As next year’s election cycle draws near perhaps you, like me, are already exhausted (and disgusted) with the political process. There are no interesting ideas circulating on either end of the political spectrum. The average voter has absolutely no influence on the political process. Oligarchy is here and the traditional political process seems pretty pointless. The famous Gilens and Page Study actually provides hard data that what voters want is irrelevant. Special interests alone dictate whether or not a bill passes or a candidate gets into office. So, even if 90% of American citizens want to audit the Federal Reserve it’s not going to happen under the current system. So, if the political process is a game where the individual is set up for failure, then what are the solutions? How do we address problems like crime, crumbling infrastructure, economic growth, and national defense if the political system is not an option? The simple answer is that the market can best address all these issues. The difficult question is how do we go from the era of the nation state to the era of free markets and free individuals?

In today’s world, in order to travel and do business a person must use government controlled instruments such as: money, passports, and contracts. The blockchain has already offered us an alternative to government currency. Now it is providing alternatives to passports (blockchain IDs), and contracts (blockchain contracts). One can foresee a future where an individual uses Bitcoin to purchase an airline ticket, shows their blockchain ID at the customs counter and rents a car with a blockchain contract. Once individuals can travel and do business without a government sanctioned document it’s easy see large behemoth nation states becoming irrelevant and disappearing altogether. How do we bridge that gap? How do we get a blockchain ID or a blockchain contract to be accepted in Canada or France or Uruguay? In other words how do we get a peer-to-peer technology to be accepted by a government?

On one hand we need government recognition of blockchain technologies like currency, ID’s and contracts. On the other hand we need a private solution that can quickly respond to demands for infrastructure, security, and economic growth. I believe the solution to all these problems is “private cities” that partner with an existing nation state under a “commonwealth” system.

What is a private city? A private city is one where all the land, infrastructure, and utilities are privately owned. The money used for upkeep of all these things comes from service fees, not taxes. What’s the difference between a service fee and a tax? It’s the difference between not paying your utility bill and not paying your taxes. If you don’t pay your taxes you can expect to go to jail, have liens placed against your earnings and property, or even have your passport pulled. In short, your life can easily be ruined. If you don’t pay your utility bill you can expect to have your power turned off. At worst you might have a lower credit rating. The beauty of private cities is they rely on happy customers to stay in business instead of tax slaves. The following are some examples of this concept currently at work: shopping malls, theme parks and resorts, cruise ships, gated communities, private schools and universities. The beauty of private cities is market competition at work instead of the democratic process. Don’t like the way one city does things? Try another. Over time it’s easy to imagine private cities cropping up to cater to every belief, lifestyle, desire, and preference. Just think of the current variety of themed cruises, amusement parks, gated communities, and shopping malls. There is a choice for every taste and budget. Contrast this with our current democratic process where we are constantly faced with choosing the lesser of two evils, compromising one set of beliefs so we can get some of what we want politically, usually to find out that we are getting none of what we want anyway.

Private cities are not some far off concept. They exist today and are expanding rapidly. The following are just a few examples: Gurgaon India, Eko Atlantic Nigeria, King Abdullah Economic City Saudi Arabia, Sandy Springs Georgia USA, ZEDEs Project Honduras, and Disney World. The city of Irvine in California started as a private development and is largely still run as a private enterprise. Perhaps the most telling thing about the overall success of the private cities model is the criticism that gets levelled against it. The criticism is not against the quality of the services provided by private communities. It’s that private cities don’t allow for the redistribution of wealth. Look at this criticism from the article I linked to about Sandy Springs, GA:

“Evan McKenzie, author of ’Privatopia: Homeowner Associations and the Rise of Residential Private Government.’ Worries that rich enclaves may decide to become gated communities writ large, walling themselves off from areas that are economically distressed.”

No complaints about the power going out or trash not being picked up. The complaint boils down to “hey you’re making it harder for us to take your money and give it to someone else.” Another criticism of private cities is that they are “undemocratic.” But isn’t that the point of private property? It’s not owned by everyone and doesn’t suffer from the tragedy of the commons. Do I really need to run down the list of failed public sector democratic enterprises that can’t deliver basic services without taxpayer subsidies?

While private cities are criticized as being undemocratic, elitist, snob fests, one thing they haven’t been criticized for is delivering effective services to their customers. At one point in time things like light bulbs, telephones, automobiles, airplanes, and computers were considered to be toys of the rich. Now all these things are tools of the masses giving us all countless hours of productivity that has improved the lives of billions. There is no reason that private communities cannot be scaled for the poor and middle class. Indeed master planned communities such as Daybreak, Utah have already emerged to service upper middle class customers. With scalability and competition it’s not hard to imagine private cities and communities serving the poor far better than the government does. In the same way that supermarkets do a better job of providing food for the poor than “government cheese” programs do.

Private cities can solve the problems of infrastructure, and economic growth. Unfortunately, private cities cannot issue passports, arbitrate contracts or enforce property rights. So, how do we bridge that gap between providing private infrastructure to providing documents traditionally issued by governments?

A common wealth has all the benefits of an independent nation. They get to make their own laws, decide their own tax rate, and raise their own defenses. But they also have the benefit of having a large nation “vouch” for their legitimacy. Think about the benefits. When a new nation emerges it often has to struggle to gain recognition. This means that citizens of the new nation may not have their passports and visas recognized by other nations they wish to visit. The beauty of the commonwealth system is that when new nations like The Cayman Islands, Belize, Pitcairn, Cook Islands, or Bermuda became independent from Great Britain they gained recognition almost immediately.

If we take this model and apply it to private cities we can easily imagine a system where a private city (under the umbrella of a host nation) sets its own laws, appoints its own judges (or allows for competing arbitration firms), permits private security firms, and allows the city to issue its own passports. In fact, all these services could be set up with blockchain peer-to-peer technology. The idea is not as far-fetched as it may seem. Numerous countries have their own special economic zones (SEZs). China’s nearly meteoric economic rise is credited almost exclusively to its SEZs. Honduras has already passed legislation for the creation of Zones for Economic Development and Employment or ZEDEs.

The United Arab Emirates created a special economic zone called Dubai that has turned out pretty great. Dubai not only has low taxes and few regulations but also laws that are based on British Common Law and Judges that are specialists in common law.

In each case the host country has given up some level of autonomy in order to improve their economy, and in most cases the tradeoff has paid big dividends. The one thing that has not yet been tried is allowing a private jurisdiction to issue a passport under a commonwealth umbrella.

In his book “The State in the Third Millennium” Prince Hans Adam puts forth the “radical” notion of the state as a service provider. Indeed this is the role the nation of Lichtenstein has played for over 150 yrs. In order to stay “competitive” with larger neighbors like Switzerland, Germany, and Austria. Lichtenstein has offered lower taxes, and strong property rights. It has eliminated departments that were too costly to maintain (like the military). The result has been a clean environment, the world’s highest per capita GDP and a land untouched by war for over a century.

The elements for the new model of private city/commonwealth hybrid seem to be in place already and if the overwhelmingly positive response to Liberland is any indication there is a strong market for a physical jurisdiction that can issue passports, and has a strong emphasis on personal liberty and free markets. This solution may be here sooner than we think as a result of peaceful market forces instead of voting or violent revolution.