The Blank Slate State

Will an isolated corner of Honduras become the new birthplace of liberty?

(Page 3 of 4)

Romer’s departure was just the beginning of the Honduran free cities’ bad press. Toward the end of 2012, in response to a challenge by lawyers opposed to the idea, first the Honduran Supreme Court’s constitutional chamber, a subbody of the court, and later the full court declared that the SDR-enabling constitutional amendments went beyond the Honduran Congress’s authority, because “transferring national territory was expressly prohibited in the constitution.” One analyst close to the Honduran government thinks Romer’s public condemnation of the deal with MGK emboldened the Supreme Court to kill the plan.

Right after the Supreme Court decision, Patri Friedman’s Future Cities Development announced it was folding after spending about $500,000 of investors’ money. “The early political momentum for the RED program faltered, and the program’s implementation suffered a number of setbacks and delays over the last year,” read a statement on FCD’s website. “As a result, we no longer see any imminent development prospects in Honduras. Since our funding was contingent on making substantial progress within a year, we are winding down the company and returning our remaining funds to our investors.”

Sources in the free cities movement say FCD was already on the verge of shutting down before the Supreme Court decision. The group felt Honduran officials were dragging their feet on decisions such as choosing the site for the city, leaving potential investors unconvinced about the Honduran government’s reliability as a partner.

Most sources close to the project think the successful constitutional challenge was more a result of domestic politics and left-leaning anti-globalism than a reflection of widespread Honduran concern. Historian Dylan Evans, author of a forthcoming book on free cities, says he found in Honduras that “left-wing romantic ideology is immensely powerful in Latin America still today” and that “the default is to suspect any foreign involvement of being inherently rapacious and exploitative and ruthless capitalist, so unfortunately some of the people who might be best served by alternative legal arrangements are ironically most opposed to those things.” 

One public relations professional who worked with a free cities company says that when she reached out to everyday Hondurans with presentations about the project, they would sometimes ask point blank: Why are you even talking to us? They knew the free cities either would or would not happen with or without citizens’ input. 

“It’s really just a discussion among elites trying to bring it down,” Sanchez says. “But as a topic, it’s too technical, you know?” Public opinion won’t be settled, Sanchez says, “until people see brick and mortar being placed.”

The international development community, including such major players as the World Bank, the World Trade Organization, and the Bill & Melinda Gates Foundation, has not yet thrown its weight behind free cities. The Gates Foundation asked the libertarian economist Bryan Caplan to write an essay questioning its decision to not fund charter city research. Caplan, an economist at George Mason University, wrote that “there is virtually no downside” in supporting the idea. “A charter city begins on empty land,” he said. “It can only grow by voluntary migration of workers and investors. If no one chooses to relocate, they’re no worse off than they would have been if the charter city had never existed.”

Giancarlo Ibarguen of the Free Cities Institute thinks it could be a good thing that international development organizations and non-governmental organizations don’t have their hands in the free cities movement, “because they usually bring to developing countries a brilliant idea that ends up being more mercantilism and interventionism.…One of the things I like very much about what is happening in Honduras is it is really made in Honduras.”

Keeping the Tanks Away

Much of the media and academic chatter about free cities concentrates on the high-level economic development issues—tariffs, taxes, building regulations, the provision of services such as roads, electricity, and water. But in talks with the principals, a possibly more important consideration rises to prominence: basic public safety in a dangerous country. 

“The security issue is huge,” Strong says. “If an American manager in Honduras must go from a gated community in an armored car to a gated factory, [then] a region in which normal life is possible, where you can walk on the streets, will be incredibly appealing. They do care about their workers, and a region in which workers and their families are not subject to random violence is appealing.”

Strong envisions the ideal free city as not just an industrial park but a full community, with schools, hospitals, welfare infrastructure, and security. But he believes those services can be supplied at lower cost and with more responsiveness to consumers than what a typical government offers. The publicist who was trying to sell the idea to grassroots Hondurans also found security to be a keen area of interest. If free cities were noticeably safer, they might attract domestic migrants.

