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Economic Renegades Rezoning the World

In Crack-up Capitalism, Quinn Slobodian examines an essential feature of the modern global economy. This is the existence of “zones” providing investors and affluent residents exemptions from taxes, regulations, and even exposure to the social problems of the surrounding region. Examples would include Hong Kong before the recent crackdown, Canary Wharf in London, Liechtenstein, gated communities in the United States, and private enclaves in South Africa and Central America, Dubai, and Singapore. All of these are comparatively small places permitting owners of property within them, and such persons exclusively, greater prerogatives than they could enjoy outside the circumscribed area. 

As for where to invest, in Liechtenstein, a factory owner can book profits with a much less onerous tax burden than he would face in the European Union, while importing workers who are not offered citizenship. In Singapore, commercial magnates can staff docks with workers who must live in orderly fashion in nearby public housing projects, with minimal precedent of strikes to support them. This stands in stark contrast to conditions nearby in South Asia. As for where to live, gated communities (and even homeowner associations) reflect, Slobodian argues explicitly, problematic theories of “polycentric law” that have “different groups carrying their law around with them,” which can lead to “the abandonment of any prospect of redressing inequality through collective action.” As investment and residential zones of various stripes have proliferated globally over the last several decades, Crack-Up Capitalism contends, the potential space of robust democracy has proportionately declined.

Slobodian quotes a South African with a flair for the zone: “Make your own country. … South Africa is vast. Find an attractive piece of land far from the urban centres, ensure it has water, build a fence around it, and invite like-minded people to live there with you. Go as far below the radar as you can. Have as little contact with the bureaucracy as possible. Build your own economy and polity. Arm yourself well.” Slobodian comments: “A clear advantage of this cantonization scheme was that it could permit the persistence of patterns of racialized economic power without the stigma of formal apartheid. … Citizen-customers would vote with their feet and sort out the population organically. … In a polity reconceived as a constellation of zones, redistribution was no longer part of the government’s role.”

The term “cantonization” is an interesting one. The notable example of a nation consisting of cantons is Switzerland. This is a country fat with economic growth, an enormous standard of living, and political stability. Who would not want to be Switzerland? Or, for that matter, today’s Singapore, or yesterday’s Hong Kong?

The talkative South African is one of many advocates of the zone whose ideas and activities make up the better part of the content of this book. Murray Rothbard, Gordon Tullock, David Friedman, Paul Romer, Prince Hans-Adam II (of Liechtenstein), Peter Thiel, John Blundell, Michael von Notten, Balaji Srinivasan—each of these figures, treated at length, has in some notable way either outlined the theory of the zone or put a zone into practice. Often it’s a bit of both. David Friedman, for example, wrote scholarly articles on legal patterns in medieval history, taking up such topics as how trade and tax patterns affected the size and shape of political units, and how the justice system in Iceland was largely private. Friedman participated in medieval re-enactment groups and founded one as well. His son Patri took things further by developing a “seasteading” enterprise to explore the construction of communities at sea beyond the boundaries of national authorities.

Slobodian treats his subjects with soft condescension, presenting them as nostalgic, revanchist, and foolishly utopian. That the Friedmans’ and others’ “understanding of the Middle Ages was based more on imagination than rigorous scholarly study goes without saying. The medieval world was regularly reduced to a few bullet points.” The economist Tullock was “an intellectual magpie, collecting and combining insights from far-flung disciplines.” To “libertarians, Liechtenstein looked like a wormhole back to an earlier form of global political economy, free of the treaties and international regulations that seemed to be tightening … the integration that libertarians feared would lead to redistribution and infringements on private property.” This kind of dismissive language is a constant in Crack-up Capitalism. The author does not respect his subjects. The thinkers and activists he studies are curios, albeit representative of possibly dangerous trends in our society, possessed of problematically formed intellect and character and obtuse to the demands of justice and the requirements of mass well-being.

Crack-up Capitalism states no positive case. Its entire focus is on the critical canvass of the theorists and practitioners of zones. The condescension therefore serves a necessary purpose. But for the condescension, one might take the zone-advocates as a remarkable example of intellectual and entrepreneurial dynamism. They are building cities in the sand, on island tips, in the bush, or on the ocean, after having intensively studied the matter, using their ideas and projects to draw together communities with a shared sense of purpose and outlook. These are the sorts of people one ordinarily might regard as renaissance types, a vanguard elite. Without the condescension, Crack-up Capitalism would be at risk of turning into a hagiography of these libertarian doers.

To pursue first-order questions—as the zone-theorists appear to be doing—is to say that the current progressive consensus is to some extent intellectually tentative and that the center-left perspective lacks complete foundation.

