The Blank Slate State Will an isolated corner of Honduras become the new birthplace of liberty?

The Blank Slate State - Reason.com

The Blank Slate State: Will an isolated corner of Honduras become the new birthplace of liberty?

Brian Doherty from the June 2013 issue

It is easy to take one look at Honduras and write it off as an irredeemable mess. The small Central American nation, wedged between the Pacific Ocean and the Caribbean, is the murder capital of the world, with the U.N. reporting over 80 homicides per 100,000 people in 2011, compared to slightly over 30 in Colombia and under 10 in the United States. Its average annual income of $4,300 per capita is below that of the Congo. According to the U.S. Agency for International Development, 65 percent of its people are living in poverty. The World Bank ranks Honduras 125 out of 185 on its “ease of doing business” list, below Uganda.

Honduras is a country in meltdown, as homicides soar, drug trafficking overruns cities and coasts,” the Associated Press reported in January. “Many streets are riddled with potholes, and cities aren’t replacing stolen manhole covers.” As Robert Naiman, policy director of the U.S. advocacy group Just Foreign Policy, told the A.P., “In many ways, the state is no longer functioning.”

But where most observers see a dysfunctional state, a few dreamers see hope for an experiment that may upend our notions of what a state can accomplish. For the last few years, libertarians and other futurists have gazed upon this misgoverned mess of mountainous jungle and imagined a clean slate for innovations in political and economic growth. Honduras, they believe, can become a laboratory for creating wealth-producing institutions that can then be replicated worldwide. The only catch:

To become a 21st-century trailblazer, Honduras—or at least a small territory within it—must become, well, not Honduras.

A Sci-fi Dream

The notion of carving out an area inside an existing country with its own set of laws—economically freer and less complicated for businesses and citizens to navigate—has been popularized under many names: charter cities, free cities, future cities, and LEAP (legal, economic, administrative, and political) zones. The notion of zones for trade and economic activity freer than the nation-states around them dates back as far as the Greek island of Delos in the second century B.C. and the Hanseatic League in the late Middle Ages. Hong Kong and other Chinese “special economic zones” are more direct ancestors.

The idea seems to be gaining steam in the early 21st century, with policy entrepreneurs from all over the political spectrum hatching their own versions. Each variant proceeds from the insight that bad government hurts an economy’s prospects more than most people realize, yet can be escaped easier than you might imagine. Good governance, the theory goes, can blossom even within a bad system.

In beleaguered Honduras, a version of the free cities idea has been percolating for more than a decade in the mind of 37-year-old Octavio Sanchez, currently the chief of staff to President Porfirio Lobo. When he was a teenager, Sanchez told an NPR reporter in a story that aired in January, his favorite amusement was imagining futuristic policy solutions, which he wrote down at age 16 in a sort of political science fiction book of imagined bulletins from the Honduran government of 2050. Sanchez never believed his country’s poverty was due to some kind of inherent national defect. “Many all over the world,” he told NPR, “don’t understand we are poor not because we are dumb; we are poor because of institutional arrangements, not because of lack of capacity to imagine things.”

Sanchez, then working his way up the Honduran political pyramid, began musing over how to evade or change the clotted mass of laws, regulations, and practices he saw strangling the economy. In 2002, when Lobo, for whom he already worked, was head of the Honduran Congress, Sanchez started advancing the conversation with an American development consultant named Mark Klugmann, who latched onto the idea of what he called LEAP zones. Klugmann’s insight was that piecemeal attempts at enacting market reforms over entire economies tend to generate opposition from powerful coalitions of entrenched interests. Why not try doing the reforms all at once, but on a smaller level? Klugmann sold both Sanchez and Lobo on the notion that Honduras should have its own Hong Kong—a more market-friendly island within the stultifying state. That would make Hondurans richer quicker.

After a period of slow germination, fortune came to the project in 2009 from an unlikely source: a constitutional crisis. The Honduran military, with the approval of the country’s Congress and Supreme Court, sent President Manuel Zelaya into exile because he was pushing a referendum that would have allowed him to remain in office beyond the four-year limit prescribed by the Constitution. Lobo won the next presidential election, taking office in early 2010, and Sanchez became his chief of staff, finally in a position to make his teenage political science fiction come true.

Around this time Sanchez discovered a YouTube video advocating something remarkably similar to the idea he and Klugmann had been hashing out for years. It was a TED talk delivered in July 2009 by Paul Romer, a respected development economist who teaches at New York University’s Stern School of Business.

