This article was published in the Summer 1999 issue of Formulations
by the Free Nation Foundation

Why Not a New Hong Kong?

by Richard O. Hammer

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[Editor’s note: This article was written for submission to another libertarian publication. It was intended to introduce those readers, libertarians not familiar with our work in FNF, to some of Richard Hammer’s assumptions about how a free nation could be founded. It uses a question-and-answer format, with answers kept brief to keep the article short. As such, it fails to elaborate as much as readers of Formulations may desire. But it provides an overview.]

The suggestion that private citizens might combine their forces to create a new free nation generally produces more disbelief than concurrence. So, devout believer that I am, lately I have taken to pushing this line of proselytism:

What if, before Hong Kong reverted to communist rule two years ago (in 1997), a handful of that city's wealthiest industrialists had decided they would pool their billions in an effort to launch a new Hong Kong, a city on a new site leased from some poor, third-world country. Do you think they might have succeeded? This question, I hope, brings the possibility to life.

Why would any government give land to these wealthy businessmen?

The land would not be given to the consortium. It would be leased. Surely there are regimes in the third world which hunger for money. I believe one could be found whose dominion included an underpopulated area that had never generated significant income for that government. A deal might be negotiated, in which the host signed away sovereignty to a tad of land, for 99 years, in exchange for a substantial boost in its spending budget.

Why wouldn't the host government invade as soon as the new city got established?

First, in a win-win landlord-tenant relationship the landlord wants the rent payments. Invading would be like killing a goose that lays golden eggs.

Second, the consortium could meet force with force. The lease agreement must, in my opinion, allow the consortium to arm in order to defend itself. And the consortium should arm itself enough to render unprofitable any attempts to invade.

Third, because such an attack could conceivably be a threat, the consortium surely would have considered this while shopping for real estate. In many third-world countries, of the sort which I think would be ideal, the regimes teeter in power. These regimes are not sure they can control the guards in their own capital cities, let alone mount an attack on a modern security force some distance from the capital. So the host selected by the consortium might be too feeble to mount a serious threat.

And last but not least, the new nation would be a good neighbor. Assuming it would adhere to libertarian principles—it would honor its commitments. It would not be offensive in ways that might provoke attack. Indeed, I believe it would have more friends than enemies, because all its trading partners would benefit from the ongoing relationship.

How would the rent be paid?

At its heart this venture would be a real-estate deal. It must have some core businesses, from the planning stage onward, which could set up profitable operations. In the Hong Kong example with which I started, I assume that industrialist billionaires would establish factories or other businesses that could pay their share of the rent. Ideally of course the lease would have room for expansion, for new businesses and settlers, beyond the initial core.

What business owners would be interested in such an unproven venture?

As a minimum I believe business owners must perceive that their gain, upon escaping regulation and taxation, would exceed their cost, of participating in the venture.

Wouldn't some major power such as the U.S. promptly invade and crush the new nation?

This does require attention because a major power might intervene if the consortium botched its diplomacy. But once again consider the Hong Kong scenario, in which respected citizens, whose lives and property were about to be annexed into a communist regime, were seeking only to relocate to some underpopulated land, to pay fair rent, to live in peace, to start a new Hong Kong. Would Bill Clinton have stood against that?

I feel more confident on this point when I observe examples of other tiny nations, now existing on Earth, which have more freedoms than their big neighbors. Singapore has more economic freedoms than its neighbors. Andorra has relatively few taxes. And Amsterdam (the city) allows unusual freedom to consume recreational drugs. Is Bill Clinton talking about invading these places? In general I think big nations do not invade little nations just because those little nations have more freedoms.

We libertarians can justifiably doubt our ability to play the game of international diplomacy, because so many of us botch diplomacy on the smaller scale close to home. But let's give ourselves some credit. Any large organization of libertarian interests would surely select diplomatically competent leadership. Imagine someone like Ron Paul or Harry Browne in the leading role.

What form of government would it have?

