At the end of last year, the president of Salvador Nayib Bukele announced its intention to build “Bitcoin City», a duty-free territory in the east of the country.
The city will use Bitcoin (BTC) and will be fed by the nearby Conchuagua Volcano. According to Bukele, there will be:
Residential areas, commercial areas, services, museums, entertainment, bars, restaurants, airports, ports, railways [..] [ma] no income tax, zero property tax, zero contract tax, zero tourist tax and zero CO2 emissions.
Whether Bitcoin City happens or not, it joins a long and bizarre history of libertarian-inspired attempts to create independent cities and towns.
Bitcoin City’s generous financial incentives are intended to encourage foreign investment.
However, the plan was quickly derided by financial commentators as something “fit for a Bond villain”. There are doubts that construction will ever begin.
As the Australian Financial Review notes, Bitcoin City is likely nothing more than a “tough distraction from Bukele’s economic woes.”
New Libertarian Cities
But Bukele is not the only one tempted to create a new territory, with new (or without) rules.
In a 2009 TED talk, American economist Paul Romer argued that developing countries should partner with foreign countries or companies to create self-sustaining model cities.
Under his plan, host states would lease large tracts of undeveloped land to developed states, which would administer the land according to their own legal system. The city’s residents would largely be drawn from the developing state, but city administrators would be appointed (and accountable to) the developed state. Residents could “vote with their feet” by migrating to or from the model city.
Romer argues that such cities would attract significant international investment because their legal architecture would insulate them from any political turbulence in the host state. Despite strong neo-colonial or neo-imperial overtones, several states considered adopting Romer’s proposal.
The Honduran experience
In 2011, the Congress of Honduras amended its constitution to facilitate the development of Romer’s idea. Towns built in “special development regions” would not be subject to Honduran law or taxation. On the contrary, they would be autonomous within a single legal framework.
Salvadoran President Nayib Bukele has announced his plans for Bitcoin City for a cryptocurrency investor meeting in November 2021. Salvador Melendez/AP/AAP
After legal disputes over whether it violated Honduran national sovereignty, the plan was revived in 2015. Under the new plan, an investor building infrastructure on a site designated as an “employment and development zone” economy” (ZEDE) will be granted quasi-sovereign authority. The investor will be allowed to impose and collect income and property taxes and to establish its own education, health, civil service and social security systems.
Under the ZEDE Act, the president appoints a committee to oversee all model cities, as well as establish ground rules and standards for investors to follow. Reflecting ideological support for the idea, the first committee, announced in 2014, was largely made up of libertarians and former advisers to US President Ronald Reagan. The first site was launched in 2020, but development does not appear to have started.
At the sea
The Honduran plan provides for a country to lease (temporarily or perhaps permanently) sovereign rights over its territory. Other projects attempted to build a new city on the sea.
Since 2008, the focus has been on the California-based Sea Steading Institute.
Founded by the American libertarian Patrick Friedman (grandson of Nobel Prize-winning economist Milton Friedman) and originally funded by billionaire Peter Thiel, the institute sought to build habitable structures on the high seas, outside the jurisdiction (and taxation) of any state. .
Although their website suggests that stabilization at sea could provide significant benefits to humanity around the world, earning money without regulatory constraints is the main motivation. Proponents are interested in Sea Steading’s potential to “peacefully test new ideas for governance” so that “the most successful ones can then inspire change in governments around the world”.
No city has yet been built. In 2017, negotiations with French Polynesia to develop floating cities in their territorial waters stalled when community pressure forced the government to withdraw. Many have wondered if “facilitating tax avoidance by the world’s wealthiest people” would actually benefit the islands.
The Republic of Minerva
Other proposals haven’t bothered to ask anyone if they can start. In the 1960s, several American businessmen attempted to establish independent states on the coral reefs off California and Florida. Both collapsed under pressure from the US government.
In the early 1970s, American libertarian Michael Oliver tried to fund the building of a new country – the Republic of Minerva – on a submerged atoll in the Pacific Ocean between Tonga and Fiji. There would be no taxes or welfare in his laissez-faire paradise.
To date, no plans have been made for new independent floating territories. www.shutterstock.com
In the second half of 1971, Oliver’s team transported sand on barges from Fiji to raise the atoll above sea level and began construction of the base. Oliver planned to create 2,500 acres of habitable land raised two and a half to three meters above high tide. Floating cities and a resort would also be built.
Progress has proven difficult. Only 15 acres of land had been cleared when Oliver’s funds ran out. Neighboring countries were also watching with alarmism. In June 1972, King Tupou IV declared Tonga sovereignty over the atoll and expelled Oliver’s team.
Oliver abandoned Minerva, but in 1982 another group of American libertarians attempted to reassert and restore the republic. After spending three weeks moored in the lagoon, they were expelled by the Tongan army. Today Minerve is “more or less taken over by the sea”.
Maybe they should have invested in Bitcoin.
Harry Hobbs, Lecturer, University of Technology Sydney.
This article was republished by The Conversation under a Creative Commons license. Read the original article.
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