post-Kelo backlash, with governors tripping over themselves to impose moratoria and state legislatures otherwise rolling back ED powers, has made investing in an ED development project a far more risky proposition–you might get quite far into the design process and suddenly find you’re not getting the land after all. If you can hedge that risk and sound principled at the same time, so much the better.

  26. It’s quite simple, and correct, for a business to be doing this.

    Any business backing Kelo, by default leaves themselves open to eminent domain abuses.

    Let’s play “what if”

    What if Wal-mart gets land to build via eminent domain. Then Target says “hey, we’ll pay more taxes if you bulldoze that wal-mart for our store!”

    In a town big enough for only one big box this can be a big deal.

    Not only is BB&T using smart marketing (‘we care’), they are protecting their own assets against gov’t takings.

    By the way, when will Reason use Eminent Domain to take the NY Times building?

  27. Maybe the CEO of BB&T doesn’t want a group of angry libertarian activists to turn his house into a hotel….

    🙂

  28. As far as Native Americans and land, I’m not here to defend everything that’s ever been done regarding land in the US. But I find no hypocrisy in somebody who places a higher priority on doing no harm (or not being involved in a new harm) than on rectifying the harms of the past. I’m not here to belittle the harms of the past or comment on the best way to address them, but the mere fact that somebody wants to do no new harm is hardly evidence of hypocrisy.

    And whatever the motive may be, we should all be glad that a political statement with a libertarian aspect now makes for good marketing.

  29. Yup.

  30. Pretty much all land in America was seized from somebody else, so I guess BB&T will be closing down their mortgage business altogether.

    ah I see so some guy 150 years ago took someone’s land illigally so now we should just keep doing that.

    Hey that means we can enslave black people now also.

    that is an awsome agreument, keep up the good work.

    Jack ass.

  31. Stormy,

    The fact that the words squash, maize, and pumpkin all come from the languages of American Indians groups would seem to suggest that they did, in fact, mix their labor with the land.

    Seriously, when’s the last time you saw a wild pumpkin?

  32. Lowdog,

    What makes you so sure American Indians considered gambling sinful. Not every culture condemns gambling.

  33. Pumpkins were genetically enginereed by American Indians?

  34. From the American Heritage Dictionary of the English Language:

    Alteration (influenced by ?kin) of obsolete pumpion, from obsolete French pompon, popon, from Old French pepon, from Late Latin pepn, from Latin, watermelon or gourd, from Greek, ripe, large melon. See pekw- in Appendix I.

    Nice try, though.

  35. jtuf – I’m not so much saying that american indians find gambling problematic, per se, just that it’s unfortunate they had to play by the white man’s rules.

    At the same time, maybe they see it as just deserts that they’re taking a bunch of white people’s money by erecting casinos on the shitty land the white man gave them…

  36. Are you willing, Dan T., to give back any money you’ve made from property that was stolen from the indians or, indeed, if you own any land of your own, are you willing to give that up as well?

    I can’t speak for Dan T., but I, for one, am willing to give Atlanta back to the Cherokee.

  37. I can’t speak for Dan T., but I, for one, am willing to give Atlanta back to the Cherokee.

    I wonder if the Canarsies would be willing to buy back Manhattan…

  38. I’ve heard hardcore Libertarians argue the Indian Wars were fundamentally unjust: the usual case of people taking land by force rather than taking the time to convince the locals to sell. The ultimate in eminent domain, right down to calling the sheriff’s deputies to deal with “protestors.” I find it convincing, but no one seriously believes we can make things right by giving it back.

    As for the argument that the Indians “didn’t mingle labor with the land,” I guess that means any forest that hasn’t been developed is up for grabs. Or rangeland. Or a lawn that hasn’t been mowed. The Indians used it how they wanted to use it.

    On topic, I don’t think it’s unreasonable for a business to consider the long term threat to its business model. Maximizing profits is fine, but life goes on past the end of the quarter. For BB&T to question what impact ED proceedings will have on “investor confidence,” meaning the homeowners who are getting screwed in all of this, is not unreasonable. Why buy a house if it’s not truly yours?

