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Gated Communities and Nation States: The Cartel Responsible for Global Poverty

August 21, 2009

This guest post comes from Michael Strong. He is the CEO of FLOW, Inc., and the author of Be The Solution: How Entrepreneurs and Conscious Capitalists Can Solve All The World’s Problems. Michael will be speaking at the Seasteading Conference in SeptemberEditor

One of the deep inconsistencies in mainstream left-liberal moral thought is that gated communities are bad, because they are exclusive, whereas nation states are good, despite the fact that they are exclusive.  If the exclusivity of small-scale gated communities is bad, why should the exclusivity of much larger scale gated communities somehow be good?  This moral perversity shows just how deeply the nation state paradigm distorts our moral vision.

This is not the US-Canadian Border, But It Could Be!

This is not the US-Canadian Border, But It Could Be!

I may be one of the few libertarians who half likes the Scandinavian nations, if only they would get over their moral presumption and acknowledge that they are no more morally lofty than are gated communities.  If we allowed the Mormons to put up borders around Utah and keep the riff-raff out, they might set up something that looks like Sweden – Mormons are committed to helping other Mormons when they are down on their luck.  I see Swedes as a clan of people who want to help other Swedes and keep non-Swedes out as much as possible.  That clan happens to own a nation state, the Mormons don’t.  If we allowed for entrepreneurial government, through secession, free zones, charter cities, or seasteading, then I could imagine a lot of clans setting up their own nation states/gated communities, and many of them might have very generous “welfare” programs.

The fastest way at present to make the global poor better off is to give them access to a developed nation – allow them to immigrate.  An unskilled Mexican can earn ten times as much per day in the U.S. as in Mexico, and although some costs of living are higher, some are actually lower here.  There is no transfer program of any kind that can provide as great an improvement in standard of living, as quickly, as immigration can.  Until we can create a world of entrepreneurial governments, open borders ought to be moral priority number one for all who are committed to the Rawlsian principle of making “the worst off, best off.”

(Of course, utilitarian moral philosophers can be just as clueless; in a dialogue between the famed moral philosopher Peter Singer and the economist Tyler Cowen, when Cowen brought up immigration as a moral issue and explained why, Singer was forced to acknowledge that it did sound like an important moral issue, but one that he had never thought about.  Here is a guy who has written dozens of books on moral philosophy, one of the most famous moral philosophers of our age, the book being discussed was Singer’s most recent book on ending world poverty, and he had never even thought about the issue of immigration!)

But immigration is so effective at increasing wealth only because we have a legally binding cartel on the creation of new legal systems.  Normally we are morally outraged by monopolies and cartels because they use their monopoly power to restrict output and raise price; it is a pure power play with no moral justification whatsoever – “We’re going to cheat you because we have the power to do so.”

But in the case of nation-states, there are 200 or so legally allowed sovereignties, a club the entry into which is tightly controlled by a small cabal of the most powerful nation-states, and new nation-states are rarely allowed to come into being.  A private, for-profit nation state, no matter how effective at improving its citizen’s lives, would not stand a chance of receiving diplomatic recognition in today’s climate of opinion.

Global poverty is caused by restricted access to high quality legal systems.  Insofar as there are obstacles to replicating high quality legal systems, the global governance system is acting like a cartel that restricts entry.  Thus some four billion people are getting screwed because the people at the top like the system the way it is, and all academic Rawlsians (do let me know if you discover even one exception) blindly support this system of screwing the world’s poorest four billion.  By their own moral standard, they are accomplices to the single greatest moral crime on earth.

Insofar as new Free Cities (Perhaps as Autonomous Free Zones) arise, they will increase the supply of high quality legal systems and reduce the power of the cartel slightly.  If we had a global industry of Free City developers, that was allowed to create new sovereign entities, and those competitive corporations responded to market demand for high quality legal systems and infrastructure, then the power of the cartel would decrease.  Not only would poverty be reduced dramatically, but higher quality versions of all of services currently provided by cartel members would become available, the qualify of life of the vast majority of humanity would improve.  This is obviously the direction that all thoughtful Rawlsians should support.

This is why I refer to the movement for entrepreneurial government, without irony, as The Most Progressive Movement on the Planet. Or, to put it another way, Nozick was the ultimate Rawlsian.

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57 Comments
  1. August 21, 2009 11:14 pm

    I mostly share your goals here, so this is friendly criticism.

    Global poverty is caused by restricted access to high quality legal systems.

