Presenting the Concept

The Issue

Current systems provide incentives for those in power to enrich themselves at the expense of the community, to waste each other’s money to enhance their own fame, and to buy votes through supposed free services. But there is no way around this insight: a system that is legitimate in any way, which by law provides for expropriations in favor of third parties (e.g. in the form of taxes and social security contributions) and which not all those affected have agreed to in advance, can in the long run create neither a peaceful nor a predictable coexistence. It destroys the foundations and results of voluntary cooperation through state power. It thus successively destroys what makes a society successful and attractive and leads to a battle of all against all for the enforcement of favorable regulations.

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It plays a subordinate role whether the system is more democratic or more authoritarian – the false incentives are comparable. Authoritarian orders only function better as long as the people at the top have integrity and are strong leaders. However, all systems whose success depends on specially qualified persons at the top have no chance of survival in the long run. New approaches must therefore be designed in such a way that they can survive without ingenious leaders. And the fewer areas of life politicians control, the less it matters who controls them.

Requirements for new systems

A new, long-term, stable social order must require those in charge of the social order to

1. Have an economic interest in the success of the society (skin in the game)

2. Be held liable for errors (coupling of power and responsibility)

3. Allow their citizens to leave or secede at any time without financial or other obstacles (allowing competition)

4. Be unable to grant special benefits to individual groups or citizens (avoidance of lobbying, corruption and struggles over state funds)

5. Have clearly defined written obligations and competences which cannot be changed unilaterally (legal certainty, predictability)

6. Be able sued by the parties concerned in the event of differences before independent courts or arbitration bodies (neutral arbitration)

It becomes clear that even the Western democratic constitutional states actually fulfill only the last requirement, often with restrictions, since only certain organs can sue the government. The legal certainty and predictability actually provided for by the constitutions is no longer given in state practice, since those in power, with their parliamentary majorities and the appointment of judges, can control both the wording and interpretation of the constitution to a large extent at will. It is therefore time to introduce new products into the “coexistence market”.

The Solution: Free Private City

Now imagine a system in which a private company as a “state service provider” offers you protection of life, freedom and property. This service includes internal and external security, a legal and regulatory framework, and independent dispute resolution. You pay a contractually fixed amount per year for these services. The state service provider as the operator of the community cannot unilaterally change this “citizens’ agreement” with you at a later date. As a “contract citizen”, you have a legal claim to it being adhered to and a claim for damages in the event of poor performance.

Besides that, you take care of everything else by yourself, but you can also do whatever you want, limited only by the rights of others and the other manageable rules of coexistence. This includes joining forces with others for all sorts of purposes.

Discussion on LEAP zones between Titus Gebel and Mark Klugmann

Disputes between you and the state service provider are heard before independent arbitration tribunals, as is customary in international commercial law. If the operator ignores the arbitral rulings or otherwise abuses its power, its customers migrate and it goes bankrupt. He thus has an economic risk and therefore an incentive to treat his customers well and in accordance with the contract.

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This system is called a Free Private City. At first glance, it may seem outrageously radical or utopian. However, we are already using the service approach very successfully in other areas of our lives. The transfer to our social order is only the last step in a development that is already underway. What is new is that living together takes place on a purely private sector level, but the system is nevertheless able to provide all the services (especially security) demanded by residents of previous states. And that better, cheaper and with far higher degrees of freedom for the customers or contract citizens. The main elements of the free market are simply transferred to coexistence, namely the voluntary exchange of services, the right to refuse offers and competition as a method of discovery, a means of limiting power and a quality filter. Since participation in the Free Private City is voluntary, the concept must be attractive in the long term, otherwise no one will come or the residents will migrate again.

