I’ve always thought that these ‘libertarian islands’ and other attempts to create restricted libertarian enclaves like the ‘Freedom Ship’ were incredibly misguided. The big problem is that tightly enclosed environments in harsh environments are exactly the wrong environments for libertarianism. You need rigid order on a ship or on a small artificial island, because almost all activities are intertwined and it’s impossible to avoid interfering with others when just carrying our your daily activities. They are also tightly constrained in resources, making development difficult.
I suspect that these ideas are driven more by developers and entrepreneurs looking to find a way to extract wealthy libertarians from their money.
But the general idea of finding an area and giving it freedom from regulation, taxes, and other big government is not a ‘wackadoodle’ idea. There is a long history of this. In 1241, the city of Lübeck was given a special dispensation from the king, allowing it to trade freely with other nations and to avoid other regulations. It was also given property rights so it could profit from trade. The result was the start of the Hanseatic League of free city-states, which eventually wound up protecting each other in mutual pacts and protecting their own trade routes. The league worked to expand free trade and to be exempted from tolls normally extracted from trade by the kings of the time. The result was an explosion of trade and a rapid rise in the wealth of the members of the Hanseatic league and the people they traded with.
More recently, Hong Kong was a British experiment in self-governance. Colonial administrator John Cowperthwaite took an explicitly Laissez-Faire approach to Hong Kong administration, refusing to engage in any industrial policy at all. Taxes were kept low, the region was left to determine its own form of governance, and business regulations next to nonexistent. Even today, you can open a business in Hong Kong by filling out a one-page form and turning it in. Then go rent a space and start your business.
China has created prosperity zones freed from state management, and those zones have exploded in wealth.
Paul Romer, husband of Ex-Obama chief economist Christina Romer and a very influential economist himself, has proposed similar ideas to kick-start wealth and trade in the third world: Charter Cities. Explicitly referencing the Hong Kong model, Romer wants countries to find areas of land that are currently not used but which are suitable for development, and zone them off for the development of charter cities. These cities would be exempt from tariffs, regulations, government planning, and taxes. The property would be sold to private investors to build cities. Central planning in the city would be kept to a minimum: things like rules of the road and public sanitation regulations would be determined by the city government, but there would be no explicit zoning or control over business development.
In short, these are very close to the ‘libertarian island’ idea, and very similar to the old Hanseatic League cities in that they would be an enclave of free trade and self-governance inside other countries.
This is an idea that’s being taken very seriously.
Here’s a Q&A With Romer about the idea.
This Page has links to more information, including Romer’s popular TED talk on the subject.