A New System Of Government: Private Cities Managed Like Companies
Dr Titus Gebel was one of two founders of an oil and gas mining company (Deutsche Rohstoff AG) in 2006. Within just 9 years the company grew and now has a stock market value of about 75 million euros.
Deutsche Rohstoff AG (German Raw Materials AG) identifies, develops, and divests attractive resource projects in the United States, Canada, Australia and Europe. The focus is on the development of deposits in the United States.
After almost nine years at the helm of the company he co-founded, Dr Gebel turned in 2015 his life’s focus to a new project.
Dr Gebel wants to start private cities. The Mayor of the city would be the CEO of a service company. The city dwellers would be customers and could rely on competition between private cities to get a good deal.
(Thanks to Staatenlos.ch for giving permission to publish the following interview.)
How did you hear for the first time about the subject of private cities? And what fascinated you about the idea?
I’ve heard some years ago about Paul Romer’s concept of chartered cities, and the idea to establish such a city in Honduras. A chartered city makes its own rules, which differs from the laws of the mother state to accelerate the development of prosperity.
I found it exciting, right off the bat, because Romer had clearly recognized that it is above all else the control structure of a system, which decides on its success or failure, not the resources or the education.
Furthermore we can try out something new in a virtually closed market, namely the state market. A market which is almost completely closed off from competition.The more I thought about it, the more I have come to believe, that such areas should be offered by private companies. Thus, we could transfer the main ideas of the free market onto our way of living together, namely the voluntary exchange of services, the right to not participate, and competition as a discovery procedure, to keep powers in check and as a quality filter. The operator of a private city offers a specific concept and only the one who likes it moves there. Such concepts must be attractive, otherwise no one comes, or moves again into other, more successful systems.
What constitutes a private city? What are the basic characteristics of distinction to City-States like Singapore?
In Singapore, which I hold in high regard, you have a government and a parliament which virtually at any time can change the rules without asking the people. And sometimes to their disadvantage and even in contradiction to the preconditions, which were the reason that many people actually came to Singapore in the first place. They are just subjects, not customers. The saying “when Parliament is in session, property and freedom of the citizens are in danger” is unfortunately true as well in Singapore. The number of rules and thus the restraints on liberty are constantly growing.In a private city, you get from the so to speak “State Service Provider”, a contract offer. This contract clearly lays down, which services it provides and what the costs are. There it also sets out what obligations you have towards a peaceful coexistence, what legal system applies and the like.
The operator cannot one-sidedly change these regulations or the payable amounts afterwards, as is customary in politics.
You have a legal claim on it. Disputes are negotiated with the operator for example before an independent arbitration tribunal. This contract runs, possibly after a period of trial, for an indefinite period. According to a long-running insurance contract you can terminate the contract in a timely manner at any time, but the operator can do so only in exceptional cases, such as when you have violated your contractual obligations.
What does your ideal private city entail — and what trade-offs would you be prepared to make? What inspiration do you take from your current residence in Monaco?
In an ideal private city, the operator of a state has permanently acquired the territory including the territorial sovereignty. The operator guarantees the protection of life, physical integrity and property of the residents. This includes the establishment of a police force, the establishment of a legal framework, as well as an independent judiciary, so that residents can enforce their legitimate claims in a regulated process. This costs the residents an annual fee per capita.Within the private city areas for commercial, housing and infrastructure by the operator are specified. This means: You cannot build a factory in a purely residential area. That’s all. The residents take care of everything else themselves, they can furthermore do (and say) what they want. There are private providers that cover everything from hospitals, schools and kindergartens to garbage, everything that is in demand. Against all eventualities of life, the residents privately insure themselves on demand or establish self-help groups, whether related to illness, age, death, infirmity or accidents.Roads, skyscrapers, ports, airports and shopping malls are created and operated by investors. There is free trade and everyone can import duty free and export whatever and whereto he wants. Everyone can offer new products and services without permission or license, and pay for them in any desired currency.
The corrective is solely competition and demand.
