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Private Cities: A Path to Liberty – Article by Titus Gebel

Private Cities: A Path to Liberty – Article by Titus Gebel

The New Renaissance Hat
Titus Gebel
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Given Voluntary Cooperation, Everything Is Possible

Let us analyze the market for governance: states exist, at least in part, because there is demand for them. A functioning state offers a stable framework of law and order, which enables the coexistence and interaction of a large number of people. This is so attractive that most people are willing to accept significant limitations on their personal freedom in exchange. Probably even most North Koreans would prefer staying in their country compared to living free but alone as a Robinson Crusoe on a remote island. Humans are social animals.

However, if you could offer the services of a state and also avoid its disadvantages, you would have created a better product. But after decades of political activity, I have come to the conclusion that real liberty, in the sense of voluntariness and self-determination, can’t be achieved by tinkering with existing states through the democratic process. There is simply not enough demand for these values at the moment.

However, someone could offer this as a niche product for interested parties. It might be possible for private companies to provide all of the necessary services that government normally monopolizes. I want to start such a company.

Private Cities

All that we know from the free market could be applied to what I call the “market of living together”: voluntary exchange (including the right to reject any offer), competition between products, and the resulting diversity of the product range. A “government services provider” could offer a specific model of living together within a defined territory and only the ones who like the offer settle there. Such offers have to be attractive — otherwise there will be no customers.

This is the idea of a private city: a voluntary, for-profit, private enterprise that offers protection for life, liberty, and property in a given territory — better, cheaper, and freer than existing state models. Residence would depend on a predefined contractual relationship between residents and the operator. In case there is a conflict about the interpretation of the contract, there will be independent arbitration.

Private cities are not meant as a retreat for the rich. Run properly, they would develop along the lines of Hong Kong, offering opportunities to rich and poor alike. New residents who are willing to work but without means could negotiate a deferral of their payment obligations, and employers seeking a workforce could take over their contractual payment obligations.

The incentive for the operator of a private city would be profit: offering an attractive product at the right price. This would likely include public goods, such as a clean environment, police, and fire protection, as well as some infrastructure and social rules. But the operator’s main service is to ensure that the free order is not disturbed and that residents’ life and property are secure.

In practice, the operator can only guarantee this if he or she can control who is coming (prevention) and is entitled to throw out disrupters (reaction). For everything beyond this framework, there are private entrepreneurs, insurance, and civil society groups. Of course, all activity ends where the rights of others are infringed. Other than that, the proper corrective is competition and demand.

Order and Exit

Will the threat of competition bring sufficient protection to the residents? Consider this: the Principality of Monaco is a constitutional monarchy. It concedes zero political participation rights for residents without Monegasque citizenship — some 80 percent of the population, including myself. Nevertheless, there are far more applicants for residency than the small housing market of this tiny place (two square kilometers) may take.

Why is this so? Three reasons: there are no direct taxes in Monaco for individuals; it is extremely secure; and the government leaves you alone. If Monaco changed this, people would just move away to other jurisdictions. Thus, despite the prince’s formal position of great power, competition with other jurisdictions — not separation of powers, not a constitution, and not voting — ensures the residents’ freedom.

Accordingly, there is also no need for parliaments. Rather, such representative bodies are a constant danger to liberty, since special interest groups inevitably hijack and mutate them into self-service stores for the political class. Unfortunately, the rule of law does not provide adequate protection against this tendency in contemporary Western societies. If laws or constitutions are standing in the way, they will be quickly modified or interpreted in a politically convenient way.

Competition has been proven as the only effective method in human history for limitation of power. In a private city, contract and arbitration are efficient tools in favor of the residents. But ultimately, it is competition and the possibility of a speedy exit that guarantee that the operator remains a service provider and does not become a dictator.

A private city is not a utopian, constructivist idea. Instead, it is simply a known business model applied to another sector, the market of living together. In essence, the operator is a mere service provider, establishing and maintaining the framework within which the society can develop, open-ended, with no predefined goal.

The only permanent requirement in favor of freedom and self-determination is the contract with the operator. Only this contract can create mandatory obligations. For example, residents can agree on establishing a council. But even if 99 percent of the residents support the idea and voluntarily submit to the council’s decisions, this body has no right to impose their ideas on the remaining 1 percent. And this is the crucial point, which failed regularly in past and present systems: a reliable guarantee of individual liberty.