Political safety is also a key concern, particularly for potential business operators. Shanker Singham of the International Roundtable for Trade and Competition, who is working with Strong, says, “If the investor community believes the host government can interfere in the same way they interfere in the rest of the country, obviously the investment proposition is the same as the rest of the country, and they simply won’t invest. In that case we have to make investors not so concerned about the nuclear option, about tanks rolling in.”

Behind the anxiety is an unanswered question: How would the government, and the people it represents, react to a Hong Kong–style economic miracle within an otherwise miserable country? How would they react to allegations from people who, in Singham’s words, are “terrified” that outside capitalists are “simply using their country to achieve some foreign investor’s profit”? With everything relying on the ceding sovereign keeping its word, it’s hard to know whether a successful free city would be able to survive for very long.

Singham thinks the uphill battle to win hearts and minds is worth it. “We see [SDRs] as a means to an end, and the end is poverty alleviation,” he says. “When you deviate from the free market and pro-competitive regulatory system, you are imposing deadweight losses on the economy and imposing a regressive tax on poor people. And that’s unconscionable and immoral, and that needs to be expressed clearly.”

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  • Nazdrakke||

    Hmm.. Sounds more like creeping Moldbuggery than creeping libertarianism to me.

  • Irish||

    What the fuck is Moldbuggery?

  • The Immaculate Trouser||

    Basically he's a long-winded pseudo-paleoconservative contrarian whose ideas include some support for defensive networks of city-states as a viable alternative to the current nation-state model.

  • Nazdrakke||

    Moldbuggery starter kit.

  • Irish||

    Jesus Christ. I just went and looked at one of those essays and it was like a 15,000 word article about Richard Dawkins.

    Longwinded is right.

  • Nazdrakke||

    The Open letter essays are pretty interesting reading. Worth the time IMO, if nothing else for their evaluation of modern American politics. If you've got a day to kill. Long-winded indeed, but fun.

  • The Immaculate Trouser||

    The smug levels and insularity of the blog posts are absolutely insane -- limited exposure is recommended, if you value your mental development.

  • Nazdrakke||

    The smug levels and insularity of the blog posts are absolutely insane

    Helps to keep in mind that he was a leftist first, and is obviously permanently malformed as a result. Keeps the smug from sticking to your clothes while reading.

  • The Immaculate Trouser||

    Ah. He's an interesting guy, but essentially for the same reasons as Ayn Rand: he is not all that great at coming up with new ideas, but he's a champ at finding and demolishing a whole series of sacred cows that society has bent the knee to. Education is the big one that comes to mind, and some Moldbug stuff on the "Cathedral" is worth reading.

  • John Galt||

    If leftism can't cause permanent malformity in an organism nothing can.

  • jemkem06||

    my neighbor's mom makes $66 an hour on the internet. She has been without work for 5 months but last month her income was $16989 just working on the internet for a few hours. Read more on this site
    (Go to site and open "Home" for details)

  • jillian77||

    If you think Leslie`s story is really cool,, last week my son made $7179 working 10 hours a week an their house and their co-worker's half-sister`s neighbour did this for 4 months and errned more than $7179 in their spare time at there computer. use the instructions available at this link...

  • Bill||

    What a hypocrite. Klugmann spends all his time with the NYT pushing the US to go more socialist and now he wants Honduras to be more free market!

    Oh wait, Klugmann, not Krugman - NEVER MIND :)

  • The Immaculate Trouser||

    Quick correction: the RED acronym is spelled "regiones especial de desarrollo" in Spanish.

    Vis a vis the free cities project, I appreciate your reportage on the issue. The debate in Honduras is *not* occurring at the level of the common man (many reporters have construed the defeat of the first proposal as a blow against big corps for the little guy), but rather at the level of the elites. Whatever happens will most likely not concern the average Honduran until he or she sees the city actually get built and invested in.

    Anecdotally, I can say that my contacts in Honduras are mildly interested in the idea: mostly what Hondurans want are jobs and security, and there's no confidence in the current institutions. A lot of Honduras' population has emigrated to more successful countries in Latin America, N America and the Caribbean, and many would like to come back and invest in their country of origin. RED cities would be absolutely transformative for Central American politics, if implemented correctly.

