Share Private Cities – a disruptive technology for the state market

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 at arms length 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.

Why should a small group of people, i.e. the government, decide how you life your live? Especially when they have neither been elected by you nor are especially qualified? In contrast, you may stand for the opinion, that you have the right to decide by yourself how you lead your life. And if you want something from others you do it by voluntary exchange. You prefer self-determination over political participation!

If you agree to this view, two principles follow. Firstly, you have the right to be left alone, even from the government and the majority. Secondly, Human interaction has to happen on the basis of voluntariness – there is no such thing as a right to live on the expense of others.

However, the states of today, including democracies, not only can’t guarantee either of these principles, they are even based on their violation. As a tax paying citizen, you have to finance, for example, military missions abroad, university chairs for gender studies, subsidies for inefficient technologies, television propaganda channels, even if you reject all of them. You are forced to take out pension-, health- and long-term-care- insurances, whether you like it or not. You are not allowed to purchase light bulbs, powerful vacuum cleaners, plastic bags or cigarettes without warnings. And the ban list gets longer every year. In other words: You are not a client, you are a subject. Many people are happy with that. I am not. You probably neither. Is there a way out?

Let’s analyse the market: States do exist because there is obviously demand for them. A functioning state creates 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 of their personal freedom in exchange. Probably even most North Koreans would prefer staying in their country compared to living free but lonely as a Robinson on a remote island. Humans are social animals.

Now if you would offer the services of a state and at the same time avoid its disadvantages, you would have created a better product. 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 in the democratic process. ​​There is simply not enough demand for these values. However, someone could offer this as a niche product for interested parties.

The more I thought about it, the more I became convinced that government services in general can be offered entirely through private companies and that I want to start such a company. All that we know from the market, can be transferred to this area, let’s call it the market of living together: the enormous diversity of the product range, the voluntary exchange, including the right to reject any offer, the competition between the various products, which ensures that they are getting always cheaper and better. Now, a “State Service Provider” could offer a specific model of living together within a defined territory and only the ones who like the offer settle there. Such concepts have to be attractive, otherwise there will be no demand or your clients wander back into other systems.

And exactly this is the idea of a Private City. It is a for-profit private enterprise, and offers protection of life, liberty and property in a defined territory. Better and cheaper with way more freedom than existing states. A Private 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 Private City is strictly voluntary.

3) The respective rights of others must be honoured, 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 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.

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 misperformance. This contract is basically one’s personal “constitution” which is superior to all existing constitutions since it may later not be changed unilaterally, 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 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, won’t get admittance.

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

Private Cities are not intended as a retreat for the rich. Rather, they should develop along the lines of Hong Kong from poor beginnings to ultra-modern cities of the 21st century. New residents, who are willing to work but without means, could be granted a deferral of their payment obligations, employers seeking workforce could take over their contractual payment obligations etc. How can the operator make money? If he calculated the consideration for 100,000 residents and 200,000 are coming, he makes profit because the police, justice and infrastructure must not be doubled to provide the same level of service. In addition, there might be some modest taxes, like land value tax, property transaction tax or value-added taxes which could help making the Private City profitable. In the first years, the operator will probably have to pre-finance, but this is no difference to other startup-businesses.

As a matter of principle, the operator does not interfere with private decisions of the residents. However, with regard to traffic regulations, construction and emission rules, there will be some guidance in order to accelerate urban development. There will also be certain rules of behaviour in public, like the prohibition of begging or walking around naked.

With regard to the immigration of new residents, the operator decides in his sole discretion. Finally, it is his main service, to ensure that the free order is not disturbed or even life and property of the residents are at risk. In practice, he can only guarantee this if he controls who is coming (prevention) and if he is entitled to throw out disrupters (reaction).

For everything beyond this framework, there are private entrepreneurs, who cover all what is in demand, be it hospitals, schools, kindergartens or garbage disposal. The residents insure against all eventualities of life privately or create self-help groups, whether for illness, old age, death, or accidents. Skyscrapers, ports, airports and shopping centers are created and run by investors. There is free trade and anyone can import and export whatever he wants duty free. Anyone can introduce new products and services without permission or license, and pay them in any desired currency. Of course, all activity ends where rights of others are infringed. Other than that, the corrective is competition and demand. But will the threat of competition alone bring sufficient protection to the residents?