  39. I have my doubts about Mr. Allison’s Objectivist purity. He made grants to USC – a government skool.

    Kevin

  40. Silly Stormy. Of course Native Americans mixed labor with land. Not all tribes were hunter/gatherers. Many were horticulturalists.

    Anyhow, hunting and gathering is labor.

  41. >Anyhow, hunting and gathering is labor.

    Yes, and they’re entitled to the proceeds of that labor. e.g. the skins, fruits, etc.

    But they fact they hunt deer in a particular forest doesn’t make them the owners any more than the fact a mountain lion hunted deer there makes it the owner.

    As for the horticulturalist Indians, yes, they owned the land they cultivated and it was wrong to chase them off it. But it’s a big jump from ‘Indians own this particular field’ to ‘Indians own the entire North American continent’, which is implied by claims that ‘All of the land in the US is stolen’.

  42. jf — joe may have erred WRT where the name “pumpkin” came from, but the plant is totally a native of the Americas. And if people were cultivating it, they were “genetically engineering” it.

  43. Private banks could stand to lose a lot more than a little business if property rights were eroded too badly in this country. Think about it. All those mortgages, backed by nothing more tangible than the belief that the valuable property can be claimed, and held, by a private entity. Stick that in the shareholders’ pipes and smoke it.

  44. I wonder if the Canarsies would be willing to buy back Manhattan…

    I hope not. They can have Canarsie, though.

  45. Some Indian tribes were considering bans on immigration. They shelved this plan when the other tribes explained this would make them rednecks.

    (I’ll have to re-read this post in the morning to see if it really is as bad as I think it is)

  46. Kevrob: FYI USC is a private school. But I doubt a pure objectivist would donate to private schools either. Rand believed charity and donations were wastes of resources.

  47. And if people were cultivating it, they were “genetically engineering” it.

    And it’s fraud to call them “organic”!

  48. SD: I have never heard the logic that a person has to break ground in order to own property. That’s just odd. They lived on the land for a thousand years and that makes it theirs. Grabbing it because they weren’t working it to your satisfaction is the same logic the city is using to grab people’s houses for developers.

  49. Are we as individuals bound by ethics to respect other’s property rights? Since corporations are just a collection of individuals, why should they be held to a different standard? We can and should expect other individuals and corporations to respect property rights.

  50. My admittedly glib comment regarding the Indians was intended to sort of illustrate that the ?ownership? of ?property? is not exactly set in stone. It basically comes down to this: the owner of a piece of property is somebody who is able to use the power of physical force to prevent others from taking it.

  51. >SD: I have never heard the logic that a person
    >has to break ground in order to own property.
    >That’s just odd. They lived on the land for a
    >thousand years and that makes it theirs.
    >Grabbing it because they weren’t working it to
    >your satisfaction is the same logic the city is
    >using to grab people’s houses for developers.

    No, the lived on SOME of the land for thousands of years. They own the land they actually turned to cultivated fields, built villages on, etc. I don’t understand the principle that you think extendd this to ownership of the entire continent.

    You have seemed to picked some arbitrary date and decided that ‘ownership’ of land is based on some Voroni partition of the earth that occurred at that time. So the indians ‘own’ North America cause they were the only ones nearby at the time.

    But then why not go back further? Why not back before the inidians arrived in America. Maybe the land really belongs to European cavemen. After all, before North America was first peopled, it was a lot closer to them than it was to their Asian counterparts.

    Or maybe go back further and say the entire planet really belongs to Kenya.

    Or heck, maybe the universe really belongs to some alien race that predates mankind. I mean, sure they never came here and did anything with the earth, but they were alone in the universe for thousands of years before we pesky humans showed up and stole their rightful claim to this planet.

    We better hope they never show up and demand we give it back.

  52. Didn’t John Travolta star in that movie, Stormy?

  53. diff phil:

    The USC Charles Oliver mentioned, and I later referred to was The University of South Carolina. The Trojans aren’t the only USC, though it wouldn’t bother me a bit if they were.

    Kevin

  54. If I were king, I’d take all Indian assets and divvie them up amongst all the indians, who could then sell their piece or not. I’d abolish tribal government, the BIA, the reservations, and be done with the whole sordid mess.

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