Where to Begin

In order to start this project, autonomy from existing sovereignties must be secured. It need not entail complete territorial independence, but it must include the right to regulate the city’s internal affairs. The establishment of a private city therefore requires first an agreement with an existing state. The parent state grants the operator the right to establish a private city and to set its own rules within a defined territory, ideally with access to the sea and formerly unincorporated.

Existing states can be sold on this concept when they can expect to reap benefits from it. The quasi-city states of Hong Kong, Singapore, and Monaco have a cordon of densely populated and affluent areas adjacent to their borders. These areas are part of the parent states and their residents pay taxes to the mother country. Now, if such structures are formed around a previously underdeveloped or unpopulated area, this is a gain for the parent state. Negotiating with a government to surrender partial sovereignty is certainly no easy task, but it is in my view more promising than attempts to “change the system from within.”

Private cities are much more than just a nice idea for a few people on the margins. They have the potential to subject existing states to creative destruction. If private cities are developed across the world, they will put states under considerable pressure to change their systems towards more freedom, or else they may lose subjects and revenue.

It is precisely this positive effect of competition that has been lacking in the state market to date. Not all private cities need conform to my own ideal rules. Specialized cities offering social security or catering to specific religious or ideological concerns are conceivable. Within this framework, even socialists would be free to try to prove that their system done properly really does work. But this time one thing is different: others do not have to suffer from this (or any other) social experiment. The superstructure of voluntary association allows many different systems to flourish. Given voluntary participation, everything is possible.

This simple rule has the potential to disarm and transform even a totalitarian ideology into just one product among many. I firmly believe that private cities or similar autonomous regions, such as charter cities or LEAP-zones, are inevitable. People of all social and economic groups will not forever agree to be looted, bullied, and patronized by the political class, without ever having a meaningful choice. Private cities are a peaceful, voluntary alternative that can transform our societies without revolution or violence — or even majority consensus. My guess: we will see the first private city within the next ten years. I hope to see you there.

Titus Gebel is a German entrepreneur with a PhD in law. He previously founded Deutsche Rohstoff AG, among others, and now lives with his family in Monaco.

This article was originally published by The Foundation for Economic Education and may be freely distributed, subject to a Creative Commons Attribution 4.0 International License, which requires that credit be given to the author.

US Gone to Pot, but Not Completely – Article by Mark Thornton

US Gone to Pot, but Not Completely – Article by Mark Thornton

The New Renaissance Hat
Mark Thornton
November 12, 2012
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The only good thing about the 2012 campaign — other than its being over — is that much progress was made on marijuana policy. Marijuana was legalized in two states, Colorado and Washington. Medical-marijuana legislation passed in Massachusetts. Marijuana was decriminalized is several major cities in Michigan and Burlington, Vermont, passed a resolution that marijuana should be legalized. The only defeats were that legalization failed to pass in Oregon and medical marijuana was defeated in Arkansas.

This is a stunning turnaround from the 2010 campaign when Prop 19 in California failed to pass despite high expectations. I explained in detail why Prop 19 failed here. It was an unfortunately common story of Baptists, i.e., people who oppose it, and bootleggers, i.e., people who profit from black-market sales, who stopped the legalization effort.

With regards to the legalization victories in Colorado and Washington, Tom Angell, Director of LEAP (Law Enforcement Against Prohibition) called the election a “historic night for drug-law reformers.” Paul Armentano, the deputy director of NORML (National Organization for the Reform of Marijuana Laws), called the Colorado and Washington victories “game changers,” noting that “both measures provide adult cannabis consumers with unprecedented legal protections.” He noted that “until now, no state in modern history has classified cannabis itself as a legal product that may be lawfully possessed and consumed by adults.” Writing for the Marijuana Policy Project, Robert Capecchi called Colorado and Washington “historic victories,” saying that they “represent the first bricks to be knocked out of the marijuana prohibition wall.”