Especially the construction as a service contract has the advantage that it has already been tested and proven. It corresponds to what we know from the private businesses of daily life. Be it buying bread rolls at the bakery, taking out insurance or hiring a tax consultant. A reciprocal, mutually agreed contract is always the basis. This regulates which product or which service is to be delivered at which conditions and at which price. This applies even if the contract – as with the baker – was only concluded through conclusive conduct. The buyer knows that his contractual partner has an economic interest; he does not have to pretend to be motivated by public welfare or human rescue. In the case of disputes, one can turn to independent courts or arbitration boards. No seller would get away with unilaterally changing the content of the contract (“You pay twice as much from now on, but receive an additional service in return, which you have not ordered”) or with allowing disputes to be settled exclusively by his own institutions.

Business Idea instead of Utopia

In a Free Private City, everyone is the Sovereign of Himself who, by voluntary agreement, has concluded a genuine contract with a more or less ordinary service provider, the Citizens’ Contract. Both parties have the same formal rights and are therefore legally on an equal footing. The relationship between authority and subject is replaced by the relationship between customer and service provider. In contrast to conventional systems, where the citizen is obliged to pay tax without having a corresponding right to benefits, in a Free Private City service and consideration are directly related.

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In a Free Private City, both contracting parties are entitled to fulfillment of the contract, i.e. the operator can demand payment of the fixed contribution from the contract citizen, but no additional fees. In turn, the contract citizen can sue the operator for compliance with his contractual obligations, for example by ensuring security and a functioning system of civil law. Who is currently in charge of the operating company or to whom it belongs is of no relevance for the functioning of the model.

A Free Private City is therefore not a utopia, but rather a business idea whose functional elements are already known and which need only be transferred to another sector, namely that of living together. Basically, as a service provider, the operator only provides the framework within which the society can develop openly in the sense of a “spontaneous order” (Hayek).

Principles of living together

Living together in a Free Private City is based on just a few principles. The guiding principles are self-determination and private autonomy. The Golden Rule applies to living together as it is expressed in the proverb “Do not unto others what you do not want others do unto you, “; in addition, the principle do ut des (“I give so that you give”), i.e. the recognition that merit is based on reciprocation; finally the principle of voluntarism or non-aggression, i.e. the priority of voluntary cooperation over coercion and expropriation, including expropriation for allegedly good causes.

In order to comply with these basic rules, coercive measures can or must also be applied. Serious or repeated violations also lead to exclusion from the private city. The right to end one’s stay in the Free Private City at any time is part of the concept of voluntariness.

Titus Gebel in conversation with Prince Hans Adam II of Liechtenstein

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Free Private Cities expect their citizens to be mature and independent. This includes taking responsibility for oneself and others, strengthening family and small communities, as well as using imagination and ingenuity to overcome difficulties. In return, there is the joy and satisfaction of being able to master your life by your own efforts according to your own ideas. In the long term, a community of self-confident, bright and realistic people will grow up in this way. If everyone is free to decide what they want to do and how they want to live, there is also no real need for participatory bodies such as parliaments. They are always at risk of being hijacked by interest groups or the government for their own purposes. The freeze on change in favor of freedom and self-determination in a Free Private City is the Citizens’ Contract. Thus, the residents can agree on a representation of their interests and, for example, establish a municipal council. But even though 99% of the population participate and voluntarily submit to majority voting, this body has no right to impose its ideas on the other 1%, who want nothing to do with it. This is precisely the point at which state systems regularly fail: the long-term guarantee of individual freedom.

Profit Motive

The city operator’s profit motive is of central importance. Many people consider the pursuit of profit to be something immoral and prefer not to have anything to do with it. They fail to recognize that there is no better incentive to make optimal use of scarce resources. Profit motive and competition force the operator of a private free city to permanently improve his product and optimize the use of resources. Every decision he makes has immediate consequences. Does this increase the satisfaction of the residents or is it not reduced by savings measures? In other words: does this ultimately generate higher income than expenditure? If so, a profit is achieved and the enterprise value of the Free Private City is increased. If not, the measure must be reversed or improved. Such efficiency can never be achieved by state orders.

