George Washington was a member of Virginia’s gentry. His father died when he was 11, but his mother and he were able to maintain a comfortable lifestyle. After fighting in the French and Indian War, he married Martha Custis, taking control of one third of the Custis estate and becoming one of the wealthiest men in Virginia. Prior to taking command of the Continental Army, he was politically active and a member of the Virginia upper class.
Thomas Jefferson was another member of Virginia’s elites. He inherited approximately 5000 acres when his father died. He married Martha Wayles Skelton, inheriting another 11,000 acres and 135 slaves when her father died. He was another member of the social elite in Virginia.
John Adams was born in Massachusetts to a middle-income family. He entered Harvard at age 16, later becoming a lawyer. He was counsel for the British during the Boston Massacre, winning acquittal for six of his clients, while two were found guilty of manslaughter. He wrote several influential essays arguing against absolutist British control over the colonies, before becoming a member of the Continental Congress.
I could continue with short biographies about other founding fathers, but you get the idea. America’s founding fathers were elites. They had money, power, influence, and high social standing.
This is hardly unique to the American Revolution. Every successful revolution, and most of the unsuccessful ones, had the support of some of the ruling class. Without aligning some of the elites with the interest of a revolution, the revolution is bound to fail. Even beyond revolutions, any institutional change requires the backing of at least a portion of the powerful.
In 1972, The Republic of Minerva declared independence. It consisted of two reefs in the Pacific, known as the Minerva Reefs, covered in enough sand to create two small islands. The sand had been transported there from Australia, courtesy of the Ocean Life Research Foundation, an organization created by a libertarian Nevadan Real Estate Mogul, Michael Oliver.
The plan was to create a libertarian utopia with no taxes, regulations, or redistribution, but the would-be nation was not welcomed by neighboring countries. Australia, New Zealand, Tonga, Fiji, Nauru, and Samoa met soon after the declaration of independence. Tonga put forward on the Minerva Reefs which was recognized by the other parties. The Republic of Minerva was unwilling to fight for their independence, and Tonga took back the reefs unmolested.
Operation Atlantis was similar project to create a libertarian state from scratch, this time in the Caribbean. Werner Steifel, a businessman who built and ran a dermatological company, wanted to create a Galt’s Gulch for those escaping oppressive governments. Atlantis II, the boat which was to be used as a base while creating the artificial island sank during a tropical storm. Atlantis III, the artificial island he was creating, had to be abandoned when a Haitian gunboat asked them to leave.
A more recent attempt is Liberland. Vit Jedlicka claimed uninhabited land between Croatia and Serbia which neither country claimed. While he has attracted a great deal of press, Croatian police have blocked access to the land and not a single country has recognized his claim.
In the case of none of these embryonic states were the ruling elites on board. Groups of libertarians simply claimed a piece of land and hoped to remain unmolested. They had neither the connections, nor the power to ensure respect for their claim.
The international community is a primitive governance structure, where there is no reliably enforced rule of law. Instead, there is a weakly enforced rule set, but the real decision making is done by those in power on an ad hoc basis. Claims of a new country are only legitimized through defensive force or through the recognition of those in power.
And within that hope lies the difficulty. Creating a new polity is, well, political. It is a fundamentally political act which should be treated as one, and which so far libertarians have been loath to do.
The first thing any groups interested in implementing their vision must do is scale back their aims. As far as, say, libertarians are concerned, benefits of an ideologically pure libertarian city which is isolated from the international community is lower than the benefit of a mostly libertarian community which is integrated into the international community.
Take, for example, banking laws. If a new jurisdiction attempted to create anonymous banking, they would effectively shut themselves off to the entire American market, if not also the Europeans. Exporting drugs would have a harsher response, literal invasion.
The second step is to consider the relevant ruling elites for a particular project. There are two relevant political bodies. The first political body is the international community. The second political body is the country which claims, or is likely to claim, the territory on which a new polity is established.
The international community is multi-lateral organizations, the UN, World Bank, IMF, as well as powerful countries, the United States, China, Britain. They are uninterested in recognizing new countries. Somaliland, an independent political unit since 1991, which has held several free and fair elections, remains unrecognized. The fear is that recognition will embolden other separatist groups.
The countries which have gained independence — such as South Sudan, Kosovo, and Eritrea — have done so through long wars. Post-Soviet Republics only acquired independence when the Soviets no longer had the political will to go to war to keep them as part of the union. As such, barring a long armed conflict, statehood for a new libertarian country is unlikely.
On the other hand, the international community does offer positive indications for semi-autonomous cities. The World Bank’s Doing Business Index, for example, tracks reasonably closely to either Fraser or Heritage’s Economic Freedom Index. With the election of Trump and Macron, and the United Kingdom’s exit from the EU, we have seen the global elite coalesce around their vision of a cosmopolitan globalist future. Packaging a semi-autonomous city in such garb will win the accolades and support of the international community without too much trouble.
On a practical level this means using the correct language and terminology. Economic liberalization, or even better, economic reforms, is bland enough language to minimize opposition. Supporting entrepreneurship is another winner. Never mind that developing countries need less entrepreneurship. Factory jobs tend to pay better and offer steadier employment than selling candy, soda, or other food or trinkets on small carts.
On the policy side, the international community has focused too much of their energy on international trade and capital flows, and too little on creating the domestic conditions for economic growth. Nevertheless, they have put their stamp on those conditions, though they have been lax about enforcing them. Bill Clinton, for example, wrote a positive blurb on The Mystery of Capital, Hernando de Soto’s book on ensuring the poor have property rights. The World Bank’s Doing Business Index is largely aligned with libertarian notions about limiting government involvement in enterprise.
Of course, it is important to do more than just packaging. To truly win the support of the international community the package must contain elements aligned with their ideological presuppositions. These presuppositions, however, can largely be summarized as ‘managed capitalism.’ The boundaries of a libertarian city-state can be pushed with a more liberalized labor market, for example. However, the international community will be happy as long as capital flows remain unimpeded.
The ruling elite of the country which claims the territory, hereafter referred to as the host country, is more difficult to assess. Different countries have different political systems. However, some general lessons may be drawn.
First, it is important to pick the right country to locate the project in. The country must be poor enough to have a large potential for economic growth which can be released through economic freedom. On the other hand, it must have enough stability to attract the magnitude of investment necessary to build a city. This is a fine line to walk.
Second, the interests of a large portion of the ruling elite must be aligned with the success of the project. This can be done in a number of ways. Perhaps the simplest is to give the ruling elite shares in the government, or have them locate business interests there. Politically connected contractors could be given preference. Or, if the city is successful, the people living there could exert enough political pressure to make it untouchable.
The interest of ruling elites must be aligned with the city in the long term as well. There is the constant risk of expropriation if the city is a success. This can be mitigated to a degree with investor protection agreements and the international treaties which enforce them. However, it is better for the threat never to emerge. If a sufficient portion of the ruling elites have a vested stake in the city, no government will seek to expropriate it. Even dictators are constrained by the coalition supporting them.
Creating semi-autonomous cities is possible in our geopolitical context. But to achieve their goals, idealists need to cultivate a sober acceptance of things as they currently are.
Mark Lutter is the lead economist of NeWAY Capital, an asset management firm dedicated to creating new jurisdictions that can grow into cities.