Take this example: the Principality of Monaco is a constitutional monarchy. It concedes zero participation rights for residents without Monegasque citizenship, which is 80% of the population including myself. Nevertheless, there are far more applicants than the housing market may take. Why is this so? (1) There are no direct taxes in Monaco for individuals, (2) it is extremely secure and (3) 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, it is therefore competition (with other places) alone, which ensures the freedom of the residents; it is not separation of powers, not parliament, not a constitution, not the right to hold a referendum.

Consistently, there is also no need for representative bodies such as parliaments. Rather, these are a danger to liberty, since they are ultimately always hijacked by interest groups and mutate into a self-service store of the political class. Unfortunately, the rule of law does not give adequate protection in current societies: if law or constitution are standing in the way, they will be quickly modified by politics or interpreted “in a contemporary way”. Competition has been proven as the only effective method in human history for limitation of power.

In a Private City, the contract at arms length and the possibility to legally arbitrate it are certainly efficient tools in favour of the residents. However, finally it is competition and the possibility to easily exit this small place, which would guarantee that the Private City operator stays a service provider who sticks to his own rules, instead of becoming a dictator who ignores arbitration or otherwise misuses his power.

A Private City is not an 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 development freeze in favour 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.

In order to implement such a concept, an autonomy within the meaning of territorial sovereignty is inevitable. This need not be complete independence, but must include the right to regulate the own affairs. The establishment of a Private City therefore requires a contractual agreement with an existing state. In this agreement the parent state grants the operator the right to establish a Private City by their own rules on a well-defined territory, ideally with access to the sea and formerly uninhabited. States can be gained for such a concept when they expect benefits thereof.

The city-states of Hong Kong, Singapore or Monaco have a cordon of densely populated and affluent areas adjacent to their borders. These areas are part of the parent states and residents living there pay taxes to the mother country. Now, if such structures are formed in a previously underdeveloped or unpopulated area, this is a good deal for the parent country. Negotiating such a contract is certainly no easy task, but it is in my view more promising than the attempt to “change the system”.

Private Cities are much more than just a nice idea. They have the potential to overcome existing states in the sense of creative destruction. Once different Private Cities are spread worldwide, they will set the countries under considerable pressure to change their systems towards more freedom, otherwise they lose their performers. And that is precisely the positive effect of competition, which has been lacking in the state market to date. This also applies to social security. Just because this issue is so important to many people, there will be offers and ideas addressing it. There are numerous historical and current examples, how social security can work successfully without coercion. It is also conceivable that over time specialized Private Cities form, which address certain religious, ethnical or ideological groups. People like to live among their peers. These cities probably would have specific rules different from the basic rules presented here.

Everything is possible, provided the voluntary nature of participation is given. Nobody has the right to judge how his fellow men arrange their living together. In a special zone open to volunteers, even the left could prove to the world, that communism/socialism -done properly- finally works. But this time one thing is different: we others do not have to suffer from this (or any other) experiment! Thus, the Private City concept has the potential to transform formerly totalitarian ideologies into simple product offers among many. And then let the market decide.

I absolutely believe, that the creation of Private Cities or similar autonomous regions, think of Chartered Cities, LEAP-zones or Seasteading, is ultimately unstoppable. Especially the high-potentials of all income groups will not agree permanently with being looted and patronized by the political class without having any relevant voice. Private Cities are a peaceful, voluntary alternative that can occur without revolution and violence. There is not even the need to convince the majority or to win an election. My guess: we will see the first Private City within the next ten years.

Titus Gebel is a German entrepreneur with a PhD in law. He founded amongst others Deutsche Rohstoff AG and now lives with his family in Monaco. After 30 years of political activity he came to the conclusion that freedom can not 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 Private Cities and will subsequently put the idea into practice.

Share