Escape ever-rising taxes? Others have tried and failed

Telegraph

13-04-2025

Singapore-on-Thames has become shorthand for embracing our Brexit opportunities by shrinking the state, breaking with the failed bureaucratic model of recent decades, and transforming Britain once more into an outward looking, low tax, entrepreneurial nation.
The former Conservative chancellor, Jeremy Hunt, is its latest advocate, arguing it is the best – perhaps the only – path to prosperity in a world of Trumpian tariffs and global trade wars.
But for some pro-market advocates, this vision goes nowhere near far enough. Since the Second World War, we have seen the relentless, marauding growth of the regulatory and welfare state across the West.
Margaret Thatcher in Britain and Ronald Reagan in the United States offered an alternative vision, but a more radical version of the pro-market creed has developed in tandem. For these libertarians, the dream is not to cut the size of the state by 10pc or so, but rather to reduce it to 10pc, or less, of what it is today.
How is this to be done? Thatcher and Reagan had enough trouble pushing through their comparatively modest reforms. For roughly the last 50 years, small bands of utopians, usually Americans, have dreamed of not reforming existing states but setting up new laissez-faire nations attracting the best and brightest from across the globe.
So far, they have met with only very limited success.
In earlier ages, those out of kilter with the society they lived in could get on a boat and head off to distant, unexplored lands to set up their new worlds. But we are not living in the 1620s. Our latter-day Pilgrim Fathers have had to find more innovative approaches. And they have come up with three broad, would be, solutions to this predicament.
The first of these is to create artificial islands outside existing nations' territorial waters. The trouble here is that existing states have inexorably stretched the borders of their sovereignty.
Most nations once claimed that their realms extended only three miles out to sea, but the standard jurisdiction is now 12 miles with claims of exclusivity reaching out to hundreds of miles in some cases. Building cities mid-ocean is not an undertaking to be taken on lightly, and probably requires Elon Musk levels of wealth.
But this has not put off some intrepid souls. In the early 1970s, Michael Oliver, a Lithuanian-born Holocaust survivor who became an American entrepreneur and died last year, set up the Phoenix Foundation to realise such visions. He attempted to build a capitalist nirvana on some submerged reefs around 300 miles south west of the Kingdom of Tonga.
Some real progress was made on constructing the Republic of Minerva, but its nearest neighbour did not approve of this upstart nation. In a pattern followed time and again with such initiatives, Tonga came calling and lay claim to the reefs. Minerva was extinguished.
This type of scheme is today championed by the California-based Seasteading Institute, founded by Patri Friedman, grandson of the pro-market guru Milton. It has attracted funding from PayPal founder Peter Thiel.
They advocate for the construction of floating cities outside territorial waters. Such initiatives are under way in locations off the coasts of the Philippines and Florida, and even in the middle of the Indian Ocean.
But unsurprisingly, none seems to have got much further than the planning stage. Perhaps their best hope is that Elon or a fellow tech bro will back one of them when they inevitably tire of Trump's America.
The second version has been to tie up with separatist movements in soon to be independent countries. In 1973, Oliver backed a plan for the island of Abaco to break away from the rest of the Bahamas as the Caribbean territory gained its independence and set itself up as a standalone libertarian republic. It came to nothing.
Oliver was not put off, and as the joint Anglo-French colony of the New Hebrides in the Pacific was gaining its independence as Vanuatu in 1980, he again tied up with separatists promising to institute a laissez-faire regime. This time the plans for the putative Republic of Vemerana ended in violence – with it died the notion that this might be a realistic approach.
The third alternative is perhaps the most realistic. In a 2009 Ted Talk, Nobel Prize winning economist, Paul Romer, proposed the creation of charter cities. These are not fully independent countries, but rather to a greater or lesser extent self-governing entities on virgin land within existing states with their own pro-market rules and tax regimes.
Honduras in Central America gave the go-ahead for three such schemes in the 2010s. Perhaps the most successful has been Prospera on the island of Roatan – construction began in 2021 and Peter Thiel is once more a backer.
But the current Left-wing president of Honduras, Xiamora Castro, is now doing her best to unravel their autonomous status. Prospera and the other Honduran charter cities have not been helped by the fact that their strongest local advocate, former president Juan Orlando Hernandez, is now serving a 45-year sentence in a US prison for drug trafficking offences.
Charter cities seem to be the most realistic experiment in establishing physical libertarian, pro-market jurisdictions. But the changing vicissitudes of politics still end up getting in their way, and will in all likelihood do so with future such experiments in other countries.
The cyber world might well turn out to be the one realm where state institutions can be circumvented and alternative, market-based structures successfully pursued. After all, cryptocurrencies have been stratospherically more successful than any of these real-life nirvanas.