Following is a list of all marijuana measures on the 2012 ballot as provided by LEAP:

Colorado Marijuana legalization Passed
Washington Marijuana legalization Passed
Oregon Marijuana legalization Failed
Massachusetts Medical marijuana Passed
Arkansas Medical marijuana Failed
Detroit, MI Decriminalization of adult marijuana possession Passed
Flint, MI Decriminalization of adult marijuana possession Passed
Ypsilanti, MI Marijuana to be lowest law enforcement priority Passed
Grand Rapids, MI Decriminalization of adult marijuana possession Passed
Kalamazoo, MI Three medical-marijuana dispensaries permitted in city Passed
Burlington, VT Recommendation that marijuana should be legalized Passed
Montana Referendum restricting medical marijuana Likely to pass

Some readers might not be fired up at the prospects of legalization, decriminalization, and medical marijuana, but the benefits are higher than you might think. First of all, the economic crisis is a great opportunity to get this type of reform passed. There are several economic dimensions at work here. The most obvious thing that comes to mind is that legalized marijuana might be a source of tax revenues and possibly excise taxes and license fees. It would also be a source of jobs, although the net gain in jobs and incomes is probably initially small.

A major benefit would be a reduction in the size of government. Marijuana prohibition results in hundreds of thousands of people being arrested, tying up police, jails, courts, and prisons. When the city of Philadelphia decided to make marijuana prohibition a low priority and treat it like public intoxication ($200 fine), they ended up saving $2 million in the first year.

One of the most important benefits of these measures is that they make for a more liberal society in the Misesian sense. Marijuana prohibition is public violence, prejudice, and partiality. Legalization and liberalism is private property and public tolerance. As Ludwig von Mises wrote,

The essential teaching of liberalism is that social cooperation and the division of labor can be achieved only in a system of private ownership of the means of production, i.e., within a market society, or capitalism. All the other principles of liberalism democracy, personal freedom of the individual, freedom of speech and of the press, religious tolerance, peace among the nations are consequences of this basic postulate. They can be realized only within a society based on private property. (Omnipotent Government, p. 48)

The key thing, economically speaking, is that more liberalism is good for business, jobs, and prosperity. Legalizing marijuana, along with things like same-sex-marriage laws, may be appalling to some people, but when companies are looking to get started or establishing new operations, those are some of the things that are looked at, just like taxes, schools, crime, etc. States that are competing for the best companies that offer the highest paying jobs are the same states that are liberalizing their policies.

Therefore, it should come to no surprise that a state like Washington legalized marijuana even though it does not have a history of marijuana-reform activism. Washington needs to compete with other states for computer programmers, engineers, and technicians for Washington-based firms like Boeing and Microsoft. Do not be surprised if what happened in Colorado and Washington spreads to other states in coming elections.

The most important aspect of the victories in Colorado and Washington is that the people of those states stood up and voiced their opposition to the federal government and its policy of marijuana prohibition. They are directing their state governments to no longer cooperate with the federal government. You can bet that federal officials will seek to intimidate local officials and businesses as they have done in California. They seek to use fear and violence to maintain their power.

However, demographically and ideologically, they are fighting a losing battle. Supporters of legalization are younger, smarter, better educated, and have above-average incomes. The leaders of the reform movement do not seem to view their efforts as “pro-marijuana,” but rather as anti-prohibition, and they realize that the benefits are in terms of health, public safety, and prosperity.

When my book The Economics of Prohibition was published 20 years ago, I was often asked my opinion if marijuana should be or would be legalized. My stock answer was that medical marijuana would start to be legalized in 10 years and that marijuana would start to be legalized in 20 years, probably during an economic crisis. My only prediction in print was that the reform process would begin around the turn of the century. The first reform was actually a medical-marijuana law passed in California in 1996.

Mark Thornton is a senior resident fellow at the Ludwig von Mises Institute in Auburn, Alabama, and is the book review editor for the Quarterly Journal of Austrian Economics. He is the author of The Economics of Prohibition, coauthor of Tariffs, Blockades, and Inflation: The Economics of the Civil War, and the editor of The Quotable Mises, The Bastiat Collection, and An Essay on Economic Theory. Send him mail. See Mark Thornton’s article archives.

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Copyright © 2012 by the Ludwig von Mises Institute. Permission to reprint in whole or in part is hereby granted, provided full credit is given.