    I’d like to hear more on why you think so. There’s no doubt that rule of law is correlated with economic growth, but the causation is more difficult to pin down. Consider, for example, how strong extralegal norms are in cultures that have achieved strong economic growth, such as Renaissance Venice, the Netherlands in the Middle Ages, and peraps even China today. Of what benefit were high quality legal systems to the Hanseatic league, for example? Or to Pericles’s Athens?

    My point is simply that both cultural and legal norms seem to be at work in economic growth, perhaps in a virtuous cycle. Maybe establishing strong legal norms is the way to get the cycle started in other parts of the world, but that doesn’t seem to have been how things got started here in the United States, for example. The founding here seems to have been contingent more on the shared experience of the failure of a variety of legal institutions.

  2. August 22, 2009 12:39 am

    Hi Michael,

    If we had a global market in entrepreneurial legal system creators, with complete freedom of entry, I expect we would see the development of companies that excelled at integrating social norms with specific legal systems. Thus although your overall perspective is right, it is not always simple to combine the two, problems that are not simple to solve are precisely the kind of problems that are best solved by means of large numbers of entrepreneurial initiatives working to gain market share or to identify niche markets that are not being adequately served by others.

    When I was in K-12 education, I found that cultural background played an immensely important role in whether or not students were learning effectively, and I designed an educational approach that focused explicitly on developing the intellectual habits and attitudes needed to help kids from diverse cultures be more successful. And I found that I could only do a half-ways decent job of that at a private or charter school. With a large education market, I’m sure we’d see schools specializing in education people from ever-more granular niches of all sorts, including cultural backgrounds. This doesn’t mean madrassas – it means schools that help, say, inner city blacks be effective adult professionals. For an article that provides more detail on the education side, see “How to Avoid Wasting $60 Billion in K-12 Educational Philanthropy,” especially the last section,

    http://www.flowidealism.org/Downloads/How%20to%20Avoid%20Wasting%20$60B.pdf

    With respect to legal systems, see Michael Van Notten’s fascinating book “The Law of the Somalis” which, in the last section, proposes creating a modern commercial free zone based on indigenous Somali law modernized for contemporary commerce. To take a different example, Botswana’s success is sometimes attributed to the way in which its first president, Seretse Khama, who was a traditional tribal king trained in British Common Law, integrated the two systems.

    I can imagine companies specializing in going to an indigenous culture and showing them how to create a commercial code that effectively integrated their cultural traditions with the key elements of modern commercial life. This would be harder to do for some cultures than others, but again we have no idea what strategies and approaches the second or third generation legal system entrepreneurs will come up with.

  3. August 22, 2009 1:02 am

    which, in the last section, proposes creating a modern commercial free zone based on indigenous Somali law modernized for contemporary commerce

    A very cool idea.

    But if I understand you right, what you’re saying is that lowering barriers to entry in providing legal rights will result in more entry into the provision of legal rights, and hence more variety in the kinds of legal rights provided — e.g., commercial law narrowly tailored to Somali cultural norms.

    This all sounds plausible, but the devil is in the details. For example, how can you lower barriers to entry in providing legal rights without at the same time destabilizing existing providers? If the existing providers don’t consent to lowering the barriers (and what incentives do they have to do so?), then somebody has to prevent them from squeezing out the new entrants. Who’s going to do that when we’re talking about sovereigns? The U.N.? Ha. But perhaps a league of small sovereigns might band together to attract talented citizens that are amenable to their cultural values through the appropriate incentives.

    Then assuming you somehow manage to negotiate lower barriers to entry that are respected by incumbent sovereigns, why are you so sure that the new entry will be better tailored to the needs of particular groups? In the past, whenever there’s been new entry, it’s been violent — i.e., by definition, NOT narrowly tailored to the needs of at least some out-group. Political entrepreneurship is a bloody business. What makes you think that such experiments in the future will be different? Recall that every political movement (virtually) has begun with such idealistic sentiments before ending in the hands of ambitious, lethal generals.

    I’m not the Burkean conservative I used to be — I’ve seen too much of how dispersed minorities (my favorite underdogs are graduate students and inventors) get screwed to show no interest in alternative arrangements. But given the dubious track record of political entrepreneurship, I’m wondering whether it might not be worth trying new strategies for change from within.

    Consider the possibility of self-organized phase transitions in institutional norms. One way to force phase transitions is by selective pressure — the challenge of new entry. Perhaps another is to find the pain points within the constituencies for existing institutional structures, and then to organize them for political action. This is the basic strategy embraced by the people who drafted the U.S. constitution. The sense was, I believe, that individuals with political ambition should be forced to make their appeals to the center — i.e., the least politically committed constituents — through institutions such as non-proportional voting (the electoral college) and the party system that resulted.

