Towards a Real Social Contract

A Thought Experiment

Most of today’s governance models date from the 19th century and rely on the threat of violence to operate. Will governance soon evolve? 

By Titus Gebel

Imagine you lived in a system where you were required to buy a car. The car’s body, interior and engine have been preselected for you by a monopoly provider who also sets the price. There’s no negotiation. You have to pay their price. Now if that seems strange, just replace the words “seller” with “government” and “buyer” with “citizen.” 

You are living in such a system.

As a tax-paying citizen, you must subsidize inefficient technologies, television channels, professors of gender studies, and military missions abroad. If you wish to reject these out of either preference or conscience, tough luck. Indeed, you’re also forced to take out a pension, health insurance, and elder care with predefined conditions–whether you agree or not. You also have to finance others’ health insurance–even those who are financially better off.

In other words, you are not a client. You are a subject.

What contract?

This imposition is sold to you as part of an alleged “social contract”. This contract is meant to exist between citizens and the state. In some versions the citizens, among themselves, are supposed to have reached such an agreement by relinquishing part of their sovereignty to the state, purportedly in exchange for a greater overall good. The details of how such an agreement is reached are not so important to cheerleaders for the social contract. But at best it is a theoretical construct. At worst it’s mendacious metaphor.

According to the civil law tradition in most of the West, regarding such a construct as a  contract is questionable to start with. A legal contract requires mutual agreement and clarity about the deliverables and performances. If there is a lack of certainty in its performance and rewards, a contract is not in force. Further, a contract is not binding if one of the parties fails to agree on any of the substantive points. In fact, if just one party subjectively disagrees with a single substantive point, there’s no binding agreement. All of these problems militate against the existence of an abstract social contract.

Since these objections cannot be conclusively dispelled, social contractarians usually urge that the physical presence of the citizen in a particular State constitutes his implied consent to the applicable social order. It’s rather like saying that a slave who does not try to escape daily has implicitly agreed to his slavery. In fact, a perverse trade-off takes place in such a case. The slave asks himself where he might go, and whether it’s too risky to attempt an escape. The citizen has to leave his house, his job, his ancestral homeland — and he might even have to abandon his family. Therefore, the decision in both cases might be to remain in the respective system. But he is merely choosing the lesser evil. There is no real agreement here.

But why should a group of people, whom we call the political class, ever decide how you have to live your life? This question looms even larger when we realize we did not select, commission or otherwise choose them. When we consider that they are not especially qualified, it calls into question this entire institution. Maybe you hold the view that you have the right to author your life and your circumstances as you see fit; and if you want something from others, you ask for their permission or offer to make an exchange. 

Two general principles result: 

• First, no harm should be inflicted on others, because they have the right to be left alone. It doesn’t matter whether harm is threatened by a majority or a representative of a majority. 

• Second, human interaction ought to take place on a voluntary basis and not under threat of harm. 

Today’s states – democracies included – cannot guarantee either of these principles. Instead, states are instituted on their violation.

Answers to two questions are sufficient to prove this finding: 

What right do you have to take lawfully acquired property from others, whether income or land? And what do you do when others no longer want to pay? The answers are simple. The government has decided and the government dispossesses them. But isn’t this just in fact little better than robbery, based on the law of the strongest? It makes no difference morally, if you rob your fellow man under threat of violence itself or entrust elected representatives to do so.

Either way, any system which, by law, performs expropriations in favor of third parties cannot permanently create a condition of either peaceful or predictable cooperation. Instead, it encourages never-ending conflicts, resentment, and social unrest. Such societies  have no future. They are Ancien Régimes.

A Community Services Agency

Imagine in contrast, that a private company offered you community services in a given area, such as the protection of life, liberty and property. This performance includes police, a fire department, emergency rescue, a legal framework and an independent judiciary. You pay a contractually fixed amount for these services per year. The community services agency, as a steward of the community, may not at any point unilaterally change the contract. You have a legal right to demand that the agreement be respected, and you can claim damages for faulty performance.

Everything else takes care of itself. Everyone can do what they like as long as they hold up their end of the agreement, too, which includes respecting the equal rights of others. You only participate, for as long as you like, in the service offerings. Disputes between you and the community service agency are heard by independent arbitrators, as is customary in international trade law. Not only will independent arbitrators’ decisions bind the parties, but any abuses of power will lead customers to drift away from the community service agency, which will cause it to drift into insolvency.

