There are more than enough books written about the pros and cons of capitalism, communism, socialism and free market economics. Now this short list of different ‘isms’ is joined by a new concept, crack-up capitalism.
Minted by a history professor, Quinn Slobodian to describe a new ideology of market radicals, this is a form of capitalism without democracy. For them, democracy and freedom are not compatible. By narrating a long intellectual history of hardcore libertarians, author identifies that prophets of crack-up capitalism like Pinochet in Chile, Reagan in the US and Thatcher in the UK, leading academicians like Nobel Prize winner, Milton Friedman, activists like Murray Rothbard, billionaire entrepreneurs like Peter Thiel and Balaji Srinivasan. He distinguishes between three kinds of liberalism. Pinochet, Thatcher and Reagan were driven to reduce taxes, privatise and deregulate as much as possible. The second kind are completely authoritarian capitalist models, from Dubai to Singapore to China. The third kind are anarcho-capitalists and their dreams have remained so far only on paper and have yet to happen. A small country of Liechtenstein may be the one which comes close to implement some of the concepts of anarcho-capitalism.
A lab for private government
An ultra-modern mega project NEOM (started in 2017) by Saudi Arabia costing about USD 500 billion seems to be influenced by anarcho-capitalism. While NEOM is a feat of architecture and engineering, it is also a laboratory of private government. It is to be run by shareholders rather than the Saudi Government – “an autonomous government whose laws will be chartered by investors.” The Saudi crown prince Mohammed bin Salman has called it “the first zone floated in the public markets and the first capitalist city in the world.”
Slobodian wonders whether the philosophy behind crack-up capitalism might have given rise to several countries resulting in more than 200 nation states after second world war. However, he is more certain that the creation of more than 5400 zones to crack-up capitalism where they have been able to promote faster economic growth as in China, Puerto Rico, Singapore, Taiwan and Dubai. To define crack-up in simplistic term, it is the fracturing of conventionally understood national power and boundaries into zones. Some anarcho-capitalists hope that in course of time, nation states will disappear like the post offices!
Zones have their own regulations
There are at least 82 different kinds of zones – special economic zone (best example is of Shenzhen in China which became the locomotive of Chinese export growth in 80s), export-processing zone (first one in Shannon airport in Ireland in early 1950s), foreign trade zone, free ports, tax havens, city-states, high-tech parks, innovation hubs, etc. One thousand new zones have appeared in the last decade alone. He even thinks of gated communities which are becoming ubiquitous as some form of zones with their own set of regulations.
According to the author, zones are used by political leaders to create areas of unaccountability or to accelerate economic activity for their own interests. Slobodian uses the example of Hong Kong to discuss the basic principle underlying crack-up capitalism. In 1842, following the first opium war, Qing dynasty ceded Hong Kong to the growing British empire. Finally, after the lease period ending in 1997, Hong Kong became, one country, with two system – a veritable crack-up.
Can one really believe the myths promoted by market radicals that state has minimal role in crack-up zones like Hong Kong and Singapore? They tend to ignore the Keynesian-welfarism, subsidising public housing, social services, and infrastructure in Hong Kong and “long arm of state intervention” to ensure its solvency and 80 per cent of Singaporeans living in public housing and all land owned by the government.
The Honduras failure
Reader is left with some confusion when the author uses three different terms: market radicals, liberals and Neo-liberals. Those who are members of Mont Pelerin Society (founded by the Austrian-British economist Fredrich Hayek in 1947) are neo-liberals and even in this category there are huge differences. One group wants to get rid of the state and have complete economic freedom. Another group does not mind losing all political freedom to enjoy full economic freedom.
Slobodian has an interesting take on the information technology driven start-up culture of Silicon Valley. To him, San Francisco is an epicentre of neoliberalism and libertarianism. There is considerable discussion on how market radicals have started to adapt start-up model in countries like Honduras to promote their ideology.
It was surprising to read Slobodian considering the US on its way to become a perfect zone. He backs up with the following argument: In 2022, it edged out Switzerland, Singapore and the Cayman Islands to take the top spot in an index of financial secrecy to illegally hide or laundry assets. It was briefly downgraded by a well-respected index to a so-called autocracy, a system mixing features of democratic and autocratic rule.
Stanford University economist professor Paul Romer promoted the charter city concept to Honduras to make another “Hong Kong” and failed so far. It is interesting to observe that when the newly elected government considered dropping the idea of charter city in Honduras, the radical libertarian sponsors who shunned any state intervention were planning to file a huge legal case with the Central Free Trade Organisation. What an irony!
No more citizens, only customers…
It is both amusing as well as scary to look at what anarcho-capitalists like Rothbard are attempting to promote through their institutions and radical ideology. They do not believe in any kind of government. For them, a state is an organised banditry, taxation as theft on gigantic and unchecked scale. Security, utilities, infrastructure, health care, all would be bought through the market with no safety net for those unable to pay. Contracts would replace constitution, and people would cease to be citizens of any place, only customers to a range of service providers.
While we can easily dismiss them as fairy tale spinners or thought experimenters, Rothbard’s Cato Institute established with billionaire Charles Koch in 1976, and Ludwig Von Mises Institute in 1982, continue to have influence on some conservative thinkers and political leaders. Will they succeed to produce future Reagans and Thatchers or worse? Only future will tell.
