Walking around the neighborhoods bordering the University, one might find it hard to believe we’re in a recession. The West University neighborhood has, in recent years, been all but turned into a construction site as hundreds of new housing units have gone up in the place of older, “well-partied” college houses, and apartment building after apartment building has been erected on the hallowed grounds of our beer pong cup graveyard.
In the face of all this growth, some of Eugene’s city councilors have begun increasing pressure on local developers by examining more closely a tax break the city grants to apartment developers, known in real estate circles as the “multi-unit property tax exemption,” or MUPTE (‘mup-tee’). The exemption allows developers to dodge taxes on the improvements they build (though their land remains taxed), a savings that can amount to hundreds of thousands of dollars for apartment owners. Students who find themselves paying fairly high rents to live in “MUPTE’d” properties might see this as unfair, especially as developers hardly seem to be hurting for money even in difficult economic times.
And real estate developers, normally some of the most ardent opponents to any government interference in the free marketplace, might rightly be painted as hypocrites for now supporting so staunchly a move by the government to subsidize development. They could, possibly, be victims of the same criticism as their brethren in the financial services industry: They insist on the strength of the free market when it makes them money, and run to the government for hand-outs when it does not.
Critics on city council and in the University community, though, would do well to remember what the MUPTE is intended to accomplish. It serves a series of goals, although perhaps inadequately. By allowing University-area developers some relief from their otherwise fair tax burdens, neighborhood organizations and students alike are able to extract from them social benefits that the market would hardly provide if left to its own devices.
Neighborhood activists must all but approve of MUPTE applications, which rarely go forward successfully without making concessions to neighborhood groups. This process, which can be witnessed at any number of the more or less sparsely attended neighborhood meetings, often results in developers agreeing to do everything from installing solar panels at cost to lowering building heights to funding local park development in exchange for neighborhood support in getting their building off the tax rolls.
The irony, of course, is that normal free market contractors would rarely consider making any of these moves toward better architecture or more sustainable energy use, or helping out with neighborhood parks if they weren’t jockeying for tax breaks. And yet, it’s possible that if they simply chose to give to their community despite their short-run bottom line, they might ultimately reap long-run benefits far above the MUPTE. Communities with better architectural design, more sustainable energy sources and more public amenities result in higher rents in the long-run, and further the job growth that supports them. Nowhere is this better demonstrated than in the Pearl District in Portland, where economic growth from a once-abandoned industrial district has been immense. While the market fueled the Pearl’s economic success, we cannot forget that it is the government that sparked it. If it were not for interference in the free market, the provision of public amenities of parks and transit, and the aggressive encouragement of local redevelopment with regulation, every penny generated in the Pearl’s markets simply wouldn’t exist.
This, finally, brings us to the bigger picture. Criticisms of regulatory and subsidizing policies like the MUPTE and the Pearl rest largely on the assertions – on both the left and right – that they constitute inappropriate interference in the free market.
I disagree. Or rather, I contest the premise that the free market, when left alone by government, achieves the greatest good. This concept is obviously debatable, not just because it cannot be easily proven in itself, but because it presumes the existence, or at least the possibility, of a such thing as a “free market.”
In reality, there never has been and never will be such a thing as a “free market” of economic forces acting independent of political, social and artistic considerations. The market is a slave to the desires of government policy, of the social tastes of consumers, and of the expressions of artists that impact those desires and tastes. Conversely, those desires, tastes and expressions are shaped by and serve economic forces. Seeing the creation of an unhindered “free market” as a noble end that political entities must serve is a fundamental mistake. To do so fails to recognize that markets, just as governments, social movements and works of art, are simply the means to an end, which is ultimately the achievement of greater outer harmony with our environment and greater inner peace with ourselves.
The market can and must be bent, diverted, created and recreated by the forces of politics, society and art such that it serves this end. We must refrain from seeing this manipulation as unfair interference and begin to see it as simply adapting a tool – the “free” market – to the realities of change. Rather than creating the supplies and demands of humanity, it simply serves them, as do all other constructed systems of organization.
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The (un)free market
Daily Emerald
January 21, 2009
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