Whitepaper

Abstract

In current political systems, the actions of both rulers and the governed are shaped by wrong incentives. Rulers have no liability and face no economic disadvantage if they make poor decisions. The governed are made to believe that “free” benefits can come into existence through the power of their votes. This politicizes the state monopoly on force and leads to constant changes to the “social contract” and an endless struggle to influence the direction of this change.

In this paper, I propose a peaceful and voluntary alternative to the political status quo: Free Private Cities. The defining feature of a Free Private City is that it is run by a for-profit company, referred to as the Operator, which acts as a “government service provider”. This company can also be organized as a cooperative or be wholly owned by the citizens. In this capacity, the Operator offers citizens of the Free Private City protection of life, liberty and property. These services encompass internal and external security, a predefined legal and regulatory framework and an independent dispute resolution system. Interested individuals and companies enter into a Citizens’ Contract, paying a fixed yearly fee for these services instead of taxes. Within that framework, a “spontaneous order” can develop which emerges from the voluntary activities of the citizens. The Operator cannot later unilaterally change the Citizens’ Contract without the permission of the citizen concerned. Disputes between citizens and the Operator are heard before external arbitration tribunals, as is already customary in international commercial law. If the Operator ignores arbitral awards or abuses its power, customers will eventually leave and the Operator will face the risk of bankruptcy.

Since all land is currently controlled by governments, the establishment of a Free Private City requires that an Operator enters into a contractual agreement with an existing state, referred to as the Host Nation. In this agreement, the Host Nation grants the Operator the right to establish the Free Private City on a defined territory in accordance with certain predefined conditions, normally encompassing extended regulatory autonomy in various fields. One would expect states to be willing to surrender some of their power if they expect large enough benefits in return. Such benefits could include job creation, attraction of foreign investment and a percentage of profits generated by the Operator. The existence of a large number of Special Economic Zones worldwide demonstrates the willingness of states to do this.

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