In reality you will have to take on probably some restrictions for residents, because the mother state probably does not give up the sovereignty completely and therefore will demand compliance with international treaties like nuclear non-proliferation, anti-money laundering, and so on. You must stop probably also drugs and arms trafficking, to not become the target of more powerful states or organized crime. From Monaco I take the knowledge that some concessions must be made to the mother state, to avoid potential long-term conflicts. So for example, Monaco is contractually committed not to violate the economic and political interest of France, which impacts the rate of value added tax and the taxation of in Monaco-based French residents, furthermore the settlement of new citizens.
Why should states decide to outsource a part of their territory in the “uncertain experiment” of a private city? Which laws of the state would continue to apply and which would be overridden?
States can be won for such a concept if they can expect benefits. Take as an example Hong Kong, Singapore, or even Monaco. Around these city-states a ring has formed of densely populated and in comparison to the rest of the country, quite wealthy areas. Those inhabitants often work in the neighboring city-state, but pay taxes in the mother state. If we now assume that those developments happen in a formerly structurally weak or completely uninhabited area, then the mother state can only benefit as a result. Ideally none of its laws continue to apply. For these reasons it will probably not be possible in its purest form. What level of internal autonomy the private city actually has, is ultimately negotiable.
What are the most likely places to implement the idea of private cities? What is the best way one should proceed?
Most likely this will be possible, where states have run out of both money and ideas. You will probably find more open ears in crisis states compared to economically strong nations.
But who knows, the money and ideas seem to deplete in many areas of the Earth currently.
Sea access is much recommended, because you then can trade uninterrupted with the rest of the world and cannot easily be constricted. I recommend to approach governments only if you have a clear concept as well as presentable investors backing you up. Also you have to be able to answer questions about the technical feasibility. Without investors, only with a vague idea in my head, I see no chance of success. I am currently working on a book on the subject, which will be released in 2016. In it I will cover most questions on the subject of private cities in detail. After the publication of the book, I will start with my own company to put those concepts into practice. It is from my point of view absolutely desirable, if many such initiatives anywhere in the world are created. That’s why I am going to publish the book. The competition as a discovery tool requires competitors.
Private cities are operated with revenue incentives in mind. How does a private city generate revenue, but remain attractive at the same time through low taxes and an efficient infrastructure? To what extent would you interfere in private decisions of people in your territory (Drugs, Sex, Gambling, etc.)?
If you assume that we spent in Western countries only 5–10% of government spending for police, justice and infrastructure, the rest is mostly spent on the redistribution machine, then the costs are not that high. You have to pre-finance something maybe for the first years. But if they have calculated a profit margin per 100,000 inhabitants and then 200,000 come, you make a profit, because they do not need to concurrently double expenditures on police, justice and infrastructure, to provide the same level of service. Alternatively or in addition, it would be possible to raise indirect taxes, in particular value added tax or property-related taxes, such as property taxes or real estate transfer taxes. If particularly high profits are made, the contributions can be reduced. This makes then the corresponding private city even more attractive.Fundamentally the operator would not interfere in private decisions of the inhabitants. But there is probably in practice a certain need for a public policy doctrine, this means for example that on the public parts of the infrastructure you may not resort to beggary, run around naked or copulate. Similarly prohibited would be full body veils like a burka, because it is not only ideologically and aesthetically contrary to an open society, but also a certain clientele should simply be disincentivized.
Anybody who does not like this, can settle somewhere else.
Who may live in a private city? What are the conditions of immigration? Who decides?
In principle everyone may immigrate, who can support himself financially and who recognizes the principles. These principles include in addition to the payment of the fee and the above mentioned public policy doctrine, that anyone can do what he wants as long as he does not intervene in the rights of others. Ideas, opinions, religious beliefs, and worldviews of others (including the operator’s) may be criticized to your heart’s content, this is no violation of the law. Additionally, there is no right to live at the expense of others.
Every legal resident is responsible for the consequences of his actions.