Everything we know about good businesses functioning in markets can be carried over to governance and community services. Such includes the enormous diversity of offerings, the right to not buy something we do not like, and finally, the competition among suppliers, which ensures better service at lower prices. 

This rationale also applies to social security. There are numerous examples to show that societies can operate successfully without coercion, for example through the means of mutual aid organizations. In the age of online networking, mutual aid could experience a revival, only aided by networks of people responding to incentives. Even those whose contribution is relatively modest will get to enjoy these options.

The sovereign citizen would at once be a courted customer able to change providers at any time, rather than a cash cow who must purchase its freedom through exit taxation. Unlike the politicians of the Ancien Régime – who make decisions at the expense of others without having the slightest economic disadvantage if something goes wrong – the private governance contractor has skin in the game. This fact alone disciplines him strenuously.

The enterprise must keep up the effort, and cannot simply changes the rules at the cost of the customers when it suits itself. Competition ensures there will be many different models of living together peacefully and that there will be something suitable for everyone. The degrees of freedom, innovation and self-reliance will be consistently high. If all those choices are simply too dizzying, all-inclusive systems will emerge, which cluster different services. After no more than a generation, such private systems are likely to be more peaceful, free and prosperous than anything we’ve known.

The new home

The home in the 21st century will be an adopted home. People are already offered a choice of countless goods, can choose among a wide variety of policies in many different aspects of life. New technical products come onto the market daily. In the area of human coexistence, why should things be any different? Indeed, who would choose to maintain a system fueled by coercion, which is expensive and functions poorly overall?

To demonstrate how poorly it functions, one need only review how poorly government policies and programs are designed simply to manage problems. It’s enough to “make a mark.” All the incentives align with continuing the existence of the bureaucracy as opposed to actually solving a problem. However, it is precisely the top performers in all income groups who will not allow themselves to be continually subjected to domination by the respective political class without having any relevant say in the matter. The private community solves this problem in a manner the Ancien Régime system cannot. Sooner or later, therefore, alternative forms will emerge.

New initiatives

Maybe you think this is a mere thought experiment. Maybe I’m just spinning a theory. 

For several years, corresponding efforts have already been underway. In 2009, the Stanford professor Paul Romer  now Nobel Laureate, went public with his proposal for “Charter Cities”. The idea was to develop areas in developing countries by industrialized countries with their rights and their officials, so as to create a zone of local prosperity. Romer described this model as roughly akin to “Canada developing a Hongkong in Cuba.” As a result, such approaches were actually pursued in both Madagascar and Honduras, but they failed because local inhabitants didn’t like the idea of a zone ruled by another country.

It turned out that an administration that is at least partially implemented by private companies could be a viable alternative. The creation of appropriate special zones was approved in Honduras by constitutional amendment. These are to be managed largely according to their own rights and with their own staff. After years of preparation, it now looks as though the first such zone will soon be established in Honduras.

From that Patri Friedman, grandson of Economics Nobel Laureate Milton Friedman, in 2008 founded the Seasteading Institute, which originally provided the so-called Floating Cities outside the territorial waters of states. Technical feasibility studies, however, showed that floating cities on the high seas are connected with such substantial costs due to the motion of the sea. Instead, the Seasteading Institute has now moved on from that idea, in order to conceive of such independent cities in sheltered bays within territorial waters. Negotiations with different countries are underway.

The first companies that want to operate free and independent private cities ashore, on a for profit basis, have been established in the last years, including Free Private Cities Inc. Several projects are already being negotiated. The solution to the political problems of today could therefore come from a completely unexpected quarter: profit-seeking entrepreneurs. If this seems crazy, just think about the operating system that’s running the device on which you’re viewing this article: If you were unhappy with its functioning, wouldn’t you choose a competitor?

Titus Gebel is a German entrepreneur with a PhD in law. Among other things, he founded the mining company Deutsche Rohstoff AG. He is currently CEO of Free Private Cities Inc., a company seeking to implement this model, and has also written a book titled Free Private Cities: Making Governments Compete for You, in which he explains the idea in detail. 

Titus will be a speaker at LibertyCon 2020 in Washington, DC, where he will explain the model in detail and inform on the first projects. The event will take place from April 3-5. To find out more, visit www.libertycon.com/

A version of this article was originally published in German at the Neue Zürcher Zeitung