Slobodian is careful to withhold intellectual respectability from the theorists and practitioners of zones. A good example can be seen in Slobodian’s treatment of the economist Paul Romer. The book discusses him at length, describing his activities in setting up independent communities in Honduras. It does not mention that Romer won the Nobel Prize in economics, an award that inexplicably did not go to Tullock when his collaborator James Buchanan won the prize in 1986 (no mention of that famous oversight either). The closest we get to Slobodian conceding some respectability is learning that David Friedman published in “the prestigious Journal of Political Economy.” In a flash, we discover that this was an anomaly. The next sentence begins, “But it was in 1978 that he made his most enduring contribution,” in a piece on Iceland in a second-tier journal. Minimization is the method of Crack-up Capitalism.

The critical jabs are so continual in Crack-up Capitalism that one wonders if the zone theorists and advocates, beyond advancing their sketchy ideas and projects, touched some kind of nerve in the academic Slobodian (who holds a chair at Wellesley College). The constant criticism suggests that energetic libertarian intellectual and entrepreneurial dynamism in themselves can be problematic, perhaps even offensive, to the established scholar. The lack of a positive case in Crack-up Capitalism, in combination with the unremitting sniping, encourages the impression that Slobodian is convinced that all important matters are settled theoretically and that project-oriented thought and activity is unseemly to the extent it does not restrict itself to the narrow mandates of well-established progressive ideals.

Crack-up Capitalism, oddly, perhaps is most useful in revealing certain aspects of the psychology of the dominant center-left academic class. Among our establishmentarian scholars, the book permits us to speculate, the sense can hold that political-economic matters as theory have largely been resolved for generations. We simply know, for example, that there should be a growing share of government involvement in the economy, guaranteeing a standard of living and a distribution of wealth and power. Inquiry that does not begin with this premise is necessarily crank activity.

If the progressive left, the camp to which Slobodian clearly belongs, believes it has settled basic questions, the task today for the best people, including university faculty, is secondary and bureaucratic. It is to iron out details and minor inconsistencies, to help put into practice the settled progressive theory, and to inculcate its spirit among the population. To pursue first-order questions—as the zone-theorists appear to be doing—is to say that the current progressive consensus is to some extent intellectually tentative and that the center-left perspective lacks complete foundation. When thinkers explore first-order questions with élan, even powering into the transition to praxis, as the subjects in Crack-up Capitalism do, they undertake activity that is no longer allowed to the establishment thinker. A sadness is apt to develop in such a figure, given that others not part of the in-group can attack the intellectual “open sea” (in Nietzsche’s phrase). In Slobodian’s case, the sadness just might have morphed into jealousy and manifested itself as condescension. Slobodian’s next book might take things to the next level, that of lashing out—its subtitle contains the words “Hayek’s bastards.”

Again and again in Crack-up Capitalism, we read about the innovative scenarios of Neal Stephenson and all the others in condescending language, sprinkled with references to “fever dreams” and other epithets. One can only do this so many times without protesting that these people are in some important sense living the intellectual life of their time as it is supposed to be led. If it is given to humanity in every age to do first-order theorizing, no matter the weight and goodness of any tradition, then the current top scholars who confine themselves to supercilious criticism are missing out. Crack-up Capitalism is one of many pieces of top-scholar, top-press scholarship that takes up the matter of the radical right, the libertarians, the Christian nationalists, and so on, and based on that scholarship the author occupies an august place in the current intellectual system. It makes for a strange division of labor. The vital thinking and activity take place among the regrettable people, while the best people spend their time and energy commenting on the regrettable people. At some point, however, the system has to flip. If top university scholarship has devolved to eating and reprocessing the dust of real-life theorists and practitioners, who happen not to be a fan of the tax-and-spend state, demographics and ultimately prestige are going to redirect themselves away from the current scholarly establishment toward the ready practitioners.

As for whether there is something wrong with Dubai, the gated community, Singapore, Canary Wharf, Bitcoin communities, and all the rest, surely there is. But one cannot, productively, be just a critic. One has to try to state a real alternative that is prospectively beneficial and productive. If Slobodian would like to hold up the ideals of the Great Society of the 1960s, or the more recent commitments of western Europe to the welfare state, he should do this explicitly and with intention. To be sure, major obstacles would be in the way. We should have had in this book, but did not, consideration of the argument that tax-break zones have redounded to the benefit of the welfare systems. If a big industrialist can make money in France, and book the profits not in that high-tax country but in some zone catalogued in the Panama Papers, France inclusive of its working class and marginalized communities are the better for it on account of the economic activity that took place in-country. That the zone may well have saved progressive redistribution policies is one of any number of more first-order questions that went by the wayside in Crack-up Capitalism. It is time for our august scholars to do more than catalog, replete with academic disdain, the energetic libertarian ideas and projects that are exploring new possibilities for the future.