  • Hyperion||

    Certainly cannot establish one of these RED (damn that somehow does not sound right in the context of discussing Libertarianism) cities, while having a majority of impoverished natives running around.

    Jobs would have to be available to the native citizens, first. Jobs, not welfare. Then this might have a chance.

  • The Immaculate Trouser||

    Nice thing is that the RED cities will have plenty of employment opportunities in both skilled and unskilled trades -- you are basically talking about building a city from the ground up.

    The project rises or falls by the truth of this statement:

    we are poor not because we are dumb; we are poor because of institutional arrangements, not because of lack of capacity to imagine things.

    IMO there's a good deal of evidence for this statement: the immigrant community of Hondurans has done quite well in the US, Canada, and Costa Rica -- I see no reason why they couldn't do even better in a truly free market environment. Honduras' population is small and mostly rural (~7-8 million) -- a free market city is quite self-sustaining and will employ much of the population, once it gets off the ground.

    Hell, Honduras will find it hard to find good help after a while!

  • Hyperion||

    We will see. Not holding my breath while waiting...

    Isn't Hondurus very prone to strong earthquakes?

  • The Immaculate Trouser||

    It's had its share of earthquakes, but so do plenty of prosperous places (Japan and Chile come to mind).

    Earthquakes are far more predictable and less damaging to an investor than an arbitrary and exploitative government.

  • Irish||

    Places with vastly different types of natural disasters have ended up prosperous. A free society, relatively free market and the rule of law are really the only commonality between different successful nations.

    California, up until relatively recently, was the greatest area of wealth creation on the planet, to the point where they are still the 10th largest economy in the world even 20 years after their growth started to lag. It's also the part of the United States most prone to natural disasters.

  • The Immaculate Trouser||

    All of the successful countries in Latin America (sans perhaps Uruguay) follow that same pattern: the "Latin California" (Argentina), Chile, Costa Rica, and Panama to some degree all experience high numbers of natural disasters.

    Humanity is pretty resilient: throw us a war, a natural disaster, or any other type of natural problem and we'll take it as a challenge to rebuild bigger and better than ever. The greatest impediment to human progress is human obstinance. This is generally true at the macro and micro level, in my observation.

  • hotsy totsy||

    Don't know if I'd include Argentina under the Kirchners as successful.

  • Ray||

    Argentina was the richest country in the world 100 years ago. What you see now is the result of 100 years of insane government.

  • Rufus J. Firefly||

    10th? Wasn't it as high as 4th at one point?

  • Hyperion||

    My only thought about that, was that when they go to building this city, they had better take that into account.

  • Cytotoxic||

    What will the RED policies be on drugs, guns, and speech? Will there be space for farming?

  • The Immaculate Trouser||

    All of those policies (except speech) will be determined by the investors, who will for all intents and purposes govern the city within the basic parameters set forth by the Honduran government -- which sets caps on income tax rates and has provisos for the protection of rights to free speech and other rights for residents. In theory, therefore, the answer is whatever answer will maximize the profits of investors.

    In practice, most of the orgs that have expressed interest in investment have been libertarian or libertarian-leaning; Michael Strong, for example, has expressed interest in adapting a simplified and more libertarian version of Texan commerce law, and in having legalized drugs in the city if his investment group has a majority share. (Obviously we all know what Petri Friedman's preferences would be if his group had some share in governance.)

    My guess if RED moves forward: guns will be protected (to further incent American investment and retirement in the city). Drug legalization will be better than surrounding states but not push the envelope too far (Honduras has problems with drug smuggling and a RED city will want a favorable FTA with the US, which will mean some level of cooperation on that issue with current policy).

    A RED project would intersect quite nicely with a Rand Presidency, methinks.

  • SAL||

    @The Immaculate Trouser: quick correction of your quick correction: it should be either the plural "regionES especialES de desarrollo" or the singular "región especial de desarrollo".

  • John Galt||

    So we're going to Honduras?

    Since I'm lazy, and allergic to both bullet holes and deep machete wounds, I'll wait until the rest of you get things rolling first.