Some sort of minarchy would probably be necessary. To be left alone the new Hong Kong would need some minimal appearance of statehood. It would "…need to be able to turn a governmental face toward other countries" (Roderick T. Long, "Options for the Body Politic, Laissez Faire City"). But of course this decision, of how the new Hong Kong would be constituted, would be made by the major investors.

How would law be enforced?

For starters I imagine a kind of "company town" law, in which all businesses and settlers would contract to accept the rulings of a court appointed by the consortium. And during startup I expect the consortium would have a security agency on its payroll that would supply any enforcement needed.

While this might sound threatening, it is not necessarily any more frightening than taking a cruise on the ocean, with the understanding that law for the duration will be decided by the ship's captain. Once a passenger has decided to entrust her life to the ship (and to the business that owns the ship) the decision to trust the ship's law usually follows without qualm.

After startup I would prefer to see the consortium's monopoly in law phased out. A government-run set of courts and enforcement agencies might be instituted, pursuant to a written constitution. Competing courts and enforcement agencies might be allowed to operate.

Wouldn't the government of this new nation grow and become corrupt, just the way all governments do?

Perhaps. But notice that governments grow gradually, not all at once. The U.S.A. kept many of its original freedoms for a century or more. The checks and balances in the U.S. Constitution still work sometimes.

With this experience it should be possible to write a new constitution—with a few additional checks on power—that could preserve liberties at least as long as the U.S. Constitution did. For instance, a new constitution might incorporate Robert Heinlein's idea of a legislative house whose single duty is to repeal laws, which it can do with one third vote (The Moon is a Harsh Mistress, Berkley Books, 1968, p. 242).

Rather that seek perfection in planning the constitution of a new nation, I argue we should be realistic. We should seek to learn from experience and to improve.

What would happen to the people who were living on the land at the time when it was rented to the consortium?

Hopefully they would be few in number. But they would be dealt with in some way that was both practical and conscionable. It would be best to consider their interests separately, and not to assume that the host state represented their interests in its negotiation for the lease. So, after signing the lease, the consortium would negotiate with these people. It might buy their land for handsome prices, or give them new villas somewhere else. Finally, if some refused to accept even outrageous prices for their land, I would have a clear conscience about simply declaring them to be citizens of the new nation—and subject to the new law.

Where would settlers come from?

In the new Hong Kong scenario, which I used as an introduction, at least a few of the prominent business owners would have come from Hong Kong. Additionally some owners and top-level managers may come from America. But most early settlers would be low-level employees of the core businesses. These would probably come from poor countries. For manufacturing plants I suppose countries like the Philippines, Vietnam, and Mexico would disgorge a supply of eager workers.

Notice that I do not show, in this sketch, the tropical vacation paradise and tax haven that some American libertarians seek. I show a working town, teeming with industry and poor immigrants on the rise. But of course luxury lifestyles could be one of the core industries, if the climate happened to be right.

Why not look for land in the western U.S., or in another first-world nation?

I cannot imagine the government of the U.S., or of another first-world democracy, surrendering sovereignty to some real estate for a reasonable price. Most Americans still believe in their form of government. And most American officeholders believe they are doing the right thing in preserving America as it exists. To obtain sovereignty within the U.S.A. it might be necessary first to convince 51% of the voters. And that would be no easier than electing a Libertarian President.

But in the third world many officeholders have a more realistic view of government. They do not pretend that their rule is ideal. I believe that a new Hong Kong consortium could find among these officeholders some who—for the right price—would ease the transition.

Would statists in the UN try to foil this plan?

Probably. But if the deal were struck with a government that was a member of the UN in good standing, then that government (eager to start receiving rent payments) would probably become an advocate for the deal in the UN. Furthermore, if the consortium sweetened the appearance of the deal by taking in some boat people as employees/settlers, or by offering college scholarships to the children of the indigenous population, then I believe the statists in the UN would fragment into ineffectual resistance.

How would infrastructure, such as streets and airports, be provided?

Since the core businesses would require a certain minimal infrastructure, I assume that the consortium would assure this base at startup. Beyond that I trust markets. D

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