Crack-Up Capitalism by Quinn Slobodian review the economic anarchy of Liz Trusss dreams – The Guardian

Book of the day

This timely and important study of investment zones exposes the limitations of the experiments favoured by free-market fanatics

Tue 25 Apr 2023 02.00 EDT

Remember Liz Trusss plan last summer to carpet-bomb Britain with investment zones? These were not just freeports these would be zones modelled on the most anarchic capitalist zones in the world. There would be no tiresome planning laws, no irksome regulations, minimal labour laws, little taxation and only the lightest veneer of democracy. For Truss and her chancellor, Kwasi Kwarteng, these would be the ultra-libertarian battering rams to ignite the capitalism flame covering almost every city and town in the country.

The idea did not survive their passing: Truss wanted an uncapped number, while even Kwarteng accepted the Treasury argument that the loss of tax revenue estimated to be 12bn if the government went full Truss was unacceptable. There had to be some limit, otherwise there would simply be a mass diversion of economic activity into the investment zones and little extra investment. It was a fools mission. The present chancellor, Jeremy Hunt, laid the whole plan quietly to rest, while persevering with a softer and mildly less mad version of the same idea freeports.

But as Crack-Up Capitalism explains, there is nothing original in any of this. Anarcho-capitalist investment zones, along with a range of less extreme ideas, have been marketed on the wilder shores of the right as the pure milk of capitalism for some decades. And increasingly, in this eye-opening account, made real. Ever since the collapse of the Soviet Union, free marketeers extolling the Hong Kong model have been trying to create jurisdictions within jurisdictions that maximise economic freedom as they characterise it and downplay all the adjuncts of political freedom, which include trade unions, obligations to the poor, opposition parties and regulation to promote the public good.

As arch-free marketeer Milton Friedman believed, capitalism flourished best where there was as much economic freedom as possible. Political freedom could even get in the way of economic freedom because democracies, giving vent to popular demands, dared to place burdens on free business. The best form of government is therefore a territory run on the same principles as a corporation. Political constitutions, which set out citizens entitlements and rights as part of the process of government, should be dispensed with in these new and widening cracks of economic freedom in the global economy. Instead, the corporation should govern through a network of commercial contracts, even with citizens, in which the only rule is whether the contractual relationship throws up a profit. Within the zone, it is everyone for themselves in an economic jungle in which you formally renounce any rights as the price of entry.

If it began with Hong Kong and Singapore, Londons Canary Wharf is a tribute to the same idea and Quinn Slobodian, professor of the history of ideas at Massachusettss Wellesley College, takes the reader through the panoply of areas around the world that are exponents of crack-up capitalism. Sometimes, its a story of ventures that do not get off the ground, as in Honduras, when a planned charter city was vetoed by a change of government determined to reassert democratic control, but sometimes, as in Dubai, the scale of what is going on in these free economic zones is breathtaking. But then some states, as in authoritarian Singapore and Hong Kong, already have some of the necessary political culture that makes dispensing with political freedoms comparatively easy.

The open question is whether crack-up capitalism has a track record of success, notwithstanding all the claims made on its behalf. As Slobodian observes, for example, it is not obvious that Singapore is quite the poster child for economic freedom that its free market fans portray. The state looms large, taking tactical stakes in companies, offering public housing and its authorities having a strategic plan that sits at odds with the notion that this is an Adam Smith heaven. Friedman was less enamoured of Singapore than he was with Hong Kong for those very reasons, although how much even Hong Kongs success will survive the ice-cold grip of the Chinese Communist partys political control hangs in the balance. The signs are that it is faltering.

And if Dubai boasts the worlds highest buildings and vast amusement parks, along with being governed exactly like a company, its success is more a tribute to oil wealth than anarcho-capitalism. It is true that there is no western concept of citizenship, that the country is a patchwork quilt of varying legal jurisdictions to appease the preferences of inward investors and that it has grown explosively. But for whose benefit? Almost 90% of its inhabitants are foreigners hardly a model for the rest of the world. The worlds population cannot all live in free zones. Without oil revenues and de facto tribal government, Dubai would have been much more like Honduras.

Slobodian has done us a great service, identifying a phenomenon that needs unmasking. But how many great companies have their roots in anarcho-capitalism, free zones and charter cities? None that I can think of. The truth about capitalism is that some risks need socialising, workforces need to be housed, educated and trained and great companies have a purpose beyond avarice, a reality Friedman and his acolytes never took on board. Companies need political and social soil in which to grow; the stronger the society, the stronger the company. Equally, as Singapore demonstrates, success also needs the state and states themselves need accountability processes and the constitutions that go with them. It will irritate Truss, Kwarteng and their followers, along with the rest of the anarcho-capitalist right, but economic and political freedom are handmaidens. Crack-up capitalism, for all its spread and the enthusiasm of its advocates, is ultimately a blind alley.

Crack-Up Capitalism: Market Radicals and the Dream of a World Without Democracy by Quinn Slobodian is published by Allen Lane (25). To support the Guardian and Observer order your copy at guardianbookshop.com. Delivery charges may apply

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Crack-Up Capitalism by Quinn Slobodian review the economic anarchy of Liz Trusss dreams - The Guardian