Terror, Mass Transit, and Social Soil

By Fred Foldvary

The people of London have reacted to the terrorist attack with courage, fortitude, and defiance. If the aim of the bombings of the London transit system was to instill fear and change the policies of the government, it was futile. Londoners were resilient when the Nazis bombed the city during World War II, and they did not give in to the Hibernian terrorist attacks. The Levantite terrorists can change the policies of states with minor interests and involvement in the Middle East, but not those such as the UK and USA with significant interests. Indeed, terrorism makes policy change more unlikely, since change would be seen as giving in to terrorism.

The Levant is the French term for the eastern Mediterranean region. Literally it means the sunrise, as the sun rises in the east, and thus rises from the Middle East in the western European perspective. We can more broadly refer to the Middle East as the Levantine region, and those coming from the Levant, including terrorists, as Levantites. I think this is better than referring to these terrorists as Muslims or Islamic, because there are also peaceful adherents, and this term will offend fewer people.

Security has been enhanced for mass transit systems in the USA, and this enhancement needs to be made permanent. If there is any use at all for "homeland security," it is to defend us from terrorist attacks. Riders need to be part of the security system, being alert for packs and briefcases left unattended, as timed bombs are the most likely form of attack.

Funding is a big problem in defending democracy from terror. Some mass transit systems should never have been built, since they are cost-ineffective. However, now that they are here and in use, the natural and efficient source of financing urban mass transit is from the land rent that they generate. City transit systems that are heavily used make the city a more productive and attractive place, which increases the site rentals and land values of the city.

This increase in land value due to civic services is called "capitalization." Private communities such as hotels, condominiums, shopping centers, and residential associations are efficiently financed from capitalization, as the unit owners or members pay fees or assessments reflecting the value of the community services. But governments have typically let private interests capture the capitalization and instead taxed activities unrelated to the civic benefits, such as earning wages or buying goods.

Governments thus subsidize landowners and penalize enterprise and labor. Given government provision of mass transit, the efficient way to finance them is a levy on site values, with no charge to users. The economic cost of one more rider on a subway train is close to zero. The efficient charge is therefore zero. Note that hotels and malls do not charge people from using elevators and escalators; they efficiently price the use at zero, since the rentals paid by the guests and renters pays for the vertical transit. Likewise, it is common for residential communities that offer local transit to have no annoying user charges; the assessments and dues pay for it.

If we are serious about defending our transit systems from terrorists, we need adequate financing, and this has to come from land value or land rent. Security enhances land value, and crime and the threat of destruction reduces land value. Any payment for security other than from land value is a subsidy to landed interests and a penalty to productivity and security.

To extricate terror, Europeans need to get serious about integrating Muslims into their local and national communities. European nationalism is based on religion, ethnicity, and culture. Muslims in Europe feel unwelcome and often live in isolated enclaves, which breeds alienated extremists, supremacists, and fanatics. European governments need to make Muslims identify themselves as Europeans who sympathize with rather than hate their communities. The USA does a much better job of integrating immigrants, as there is no religious, racial, ethnic, or cultural basis for being an American.

The ultimate antidote to terror is free markets and deep democracy. The Levant has neither. The US government’s pushing of democracy is a step in the right direction, but it has to be democracy in substance, not just in form. The national and provincial legislative elections in Iraq were not regarded as legitimate by some Iraqis as they were based on political parties. The candidates were selected by the party chiefs, and the whole process could be accused of manipulation. The German democracy of the Weimar Republic during the 1920s was likewise based on political parties with proportional representation, which made Germany vulnerable to the Nazi takeover.

Iraqis and Palestinians will make a big mistake if they create elections based on political parties. They should instead ground their democracy in neighborhood councils. These councils would then elect city and provincial representatives, which in turn would elect the national parliament. A bottom-up structure would be based on geography rather than party and religion. People would feel they have voice and representation. Bottom-up multi-level democracy would make the top level less vulnerable to a takeover.

Terrorism ultimately comes from dysfunctional economies and governance, which breed resentment and desires for revenge. Creeds of hatred require receptive soil to grow in. We need to change the chemistry of the social soil to prevent the weeds from spreading and to instead plant and harvest peace, justice, prosperity, and above all, liberty.

This article first appeared in the Progress Report, www.progress.org. Reprinted with permission.

Dr. Fred Foldvary teaches economics at Santa Clara University and is the author of several books: The Soul of Liberty, Public Goods and Private Communities, and the Dictionary of Free-Market Economics.