Begin Reading

  Table of Contents

  About the Author

  Copyright Page

  Thank you for buying this

  Henry Holt and Company ebook.

  To receive special offers, bonus content,

  and info on new releases and other great reads,

  sign up for our newsletters.

  Or visit us online at

  us.macmillan.com/newslettersignup

  For email updates on the author, click here.

  The author and publisher have provided this e-book to you for your personal use only. You may not make this e-book publicly available in any way. Copyright infringement is against the law. If you believe the copy of this e-book you are reading infringes on the author’s copyright, please notify the publisher at: us.macmillanusa.com/piracy.

  for my sister, Mayana

  But early in the twenty-first century it became clear that the planet was incapable of sustaining everyone alive at Western levels, and at that point the richest pulled away into their fortress mansions, bought the governments or disabled them from action against them, and bolted their doors to wait it out until some poorly theorized better time, which really came down to just the remainder of their lives, and perhaps the lives of their children if they were feeling optimistic—beyond that, après moi le déluge.

  Kim Stanley Robinson, The Ministry for the Future

  INTRODUCTION

  Shatter the Map

  The world’s special economic zones. The dot size corresponds to the area covered by each zone. For an interactive version of the map see openzonemap.com.

  COURTESY OF THE ADRIANOPLE GROUP

  Without looking at your phone, how many countries are there in the world? Not sure? The answer is about two hundred, more or less. Now think ahead to the year 2150. How many will there be then? More than two hundred? Fewer? What if there are a thousand countries? Or only twenty? What about two? Or one? What kinds of futures would these maps suggest? What if everything depended on the answer?

  The person posing this thought experiment in 2009 was the forty-one-year-old venture capitalist Peter Thiel.1 Having made a small fortune by founding PayPal and investing early in Facebook, he had just taken a huge hit in the financial crisis the year before. He now had one thing on his mind: how to escape from the tax-collecting democratic state. “I no longer believe that freedom and democracy are compatible,” he wrote. “The great task for libertarians is to find an escape from politics in all its forms.”2 The more countries there were, the more possible places to take your money, and the less likely any country would be to raise taxes for fear of spooking the goose that laid the golden eggs. “If we want to increase freedom,” he said, “we want to increase the number of countries.”3

  Thiel cast the idea of a world of thousands of polities as the utopian dream of a future reality. What he didn’t mention was that the future he was describing in many ways already existed.

  A standard globe shows an uneven mosaic of colors, pixelated more densely in Europe and Africa, easing out to broader chromatic stretches across Asia and North America. This is a familiar vision of the world, the one that we have been taught since grade school, the one that Thiel was referring to: each patch of land with its own flag, its own anthem, its own national costume and cuisine. The opening parade of the Olympic Games performs this version of the globe every couple of years, reassurance that it’s a small world after all.

  But we make a mistake if we see the world only in this jigsaw of nations. In fact, as scholars remind us, the modern world is pockmarked, perforated, tattered and jagged, ripped up and pinpricked. Inside the containers of nations are unusual legal spaces, anomalous territories, and peculiar jurisdictions. There are city-states, havens, enclaves, free ports, high-tech parks, duty-free districts, and innovation hubs. The world of nations is riddled with zones—and they define the politics of the present in ways we are only starting to understand.4

  What is a zone? At its most basic, it is an enclave carved out of a nation and freed from ordinary forms of regulation. The usual powers of taxation are often suspended within its borders, letting investors effectively dictate their own rules. The zones are quasi-extraterritorial, both of the host state and distinct from it. Zones come in a bewildering range of varieties—at least eighty-two, by one official reckoning.5 Among the more prominent are the special economic zone, the export-processing zone, and the foreign-trade zone. At one end of the socioeconomic spectrum, zones can be nodes in the networks of cross-border manufacturing.6 Often ringed by barbed wire, these are sites for low-wage production. At the other end, we can see a version of the zone in the tax havens where transnational corporations secrete away their earnings—what the economist Gabriel Zucman calls “the hidden wealth of nations.”7 The flight of corporate profits to these low- or zero-tax jurisdictions costs the United States alone $70 billion a year in tax revenue, while offshore tax shelters hold an estimated $8.7 trillion of the world’s wealth.8 Some Caribbean islands count more registered companies than residents.9 In his first run for office, candidate Barack Obama singled out Ugland House in the Cayman Islands, which contained twelve thousand corporations. “That’s either the biggest building or the biggest tax scam on record,” he said.10 In fact, it was totally legal, a workaday fact of the global financial system.11

