Over the weekend, it was announced (by whom, exactly, seems uncertain) that there will be a demonstration in Washington, D.C. to assemble those interested in “protecting the Free Market” from the Obama administration. It is ironic but surely no coincidence that this gathering is scheduled for May Day, the May 1 socialist holiday that is also known as International Workers’ Day. Though the website for the event is full of free-market rhetoric the organizers seem to misunderstand what a free market actually is. The MayDay2014.com homepage reads,
The U.S. Department of Justice is aggressively working to shut down dozens of industries, and we need YOU to help us stop it: From taking away your right to choose how big of a soda you drink, to taking away your healthcare choices; from destroying free-market industries like short-term loans and firearms sales through Operation Choke Point to killing access to expanded energy production and distribution such as the Keystone XL Pipeline, this isn’t just an assault on our free-market industries…THIS IS AN ASSAULT ON OUR FREEDOMS.
It is frustrating to see “Keystone XL Pipeline” and “free-market” used in the same sentence, but is easy to understand why so many share this misunderstanding when even Reason has phrased descriptions of the federal battle over the oil pipeline as if Obama were standing in the way of purely voluntary business transactions.1
For those who are unfamiliar, the Keystone XL is a proposed extension to the Keystone oil pipeline system owned by TransCanada Corporation that is already in operation. The XL extension would replace a current portion of the system that pumps oil from Alberta, Canada to Steele City, Nebraska. The U.S. Congress and President Obama have battled over whether or not to approve the extension for construction for years due to concerns over environmental impact. Just as importantly (though not nearly as often discussed) are the private-property implications if Obama approves construction.
The Keystone XL will run over eight hundred miles and its construction will require TransCanada to obtain the property rights for the land the pipeline will cover. But instead of purchasing the land, TransCanada is turning to government to use eminent domain in order to transfer ownership their way. The company has been successful in expropriating property from landowners in Texas and has attempted to do so in Nebraska where the action was shot down as unconstitutional according to the state constitution.2 But the use of eminent domain to take land from one private owner and transfer it to another private owner has, as of 2005, been ruled constitutional at the federal level by the Supreme Court case of Kelo v. New London. Wikipedia accurately sums up the ruling:
Kelo v. City of New London was a case decided by the Supreme Court of the United States involving the use of eminent domain to transfer land from one private owner to another private owner to further economic development. In a 5–4 decision, the Court held that the general benefits a community enjoyed from economic growth qualified private redevelopment plans as a permissible “public use” under the Takings Clause of the Fifth Amendment.3
Of course, the use of government force to transfer private land to the politically well-connected is not a feature of a free market; well-defined and well-protected property rights are. For this reason alone, the libertarian and the free-marketeer should be opponents of the Keystone XL Pipeline.
Some have defended the project on grounds that it will help the economy. Nick Gillespie wrote that, once operational, the pipeline “will adds [sic] billions of dollars in ongoing economic activity and tax revenues.”4 If the construction of the XL extension will be such a profitable endeavor, then TransCanada should be willing to pay the market price to the current landowners because of the large return they will be earning on their investment. If they cannot pay the market price, then it suggests the landowners have a more beneficial use for their property.
The free-marketeers’ stance on this issue is also crucial to the perception others have about the free market. Libertarianism is often criticized as supporting big business and having contempt for the poor. When the Left sees libertarians sacrificing their principles of property rights, the very foundation of the libertarian philosophy, in order to benefit a well-connected oil company at the expense of small landowners, it only corroborates the argument that so much time has been spent dispelling.
In order to be ideologically consistent and economically sound, proponents of the free market must oppose the construction of the Keystone XL Pipeline unless and until TransCanada Corporation agrees to purchase the property rights to land it will cover instead of using government force and privilege to acquire the land below market price.
1. Ronald Bailey, “President Obama Bows to Special Interests: Refuses to Approve Keystone XL Pipeline from Canada” Reason.com (18 January 2012).
2. James Conca, “TransCanada Tries To Seize U.S. Land For Keystone Pipeline” Forbes (24 February 2014).
4. Nick Gillespie & Meredith Bragg, “3 Reasons to Build the Keystone XL Pipeline” Reason.com (17 February 2013).