Romer is the pioneer of “new growth theory,” emphasizing the importance of ideas and technology in economic development. Back in 1997 he was named one of the 25 most influential Americans by Time magazine, and he has long been considered a contender for the Nobel Memorial Prize in Economic Sciences. Romer had begun staking his reputation on a concept he called “charter cities,” launching an organization of the same name to promote it.

In his viral TED talk, Romer used North and South Korea as a vivid example of how the rules under which a people operate affect their wealth and development. Haiti, he said, is an example of how governments can stifle growth by being too weak, not just by being too strong. He used China and its market zones, such as Shenzhen (modeled on the economic success of Hong Kong), as an example of how different rule zones within one polity can generate wealth and combat poverty. The Chinese/British alliance in Hong Kong, he claimed, “did more to reduce world poverty than all the aid programs we’ve undertaken in the last century.”

Romer had been trying to convince various nations to carve out a charter city and had even received a commitment from Madagascar to launch one in 2008 (to be operated by the South Korean corporation Daewoo). But Marc Ravalomanana, the president Romer had convinced, resigned under pressure in 2009, and the Madagascar project died. Sanchez, delighted to find such a renowned intellectual on the side of free zones, invited Romer to participate in Honduras’ attempt to create them.

Into the RED Zone

The Honduras project began gathering steam and attracting international attention in 2011. In January and February, the Honduran Congress amended the constitution to allow for the creation of free cities. In July it passed a statute defining “special development regions” (SDRs)—in Spanish, regions especial de desarrollo, a.k.a. RED zones.

The SDRs would be “autonomous legal entities” with “their own system of administration,” armed with the power to “promulgate their own rules and have their own judicial entities.” The national government in Tegucigalpa would retain control over defense, foreign affairs, elections, ID documents, and passports. Honduras would not be responsible for any debts or financial commitments of the SDRs and could not tax them. The SDRs’ own tax levels were capped by statute at 12 percent for individual income, 16 percent for corporate income, and a 5 percent sales tax.

Judges in the zones would have to be approved by a two-thirds vote of the Honduran Congress, but the jurists themselves need not be Honduran. SDR residents would be free to “contractually consent to arbitration of judicial proceedings outside the SDR’s judicial entities and arbitration forums.” Ports and airports would be the SDR’s responsibility, and it could collect whatever related fees it saw fit.

Initially, the Honduran president would appoint a governor and a Transparency Commission to oversee the charter cities; the commission would then appoint governors, as well as a consultative council that could veto a governor’s rules, plus an audit committee. According to Romer’s Charter Cities website, the governors’ powers would disappear in favor of a popularly elected “normative council” after the SDR had reached “population and economic benchmarks” set by the Transparency Commission.

Romer began telling the press he was chairman of the Transparency Commission, a role in which he would help guard against the skullduggery and corruption that so many associated with the Honduran government and business world. His involvement seemed a natural fit. But as Romer prophetically if jokingly warned in his TED talk, “Don’t send academics out in the wild.”

From the beginning, there were conflicts of visions between Romer, the Honduran government, and the libertarian activists and theorists attracted to the free cities model. Romer imagined not a small, organically growing project but one built from the beginning to house 10 million mostly immigrant residents (more than the population of the whole Republic of Honduras, now 8 million), on the theory that such size was necessary for economies of scale.
Romer’s grand plans ran afoul of Honduran politics. The Honduran Congress included in its initial legislation a requirement that 90 percent of SDR employment go to Hondurans, a rule that could be amended in specific cases. Worse, contends Michael Strong, a major player in the free cities movement, Romer’s vision was impractical and relied too much on a sort of pre-central planning of how the zones would function, not allowing for the organic growth Strong prefers. Romer also wanted to contract out operations directly to a foreign sovereign, which smacked of neocolonialism to some. “We wanted a small startup near existing urban areas,” says Strong, “where one could prove the concept that improving law will attract capital” without having to spend the tens of billions upfront that Romer’s plan required.

Strong was at the vanguard of a loose community of mostly libertarian policy and business entrepreneurs excited by Honduran free cities as an example of competitive governance. Just as competition and free entry and exit in markets create wealth and consumer satisfaction, they believed, so would governments work better if new entrants arose to compete over rules with existing sovereigns. The rules that allow citizens to thrive—which to the libertarian-minded meant lower taxes, less regulation, and free movement of people and capital—would provide a competitive example for other states to emulate.