  There are over 5,400 zones in the world, far more regimes than in Thiel’s fantasy of a future world of a thousand countries. One thousand new zones have appeared in the last decade alone.12 Some are no bigger than a factory or a warehouse, a switch-point in the logistical circuitry of the global market, or a site for storing, assembling, or refining a product to avoid tariffs.13 Others are urban megaprojects—such as New Songdo City (Songdo International Business District), in South Korea; Neom, in Saudi Arabia; or the city of Fujisawa, in Japan—which run under their own rules like private city-states.14 In 2021, lawmakers in Nevada floated a similar idea, suggesting they might let corporations that relocate to their state write their own laws—the return of the company town a century later, made over as the “innovation zone.”15 In the United Kingdom, the Conservative government made the creation of a chain of duty-free zones or free ports the centerpiece of a proposal to “level up” the deindustrialized North after Brexit. Its quixotic goal? To compete with Dubai’s Jebel Ali Free Zone, founded in 1985, where corporations enjoy half-century tax holidays and have access to foreign laborers housed in dormitories and paid a fraction of a British living wage.16

  I use the metaphor of perforation to describe how capitalism works by punching holes in the territory of the nation-state, creating zones of exception with different laws and often no democratic oversight. The philosopher Grégoire Chamayou adds another metaphor, likening projects of privatization to the technique of the longhorn beetle, gnawing away at the structure of society from inside.17 We could reach for another metaphor and recall how a piece of lace is made by knotting threads together with gaps in between. What emerges gives the impression of a pattern by what is left out. The insider’s term for this is voided patterning. To understand the world economy, we need to learn to see the voids.

  Most of the world’s zones are in Asia, Latin America, and Africa. China alone has almost half of them. Europe and North America combine for less than 10 percent.18 Yet as we will see, zones have some of their most ardent supporters in the West, who hail them as experiments in what I call micro-ordering, or the creation of alternative political arrangements at a small scale. Champions of the zone suggest that free-market utopia might be reached through acts of secession and fragmentation, carving out liberated territory within and beyond nations, with both disciplining and demonstration effects for other states. “Localized freedom,” the Heritage Foundation’s Stuart Butler wrote in 1982, “can rot the foundations of the unfree state around it.”19 Promoters of perforation cast themselves melodramatically as guerrillas of the Right, reclaiming—and decomposing—the nation-state, zone by zone. Once capital flees to new low-tax, unregulated zones, the theory goes, nonconforming economies would be forced to emulate these anomalies. By starting small, the zone sets out to model a new end state for all.

  This book tells the story of what I call crack-up capitalism. It is, at once, a description of the world that has come into being through the uncoordinated efforts of private actors seeking profit and economic security over the last forty years, enabled by willing governments, and the tale of a deliberate ideology. Crack-up capitalism is a label for both the way the world works and a way that specific people hope to continue to change the world. It is a way to describe a world that is both ever more interconnected and ever more fragmented. Crack-up capitalists spot signs of the mutation of the social contract and ask whether they could accelerate and profit from the dynamics of dissolution. They are students of what Lionel Shriver calls in her 2016 novel, The Mandibles, “the recently minted genre of apocalyptic economics.”20

  The zone is not only out there in the world. The zone begins at home. For most, this does not mean outright secession or the creation of a new state—not seizing the heights of power but the accretion of many small acts of refusal. One market radical calls this soft secession.21 We can secede by removing children from state-run schools, converting currency into gold or cryptocurrency, relocating to states with lower taxes, obtaining a second passport, or expatriating to a tax haven.22 We can secede, and many have, by joining gated communities to create private governments in miniature. By the new millennium, about half of all new de
velopments in the American South and West were gated and master-planned.23 Gated enclaves are global, from Lagos to Buenos Aires.24 In India, gated communities began with the seizure of public roads through the installation of steel barriers, before moving on to blue-sky master-planned “colonies” clustered around special economic zones.25

  A venture capitalist who worked for Peter Thiel coined an ingenious term when he called this form of soft secession underthrow.26 For him, the best model of politics was the corporation. We opt in and out as customers. If we don’t like the product, we shop elsewhere. Nobody demands anything of us and we feel obliged to nobody in particular. We rely, in the classic dichotomy laid out by the economist Albert Hirschman a half century ago, on exit rather than voice.27

  Each act of soft secession—each corporation stashing away its profits with a brass-plate company in Switzerland or the Caribbean; each standoff over grazing rights with federal agents; each rent-a-cop, contractor, or mercenary hired to patrol, jail, or raid—is another small victory for the zone, another pinhole in the collective. We are being encouraged to live in zones by those who profit most by our abdication from the shared set of responsibilities. A hundred years ago, the robber barons built libraries. Today, they build spaceships. This book is a history of the recent past and our troubled present, when billionaires dream of escaping the state, and the idea of the public is repellent. It tells the story of a decades-long effort to pierce holes in the social fabric, to opt out, secede, and defect from the collective.

  * * *

  TO UNDERSTAND THE significance of crack-up capitalism, we need to step back and recall the big stories scholars have told about the last several decades. The fall of the Berlin Wall on November 9, 1989, inaugurated an era of globalization. In his novel Islands in the Net, Bruce Sterling conjured a vision of this hyperconnected earth “all netted together in a web over the world, a global nervous system, an octopus of data.”28 The dominant visualizations are of connection: blue lines of lasers linking the world’s far-flung locations, a skein of exchange and mobility. The trend was toward interconnection: the World Trade Organization, the European Union, and the North American Free Trade Agreement were created within a few years of one another. But there was also an alternative timeline if you looked closely, one that was marked as much by fragmentation as unity. The two Germanys unified in 1990, but the Soviet Union splintered the following year. Yugoslavia dissolved as the European Union formed. Somalia descended into a civil war and would have no central state for over a decade.