    In the long run, it seems that such efforts have had more lasting significance for quality of life. And just because the historical examples seem to have resulted from geographical accidents (Ptolemaic Egypt’s restriction to the Nile River delta; Venice’s to the lagoon, the Netherlands to… the Netherlands), doesn’t mean we can’t make our own accidents today. (And maybe the Dutch, in fact, did make their own constraints.)

  4. O.T. permalink
    August 22, 2009 2:11 am

    Hello Michael,

    Fascinating discussion, as always. To me, the primordial political question is “who’s property is a human being?” Obviously, to the current nation-state protection rackets, we are all property of members of the nation-state cartel. We are owned and there are tremendous benefits to the controllers of the nation-state cartels and to the monetary rackets to which these nation-states are beholden to keep us OWNED. It’s like any other form of slavery. Your argument is brilliant, but I find it somewhat akin to slaves having a thoughtful discussion about how their lot, and the lot of their fellow slaves could be vastly improved simply by allowing them to pick their plantation.

    Such an argument misses the point of power, control and slave-trading entirely. I see the current nation-states as more or less advanced forms of slave-holding. Why would the people who own the slaves let them loose, especially when most slaves are so well conditioned that they actually defend their captors, are thoroughly infected with the mimetic indoctrination of the state, and would give their lives to defend the mythos of the state? Furthermore they don’t need chains. They are acculturated to continue proclaiming their freedom “by definition,” à la “I’m American therefore I’m free!” even as their freedoms erode beyond the wildest dreams of King George and his Bank of England handlers, etc.

    So your argument, I think is correct: I don’t doubt that the lot of humans would vastly improve if humans were free, if not to escape tyranny, to a least pick the tyranny they prefer. But I don’t think that will happen – until the day the tyranny becomes unified, global, homogenized and even more inescapable – or the people have an acute awakening.

    That would at least require an economic collapse such that the current educational incarceration/indoctrination system go to hell. I think Obama is a man who could thoroughly destroy this nation-state; but of course this will just serve as a further step in the Machiavellian praxis of provoking a crisis to implement the unthinkable solution: the global-state.

    AND I uphold your effort to engage the dialogue, which I believe is critical, to promote thought in this area.

    Right now I’m sitting in Hotchkiss, Colorado in the midst of a Western Slope culture where churches and flags proliferate and where the level of conversation, or the absence thereof, is amazing.

    But perhaps the question is NOT about creating free market states but of creating alliances, friendships and collaborations that invite participants and their children into experiences and connectivity that enhances their choices such as you have enhanced yours. A new culture must be born. Certainly Free Enterprise Zones are important. Anywhere that any movement toward birthing liberty as an existential premise occurs is important and I believe that we need clearinghouses, bards, and heralds to announce, publish and study the birth of such movements.

    The Law of the Somalis is a brilliant example of how an indigenous, relational, connective system of justice (not “legal” system because there is very little that is legal about it – it is based in RELATIONSHIP) can serve modern ventures.

    I’d love to read more about Botswana – any recommendations?

  5. August 22, 2009 4:02 am

    Michael and O.T.,

    Thanks for your comments; I’ll to get to a more complete response to both of them soon.

    Briefly with respect to O.T. on Botswana, here are two very inadequate links which begin to tell what I suspect is a much more interesting story; let me know if you discover more.

    First, a Cato article on Botswana’s economic success that is mostly about the economic success, but does mention the combination of indigenous culture and British law, and credits Khama with their successful integration,

    http://www.cato.org/pubs/journal/cj23n2/cj23n2-6.pdf

    Second, an article on Kgotla, the Botswana practice of deliberation that Khama integrated into their system,

    http://www.allbusiness.com/africa/926724-1.html

    For a more poignant element of the story that I did not mention, because of the protests of apartheid South Africa, after Khama married a white British woman in 1948, he was banned for life from returning to Botswana. Of course, he later became president of Botswana. I especially love this 1952 photo from Jet magazine,

    Seretse Khama Appeal Fails, Banned for Life - Jet Magazine, May 15, 1952

  6. August 23, 2009 1:54 am

    The discussion here kind of reminds me of Animal Farm. Is self-rule even possible? And if it is, why hasn’t anyone tried it (successfully)? Maybe a choice among masters is the best that can be offered. The vast majority of people certainly seem to prefer it.

  7. March 16, 2010 4:14 pm

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