Free Private Cities

The Next Stage of Development for Human Coexistence

Imagine a system in which a private company as a “government service provider” offers you protection of life, liberty and property. This service would include internal and external security, a legal and regulatory framework, and independent dispute resolution. You would pay a contractually fixed amount per year for these services. Besides that, you would take care of everything yourself. You would be able to do as you please, limited only by the rights of others and the contractually agreed rules of coexistence.

The government service provider as the operator of the community cannot unilaterally change this “Citizen Contract” with you at a later date. Disputes between you and the government service provider would be heard before independent arbitration tribunals, as is customary in international commercial law. If the operator ignores arbitral awards or abuses their power, their customers would leave and they would go bankrupt. The operator therefore has to face the economic consequences of their actions, giving them an incentive to treat their customers well in accordance with their contract.

As conventional political systems reach their limits, Free Private Cities represent a peaceful and voluntary alternative for governance.

Today’s political systems provide incentives for those in power to enrich themselves and their supporters at the expense of society. Politicians use other people’s money to enhance their own fame, and buy votes in exchange for benefits they portray as being “free”. The hypothetical social contract – said to define the relationship between governments and citizens – can, in practice, only be changed by one party: the government.

A system which by law allows for expropriation in favor of third parties (e.g. taxes and social security contributions) without the consent of all involved cannot sustain itself in the long run. Expropriation undermines what makes societies successful and attractive, leading to a battle of all against all for the enforcement of favorable regulations.

To solve these problems, we propose introducing new products into the “market of living together”.

What Would Life Be Like in a Free Private City?

Innovative service providers such as Uber or Airbnb would be welcomed to a Free Private City. Private entrepreneurs would provide everything demanded by citizens: from hospitals, schools and kindergartens to waste collection and transport. If desired, residents would take out private insurance or set up self-help groups to protect themselves against illness, death, need of care or accidents. Anyone would be free to offer new products and services without authorization or license, and get paid in any currency they desire, including bitcoin. Lack of labor market restrictions such as minimum wage laws would mean that lower skilled workers would easily find jobs, rather than being excluded from the labor market. New drugs and treatment methods would be available to any adult wanting to test them with knowledge of the potential risks. Environmental thresholds would apply only to products and processes deemed truly dangerous by serious scientific research. Crime and vandalism would hardly exist. Citizens would be able to let their children out on the streets at night without having to worry.

In Free Private Cities, people would not be stirred up against each other by politics. In a contract-based society with no parliament or central bank, political activism would no longer play a significant role in people’s lives. Without the fetters of top-down regulation, residents would be able to produce innovations that improve productivity. Free Trade would prevail, and everyone would be able to import everything duty-free. No taxes would be payable apart from the annual contribution to the operator specified in the Citizen Contract. Through this system, even low-income earners would be able to achieve a high standard of living.

Because neither currency nor interest rates would be manipulated by governments and central banks, the purchasing power of the residents of Free Private Cities would constantly increase. Pension schemes would be private and allow for retirement whenever the person concerned considers their funds to be sufficient.

Political activism, missionary zeal, distributional struggles and the stirring-up of social groups against one another would practically disappear in Free Private Cities. Residents would know that they cannot interfere with the contracts of fellow citizens and would respect each other’s different views and assessments. People would once again be responsible for taking care of themselves. This would make them more self-confident, stable and realistic in their assessments. After a couple of generations, Free Private Cities would be wealthier, freer and more peaceful than any place we have known so far.

Utopia or Business Case?

The establishment of a Free Private City requires a contractual agreement with an existing state. In this agreement, the Host Nation grants the operating company the right to establish the Free Private City on a defined territory in accordance with the agreed conditions. But why would existing states agree to this?

States would agree to surrender some of their power if they expect benefits in return. A win-win situation must therefore be created. The establishment of Free Private Cities in structurally weak areas would not only increase the attractiveness of the surrounding region, but also create jobs and encourage investment, ultimately benefiting the host state.

In a Free Private City, everyone would be self-sovereign. By voluntary agreement, all citizens enter into a genuine contract with a more or less ordinary service provider: the Citizen Contract. Both parties have the same formal rights and are therefore legally on an equal footing. The relationship between authority and subject is replaced by a relationship between customer and service provider. In contrast to conventional systems, where the citizen is obliged to pay tax without having a corresponding right to benefits, in a Free Private City, citizen fees and services are directly linked. Both contracting parties – the citizen and the operator – are granted certain entitlements by virtue of their contract. The operator can demand payment of a fixed contribution from the contract citizen, but no additional fees. In turn, the contract citizen can sue the operator for lack of compliance with their contractual obligations, for example obligations to ensure security and a functioning system of civil law. The operating model continues to function regardless of who is in charge of the operating company.

A Free Private City is not a utopia. It is a business idea whose functional elements are already known. These elements only need only be transferred to another sector: the market of living together. As a service provider, the operator only provides the framework within which society can develop openly (as in Hayek’s “spontaneous order”). Once the first Free Private Cities have been successfully established, a completely new, highly lucrative asset class will emerge. This is because both the “software” (the legal and contractual framework), and the “hardware” (the master plan and infrastructure), can be reused as often as required and adapted for different purposes.