Since 2021, the Biden Administration and various governors have utilized economic development incentives to engineer an electric vehicle (EV) market. From 2021 to 2023, states awarded EV companies $17.4 billion in potential subsidies. Unfortunately, North Carolina ranked among the top, doling out nearly $2 billion in corporate welfare to the EV industry. 

Governor Cooper’s push for a “clean energy economy” comes despite a lack of enthusiasm from the state’s citizens. A recent High Point University poll found climate change ranked 17th among 20 issues for North Carolinians. In response to the survey, Cooper encouraged politicians to ignore the preferences of the people by stating, “It is up to leaders — elected leaders — to make sure that even though they aren’t the most popular campaign issues that they continue to make sure that these policy challenges are faced.”

Growth in Economic Development

North Carolina’s primary economic development program is the Jobs Development Investment Grant (JDIG). Despite a poor track record in job creation and no clear link between economic growth and corporate welfare, the JDIG has expanded rapidly.

VinFast

The most controversial economic development deal in North Carolina is the 2022 handout to VinFast, a Vietnamese EV manufacturer. Central to the controversy is the state’s use of eminent domain to condemn 27 houses, five businesses, and a church to roll out the red carpet for the foreign company. Originally set for 2024, VinFast has delayed vehicle production to 2028. When asked about the delay, a company chairwoman stated that VinFast is prioritizing lower-cost factories in Indonesia and India due to “policies and culture a lot closer to us.”

Unfortunately, the chairwoman did not clarify which policies and cultural characteristics.

History of Eminent Domain

The Takings Clause of the U.S. Fifth Amendment states, “Nor shall private property be taken for public use, without just compensation.” Originally, this prohibited eminent domain for anything other than military bases, roads, public facilities, and public utilities. However, the following key cases broadened the definition of “public use” to include private economic development:

  • Berman v. Parker(1954) – The U.S. Supreme Court ruled in favor of condemning a semi-dilapidated District of Columbia neighborhood for private redevelopment despite some of the location’s properties being in good repair.
  • Poletown Neighborhood Council v. City of Detroit(1981) – The Michigan Supreme Court ruled in favor of condemning a Detroit neighborhood containing hundreds of houses and businesses in solid condition to make way for a General Motors factory.
  • Kelo v. City of New London(2005) – The U.S. Supreme Court, in a 5-4 decision, ruled in favor of condemning a Connecticut neighborhood with over a dozen homes and businesses in decent shape to clear the path for a Pfizer factory.

The Kelo decision established that property can be transferred between private entities for economic development under the guise of “public purpose.” However, the court did not define “public purpose,” leaving the interpretation to the states, to which numerous responded by strengthening protections against eminent domain abuse.

Unfortunately, many of the safeguards were merely symbolic, including North Carolina’s HB 1965 from 2006. It is worth noting that since 2007, the House has repeatedly passed bipartisan bills for greater protections against eminent domain, but the Senate has consistently failed to act.

When the state condemned 27 houses, five businesses, and a church to grease the wheels for VinFast, we found out why. Certain policymakers apparently want the power to purchase private property from hardworking citizens without their consent to benefit their cronies.

Property Rights

The right to acquire and maintain private property, which is fundamental to a free society, is susceptible to attack in North Carolina. Furthermore, as policymakers increase the rate at which they provide corporate welfare, the risk of eminent domain will continue to rise.  

In a critique of command-and-control policies, the economist Friedrich Hayek explained, “The more the state plans the more difficult planning becomes for the individual.” Hayek argued, “Protection of several property, not the direction of its use by government, laid the foundations for the growth of the dense network of exchange of services that shaped the extended order.”

Stated simply, protecting the right to private property, not its abuse by the government, is the driving force behind economic growth.

Policy Solution

Only 23 states have implemented effective protections against eminent domain for economic development; 12 states have passed constitutional amendments, and supreme courts in 11 states have repudiated Kelo.

North Carolina should follow the 12 states that have passed constitutional amendments protecting against eminent domain for private gain. My colleague Jon Guze, an advocate for reform since Kelo, emphasizes that the wording must be precise to prevent workarounds. For instance, in the VinFast case, the properties are condemned to build roads for the facility, not for the facility itself. The amendment must prohibit such loopholes.

The following is an outline of Guze’s recommendation in the John Locke Foundation’s North Carolina Policy Solutions for 2024-25:

  • Amend the state constitution to assert that private property may only be taken for public use and with just compensation
  • Stipulate that a neutral third party must determine if the taking meets the “public use” criteria without consideration of any legislative or administrative determination
  • Define “public use” to prohibit forced property transfers between private parties for economic development except for a public utility to fulfill its mission
  • Restrict blighted to mean that the property’s condition poses an imminent threat to health or safety
  • Define “just compensation” to include not only the value of the property, but also any other costs or losses incurred due to the condemnation