Among the most prominent advocates of competitive governance was Patri Friedman, grandson of Nobel Prize–winning economist and libertarian intellectual giant Milton Friedman. Patri first promoted the concept in the context of the Seasteading Institute, which he founded in 2009 with the financial support of Peter Thiel, the billionaire co-founder of Paypal, who loves financing seemingly outrageous ideas on the cutting edge of physical and political science. Seasteading advocated a free city model based not on land ceded by an existing sovereign but on land freshly built, floating in international waters.

In April 2011 the Seasteading Institute co-sponsored, along with Giancarlo Ibarguen of the libertarian-leaning Guatemalan University Francisco Marroquin, a Future Cities Conference that spun off into a Ibarguen-run think tank dedicated to promoting the free cities model. One of the conference speakers was Michael Strong, who had helped promote “conscious capitalism” with the organization Flow, launched with Whole Foods founder John Mackey.

After meeting the Honduran free cities team run by Sanchez, and after some initial collaborative meetings with one another, Friedman and Strong each launched his own company seeking partnership with the Hondurans. Friedman’s was called Future Cities Development (FCD); Strong’s, co-founded with Kevin Lyons, an entrepreneur and co-founder of Consent Unlimited (a nonprofit studying how to “expand the sphere of human consent at the expense of politics”), was called the MGK Group.


The idea seemed as close to actuation as it had ever been. But conflicts both within and without Honduras soon derailed the project........

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Ayn Rand's Vision of Galt's Gulch Has Become Reality As Of Today

After months of hard work by the entire staff at Galt's Gulch Chile (GGC) I am extremely pleased to announce to the world that Ayn Rand's vision in her iconic book, Atlas Shrugged, has become a reality. It is unfortunate that the world has transformed much into what Rand had envisioned and the need for a place like Galt's Gulch has become so urgent. But, since that is today's reality we are very happy to offer the respite from the Western world of oppressive governments to freedom-minded people in which they can build a new, more prosperous community.

A BRIEF ON GALT’S GULCH CHILE
For those who haven’t been following the evolution of GGC, here is some background:

I left my home country of Canada in 2003 and just celebrated my 10th anniversary of being free from the Canadian Revenue Agency (the equivalent of the IRS in Canada) this year. My reasons for leaving weren’t just tax related, however. Just as I still write about today, my main reason for escaping was that I wanted to live in a place that was much freer. I subsequently traveled via sailboat, plane, train and automobile to nearly a hundred different countries, searching out places that had more social and economic freedom than the limited amount I had grown quite tired of up in the not-so-great white north.

Many places met those requirements. Two of my favorites, where I have lived as a Perpetual Tourist/Prior Taxpayer (PT) off and on for years, were Thailand and Mexico.
In subsequent years, and after having launched The Dollar Vigilante in early 2010, it became clear that many thousands of others were also searching for their own place to which to expatriate. Informal surveys that we carried out over the next few years showed that these were the top things most people were looking for:

• A country with less taxation and regulation than the Western countries
• A warm and moderate, southern California/Mediterranean-style climate
• Proximity to a modern city and an international airport, but also being far away enough from civilization to be sheltered from the coming global fiat currency collapse
• Completely self-sustainable, with water, power and organic farming
• Something affordable for young families and for those without millions of dollars in assets
• A community philosophically based on freedom
• An economic environment conducive to productive business opportunities, with a government that allows people to create and keep the majority of their wealth
• Legal and secure ownership of land by foreigners
• A culture amenable to foreigners, making it easy to interact with locals
• Preferably in the southern hemisphere, with significant distance away from the US but still close enough for direct flights with one day of travel or less
• Close proximity to natural attractions, such the ocean, mountains, etc.

Given all the items listed, you might have thought it’d be impossible to find a place that fit them all.


Some colleagues mentioned that the central region of Chile was a tremendous place to look at land. Taking them, and others, up on their suggestions, we came across some land that is now to be the world’s best freedom-minded community in existence.

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Free State Wyoming - On the Frontiers of Freedom - Wyoming Free State Project, originally organized by liberty activist, Boston T. Party (the pseudonym of guy who wrote the now-infamous eponymous gun book). The project never got many people (in comparison to the NH project), but the few activists who did join the project have been sticking it out.


Free State Project - Liberty in Our Lifetime - The original project in New Hampshire which is going well and has attracted a lot of people.

 

Anyone a regular reader of Survivalblog that knows if Rawles keeps track of the number of people who moved to the northwest as part of his Redoubt concept (see link), or if his idea has gained much traction?

SurvivalBlog.com