In this respect the city will not allow applicants who from the outset hold views that are not compatible with this order or even destructive to the order, for example, Socialists or Islamists. The same applies to known ex-dictators, internationally wanted criminals and the like. The respective suitability is queried via questionnaire/interview. Since you can pretend in this respect, of course, a trial period is agreed, within which the operator may terminate the contract at any time.The operator alone decides in questions of immigration. Because it is his primary service for the existing local residents to ensure that immigrants do not disturb the principles of liberty, or threaten life and limb even. The operator can do this only if he can control immigration and also throw out troublemakers. Otherwise, it is not possible to preserve the social peace and prosperity permanently at a high level. “Open Borders” is an unworldly and false dogma. But it is conceivable that residents who want to bring certain people in at all costs (for example as an employee), would need to provide a deposit for them, if their suitability cannot be determined conclusively or if the immigrant does not (yet) have the required funds available.
Would a private city not be doomed by its potential success? How can you protect yourself from an incursion of other states? How does a private city guarantee the external security?
The questions are definitely justified. It is unlikely, however, that another state than the mother state of a private city becomes immediately dangerous, because this is in a sense still part of its territory. Therefore, one must above all consider how you can defend yourself against blackmail or appropriation by the mother state. After a change of government in the mother state, a demagogue might come into office, which holds the opinion, that the mother state has been cheated during the negotiation of the contract with the operator of the private city. The more the private city is successful, the more popular such opinions in the mother state would be. There’s no panacea, you will have to try through a combination of different means to ultimately prevent the aggressor from taking this step, such as public relations, diplomatic contacts to other states and also some certain defensive ability, which at least connects taking the private city with a certain price, possibly associated with a resistance concept by the civilian residents.
Would such a private city necessarily be a “tax haven” or would it offer several “offshore”- services to lure international investment capital into the country?
For residents, it would be of course a kind of tax haven. I would rather refrain from offshore services for foreign individuals, because you would get unnecessarily in the line of fire of other states. It is a big difference whether I use internal rules for my own citizens or whether I help citizens of other states that are non-resident.
My impression from many conversations is that many people are so fed up with their current country, that a private city would get enough settlers and investors anyway.
How many years is it going to take until will we see the first private city? Do you see other possibilities such as seasteading as an alternative?
I think the creation of private cities or similar autonomous areas is inevitable.
Especially the high performers are not permanently going to accept to be utterly gutted and patronized by the political class, without having any relevant way of representation. You cannot change that democratically.
Stefan Zweig writes in his book “Decisive Moments in History”, that the majority would never entrust the patient and fair people with the steering of the state, but always some swindlers who promise heaven on earth. By now that happened so often in history that the next development step is relatively obvious: the clear-sighted people simply set up their own state. I think that will happen in the next 5–10 years. All alternatives are welcome, we can only learn. In this respect, I have been following with goodwill and interest the development of Seasteading, Liberland, the Free State Project in New Hampshire and more.
If you would combine the advantages of different states in your private city, which states would it be? Which German aspect (if any) would you want to incorporate?
I would combine with each other: the tax exemption, the civility and the climate of Monaco, the absence of crime and government debt from Liechtenstein, the opportunity to build huge buildings in a short amount of time of Dubai, the peaceful coexistence of different ethnic groups of Singapore; and mix the whole thing with the economic common sense which so many Americans possess, the Swiss commitment to independence and strong defense, as well as the incorruptibility, efficiency and compliance of the German administration.
Conclusion
Maybe the plan by Titus Gebel is an utopian dream, maybe it is a bold idea whose time has arrived like the first iPhone, which many competitors deemed to become a big failure.I say, even if it’s an utopian dream, utopias have earned their place. How much inventions have been inspired for example by the Star Trek franchise? Many people will be helped in by dreaming of a better future today.We dream today and tomorrow we do everything humanly possible to make the dream come true, as inventor, entrepreneur and supporter.Thanks to Staatenlos.ch for permission to publish this Interview.Original Interview in German language by Staatenlos.ch
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