  • The Immaculate Trouser||

    We'll have the piña coladas and barbacoa waiting for you.

  • John Galt||


  • Lord Humungus||

    how are the womynz?

  • John Galt||

    Desperate to leave Honduras.

  • ||

    Desperate to leave Honduras.

    I'm sold!

  • Rufus J. Firefly||

    Honduras is probably too humid. Might make for a great Warren Zevon song but he's dead now. So...try and find a more convenient place. Northwest Kansas maybe? Whatever happened to that website that showcased it? Seems to have disappeared.

  • Harvard||

    Wouldn't Vermont be easier? Closer too. Of course they don't have monkeys and shit, but...just sayin'.

  • Rufus J. Firefly||

    You would have to use a machete to clear it of all those hippie-hipster-doofuses.

  • Gordilocks||

    This hippie is armed. Don't bring a machete to a gun fight.

  • ||

    Sadly, although I was initially really enthusiastic about free cities, I've since come to the conclusion that to the extent they will ever exist, which I suspect is very unlikely, they will most probably turn into dens of cronyism between the governing corporation and the host government, operating more like GSEs or pubic monopolies than truly free states. And then when they "fail" as the free states that they really aren't, you can officially bury and eulogize free market capitalism as both economic and political theory.

  • ||

    *public. That is *public monopolies

    Although that may have been more a Freudian slip than an actual typo

  • ||

    Yes, 6 billion people are obviously going to cross oceans and funnel themselves through 2 small land bridges to a tiny administrative district on either an island off the coast or a small piece of uninhabited land in a dysfunctional country in Central America. Good point. They'll have to watch out for that. Really though, the more important point is that it's a perfect analogue to a 3.8 million square mile country with a 15 trillion dollar economy and 7500 miles of land borders wherein exists one of the world's freest economies and a generous welfare state.

  • ||

    I feel like I'm getting the short end of the stick....

    Start dating black guys...

  • C. S. P. Schofield||

    Throw this into the mix; Honduras is one of the places that has a long history of producing top quality cigars (The others being Cuba, The Dominican Republic, and Nicaragua). So Honduras has a a high level luxury export. At the moment the country's cigars are in eclipse (Opus X is Dominican, and Master Blender and industry darling Pepin Garcia is working out of Nicaragua), but a little imagination could change that.

  • WilliamGiannone||

    just as Leonard answered I can't believe that any body able to earn $9772 in a few weeks on the computer. have you seen this web link...

  • Tom Beebe||

    why can't webmasters scrub there infoads?

  • Tom Beebe||

    Strikes me as akin to Federalism. If we accorded more power, MUCH more power, to the states, some would thrive and show the way for the rest. Not as complete a program as this article suggests, but certainly worthy of study.

  • waltercollin||

    as Francis responded I'm shocked that you able to earn 4615 in 1 month on the computer. did you see this page

  • Mark22||

    The US homicide rate is 4.8 per 100000, and much of that is gang related and occurs in a tiny subpopulation.

  • lukescott610||

    If you think Marvin`s story is impossible,, 5 weeks ago my boyfriend basically also made $7683 grafting eighteen hours a week from home and they're buddy's sister-in-law`s neighbour was doing this for seven months and errned more than $7683 parttime from a labtop. applie the information available on this page...

  • lukescott610||

    If you think Marvin`s story is impossible,, 5 weeks ago my boyfriend basically also made $7683 grafting eighteen hours a week from home and they're buddy's sister-in-law`s neighbour was doing this for seven months and errned more than $7683 parttime from a labtop. applie the information available on this page...

  • trutherator||

    I danced for joy when Honduras defied all the global-socialists and left-fascists of the world and dethroned the coup-running dictator Manuel Zelaya, and when I heard that when Hillary Clinton called the constitutional president Roberto Micheletti to order him to resign and let Zelaya have his coup back, he said "No!"

    I was so glad I married a Honduran gal before, now had more reason than ever.

    And now this! Hallelujah! Thank you so much for the detail, and God bless Octavio Sanchez!


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