Implementation

The Approach

In order to implement a Free Private City, internal autonomy is necessary. This does not necessarily mean sovereignty under international law, but at least the right to regulate one’s own affairs independently. The establishment of a Free Private City therefore requires a contractual agreement with an existing state. In this agreement, the Host Nation grants the operating company the right to establish the Free Private City on a defined territory in accordance with the agreed conditions.

Free Private Cities therefore do not correspond to privately administered new cities or gated communities that are fully subject to the laws of the respective state, or authoritarian city states such as Singapore or Dubai, which can unilaterally change the rules at any time. They also go well beyond special economic zones, but rather correspond to independent special administrative zones, comparable for example to Hong Kong’s or Macau’s relationship with China.

Win-Win Situation

But why should existing states, whose consent is needed, get involved? As with the free imperial cities of the Middle Ages, there is only one reason: one’s own interests. States can agree to surrender some of their powers for a certain territory if they expect to gain advantages from it. So you have to create a win-win situation.

More and more people and businesses are suffering from less security, less freedom and ever changing rules. Giving them a safe, free, affordable and predictable new home based on a real, enforceable contract could become a game changer. Establishing Free Private Cities in formerly uninhabited or unattractive locations will not only vastly increase in the value of the land, but also in the value of the operating entity and the local businesses. Cherry on the cake: if the concept is successful once, it could be applied all over the world.

With the right framework, astonishing prosperity is possible. The independent city of Singapore overtook the world’s GDP per capita in less than 30 years, and that of the USA in less than 50 years.

From Third World to First: Singapore’s skyrocketing growth

GDP Per Capita (current USD)

  • Singapore
  • World
Source: World Bank

Lee Kuan Yew’s Singapore flourished while Fidel Castro’s Cuba floundered

GDP Per Capita (current LCU)

  • Singapore
  • United States
  • Cuba
Source: World Bank

Consider Hong Kong, Singapore or Monaco. A kind of wealth belt has formed around these city states in the neighboring countries. Its inhabitants pay tax in the neighboring states. In addition, the city states mentioned create numerous jobs for commuters from the surrounding countries who might otherwise have remained unemployed. If a Free Private City is created in a previously underdeveloped or uninhabited area, the host state can only gain from these effects.

Hong Kong

Monaco

Singapore

Wealthy urban areas around Hong Kong, Monaco, and Singapore

But even in more densely populated areas, the economic benefits that the host state generates from them can be higher than before once a Free Private City has been established. In other cases, governments are willing to reform, but face considerable obstacles and inertia in their own countries, which for various reasons do not want change. In such cases, Free Private Cities can enable new approaches without having to change the host state’s political system. There may also be special situations, such as the establishment of security zones or refugee cities in former civil war zones, or the desire to try alternative solutions in special zones. In such cases it may be advantageous to entrust the administration to an independent, impartial private company.

Lower the reluctance threshold

Getting existing states to abdicate some of their sovereignty is certainly no easy task. Nevertheless, this path seems easier than changing existing systems “from within” in the direction of more freedom, legal certainty and self-responsibility. The easiest way to do this is to dock onto familiar concepts. In particular, free private cities can be described as a “Special Economic Zone Plus”, a “Prosperity Zone” or a “Special Zone” in order to lower the reluctance threshold. More than 4000 special economic zones already exist worldwide.

In many possible host states, however, the legal basis must first be created before a contract can be concluded with the operating company of a free private city / special zone. This usually requires a parliamentary law or even a constitutional amendment.

This step is politically no easy undertaking and represents in practice the largest hurdle. Before planning the establishment of a Free Private City, it should therefore be clarified whether the necessary legal autonomy is politically enforceable. This can be done on the basis of the following list:

Requirements List
  1. BUSINESS AND COMMERCIAL FREEDOM. The Free Private City has the power to regulate business and commercial law at its own discretion. This includes labor law, building law and environmental law regulations, which facilitate the establishment and implementation of companies. This also includes the possibility of concluding transactions in any currency and being able to set up companies quickly and easily.
  2. FINANCIAL AND SOCIAL FREEDOM. The Free Private City may establish its own tax, customs and social regime, independent of the regulations of the host state.
  3. PROPERTY RIGHTS. The acquisition of property, including real estate, is possible without further hurdles and in a legally secure manner in accordance with the rules of the Free Private City. Such acts shall be recognized by the host State.
  4. LEGAL RECOGNITION OF THE CITIZENS. The legal position of the city residents (under the Residents’ Contract with the operator of the city) is recognized by the host State, even if some are also its own citizens.
  5. SELF GOVERNANCE. Justice, police and administration are carried out under the city’s own control and by their own staff.
  6. INTERNAL AFFAIRS AUTONOMY. The host State and its organs shall not interfere in the internal affairs of the city, its inhabitants or businesses.
  7. HUMAN RIGHTS. Fundamental freedoms such as freedom of opinion, freedom of assembly and equality before the law are guaranteed, even if the host nation has conflicting legislation.
  8. MIGRATORY CONTROL. The Free Private City is entitled to expel unwanted persons or to deny them entry, even if they are citizens of the host state.
  9. RECOGNIZED SOVEREIGNTY. The status of the Free Private City is guaranteed by the host state for a long period (ideally 99 years).
  10. INVESTOR PROTECTION. All investments made in the Free Private City are subject to special contractually guaranteed investor protection.

Territory and project company

Finally, a territory must be secured that ideally has sea access. This land can previously be either owned by the government or privately. In the latter case, it is preferable to conclude an option agreement that provides for purchase at a fixed price only in the event that the special zone is actually established. In order to ensure voluntary participation, this area should initially be uninhabited.

If it is likely that the above conditions can be met, it is advisable to set up a project company for the respective private city. Further, it is advisable to locate the company in a country that has concluded an investment protection agreement with the host country, in order to benefit from the relevant regulations.

With advisors Oliver Porter and Mark Frazier

To support, advise and implement initial projects, we have established our own consulting agency called Tipolis. Any relevant news will be shared on our quarterly newsletter.

Support

There are many ways you can help us in our mission. Here are some of them:

Titus Gebel answering questions from the audience

Spread the Idea

The easiest way for everyone to support the idea is to link the website, the book or our videos or blog articles on social media. Giving the book a review on Amazon and Goodreads also helps. Also, you can also wear our merchandise if you’d like to give us some financial support.

There is also the possibility of translation. Many articles of ours have already been translated to other languages, and for those translators: Thank you. Feel free to translate our articles and subtitle the videos in all languages imaginable. If you get it published somewhere, send us a message and we’ll likely share it on our social media as well. If you’d like to translate the Free Private Cities book, contact us directly.

Free Private Cities are currently the only non-totalitarian alternative to Western democracies. It is important that the concept is known when these systems go wrong, which sooner or later is to be expected.

Become an Ambassador

We are looking for at least one ambassador in each country who will propagate the idea and ideally also have contacts in politics. This person would also be the local contact person for interested parties.

Interested candidates must fulfill the conditions listed aside and contact us through the contact form below.

Conviction

Interested candidates must support the principles underlying the foundation of private cities, of self-determination and competitive governance.

Book

Interested candidates must be knowledgeable of the book content. Being versed in the literature of Special Economic Zones and self-governance concepts is a plus.

Communication

Interested candidates must have the ability to answer the usual questions (FAQs). Experience with public speaking is a plus.

Network

Interested candidates should be multipliers with a strong network of investors, experts, politicians, and entrepreneurs.

Live, Invest, Suggest

Anyone who is interested in setting up a company in Free Private Cities or investing elsewhere should contact us directly.

If you want to become a contractual citizen of a Free Private City, please subscribe to our newsletter. As soon as the first projects get ready, we will inform you there.

If you think that a certain country could be considered as a host country, please have a look at our wish list above. Please discuss it with people you know who have insights or influence in the politics of the country and tell us which of these points are feasible. Further plans for the establishment of a Free Private City can be made once these questions are answered.