Free Private Cities: The Future of Governance is Private

By Titus Gebel

Imagine a private company offers you the basic services of a state, i.e. protection of life, liberty and property in a defined territory. You pay a certain amount for those services per year. Your respective rights and duties are laid down in a written agreement between you and the provider. For everything else, you do what you want. Thus, you are a contracting party on an equal footing with a secured legal position, instead of subject to the government’s or majority’s ever changing will.  And you only become a part of it if you like the offer.

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.

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 have started such a company: Free Private Cities Ltd (freeprivatecities.com).

The market of living together

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 “state service provider” or “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.

And this is exactly the idea of a Free 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. A FreePrivate City as I propose it is based on the following principles:

1) Every resident has the right to live an independent life without the interference of others.

2) The interaction between the residents happens on a voluntary basis, not based on coercion. Participating and remaining in the Free Private City is strictly voluntary.

3) The respective rights of others must be honored, even if one does not like their way of life or attitude.

4) There is complete freedom of speech with one exception: If you are promoting expropriation or violence against others, you have to leave. The pure criticism of other people, ideologies, religions, etc. has to be accepted. “Feeling outraged” justifies no limitation of free speech.

5) The operator of the Free Private City ensures a stable regulatory framework and a basic infrastructure. This includes the establishment of a police, fire-fighters, emergency rescue and furthermore, the establishment of a legal framework and independent courts, so that property ownership is registered bindingly and residents can assert their legitimate claims in a regulated process, if they are unable to agree on arbitration.

6) The framework is laid down between the residents and the operator in a contract which holds all the respective rights and obligations. This includes the consideration for every inhabitant for the operator’s services. Every resident has a legal claim that his contract is performed and can claim damages for nonperformance. This contract is basically one’s personal “constitution” which is superior to all existing constitutions since it may not be changed unilaterally later, neither by the operator nor by majority vote.

7) All adult residents are responsible for the consequences of their actions, not “society” or the operator. Again, there is no “human right” to live at the expense of others.

8) Conflicts of interest between residents or between residents and the operator are negotiated by independent courts or arbitral tribunals. Their decisions must be respected. Namely conflicts with the operator, e.g. about interpretation of the contract, go to arbitration, not to courts of the operator.

9) There is no legal entitlement to join the Free Private City. The operator can reject candidates at his discretion. People who openly declare views that are not compatible with a free society, e.g. socialists, fascists or islamists, or known criminals, won’t get admittance.

10) Each resident may terminate the contract at any time and leave the city again, but the operator may –after a trial period- cancel only for cause, as for breach of the basic rules.

Free 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 Free Private City would be profit: offering an attractive product at the right price. This would include some public goods as mentioned as well as some infrastructure, clean environment and a set of 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 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.

Competition 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.

Similar in Free Private Cities: if the government provider sticks to his few core areas, there is no need for political participation. The idea is to have the greatest possible self-determination, not to ensure maximum participation. 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.

Competition has been proven as the only effective method in human history for limitation of power. In a Free 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.

Free Private City is not a utopian, constructivist idea. Instead, it is simply a business model whose elements are already known and which are merely transferred to another sector, namely 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, with open outcome. The only permanent requirement in favor of freedom and self-determination is the contract with the operator. Only this contract creates mandatory obligations. For example, residents can agree on establishing a council. But even if 99% of the residents support the idea and voluntarily submit to the council’s decisions, this body has no right to impose his ideas on the remaining 1%. Think of ideas like financing a public swimming pool, a social security system or establishing a minimum wage. And this is the crucial point, which failed regularly in past and present systems: the permanent guarantee of individual liberty.

How to start

In order to initiate 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 Free Private City therefore requires first an agreement with an existing state. The parent state grants the operator the right to establish a Free Private City and to set its own rules within a defined territory, ideally with access to the sea and formerly uninhabited.

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.”

Free 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 Free 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. And this is precisely this positive effect of competition that has been lacking in the state market to date. Not all Free Private Cities need conform to my own ideal rules. Specialized cities offering social security or catering to specific religious, ethnical 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 Free Private Cities or similar autonomous regions 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. Free 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 Free 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 founded amongst others Deutsche Rohstoff AG (www.rohstoff.de) and now lives with his family in Monaco. After 30 years of political activity he came to the conclusion that freedom cannot be achieved in the democratic process. His solution: create an entirely new product that will work as a role model in case of success. He is currently working on a book about Free Private Cities and will subsequently put the idea into practice.

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