  New barricades replaced old ones as the Cold War ended. Goods and money were free to flow, but not people. Walls were built the world over. By one estimate, more than ten thousand miles of borders worldwide have been hardened with barriers.29 In 1990, the United States planted its first stretch of border fence, south of San Diego. President Bill Clinton liberalized trade in North America while he authorized Operation Gatekeeper, further fortifying the southern border.30 Two months after the Wall fell in Berlin, the BBC released a drama called The March, which follows a Sudanese man as he musters people displaced by war and poverty to march across North Africa to Europe. The final scene shows the caravan arriving in a resort town in southern Spain, climbing steps toward a wall of armed troops as a helicopter hovers overhead. An African teenage boy in a Miami Dolphins cap is shot dead on the beach by the soldiers, an icon of cosmopolitanism’s broken promise. Since 2014 alone, upwards of twenty-four thousand people have died at sea attempting to reach Europe.31 Globalization has both centripetal and centrifugal force. It binds us together while it tears us apart.

  This book homes in on the 1990s as an underrated period of political ferment and a crucible of national and post-national imagination. The story we tell of the decade—based on ever-broader integration and ever-larger economic unions—must be flipped to show the depth of the secessionist energy and zeal for experiments in micro-ordering. When the political scientist Francis Fukuyama speculated about “the end of history” in 1989, he meant the convergence of the world around the model of liberal democracy but also the uncontested reign of a particular model of arranging the earth: divided into bound, self-determining nation-states within a single global economy linked through public international law.32 But the ongoing evolution of global capitalism has changed the picture. The end of empire and the end of communism birthed a bevy of new sovereign nation-states even as another political form was also coming into being. From the 1990s, and increasingly so through the present day, the nation-state has been joined by the new entity of the zone.

  Zones help us rethink globalization as a fracturing of the map into what scholars call the “archipelago economy of offshore,” with territories engaged in perpetual competition for roving clients, savers, and investors.33 In the wake of the blockbuster research of Thomas Piketty and Emmanuel Saez, and the jaw-dropping revelations of the Panama and Paradise Papers, we are beginning to learn more about one particular kind of zone, the tax haven.34 But to see the zone as a device of “wealth hoarders” is both true and not enough.35 We must appreciate how, for market radicals, the zone was not merely the means to an economic end but an inspiration for the reorganization of global politics as a whole.

  The zone serves many functions for the capitalist right. The specter of the zone and the attendant threat of capital flight serve to blackmail out of existence the remains of the social state in Western Europe and North America. The zone also showcases a second belief central to the shared imagination of the contemporary political right: a belief that capitalism can exist without democracy. When Germany reunified, the political philosopher Raymond Plant observed that “in the light of the collapse of communism in Eastern Europe, some may think the relationship between capitalism and democracy is obvious. Yet this is far from the case, and some of those who have been in the intellectual forefront of the debate about free markets are now rather worried about the relationship between markets and democracy.” He pointed out that “according to this argument, democracy as it has grown up in Western societies may be inimical to the growth and maintenance of markets.”36 To some, longtime colonial holdouts like Hong Kong, homelands in apartheid South Africa, and the authoritarian enclaves of the Arabian Peninsula offered evidence that political freedom may actually corrode economic freedom.

  The idea of capitalism without democracy circulates more broadly than we might think. One of President Donald Trump’s chief economic advisors and nominees to the Federal Reserve Board, Stephen Moore, a longtime fellow of the Heritage Foundation and mainstream right-wing intellectual, stated frankly: “Capitalism is a lot more important than democracy. I’m not even a big believer in democracy.”37 Far from an idle joke or a slip of the tongue, this is a well-formulated position that has quietly been on the advance for the last fifty years, shaping our laws, institutions, and the horizon of our political aspirations.

  The shattering of the world map has not happened spontaneously. It has had its champions. This book is about those who came before and after Thiel, the people who have seen a crack-up coming and cheered it on. After the Cold War’s end, they proposed something surprising: maybe capitalism had secretly lost. Maybe social democratic superstates were picking up where communist ones left off, as state spending was only continuing to grow. Maybe for the true victory of capitalism, it was necessary to go further. What if the end of history was not the checkerboard of two-hundred-plus nation-states existing under conditions of liberal democracy, but tens of thousands of jurisdictions of various political systems in constant competition? As one market radical put it, “What if the greatest political trend of the past two hundred years, namely the centralization of state power, reverses in the twenty-first century?”38 What if society needed to be founded anew?

  Beginning in the 1970s, the zone offered a sleek alternative to the messiness of mass democracy and the sprawl and bloat of unwieldy nation-states. Secessionism, not globalism, was the mantra of the thinkers at the core of this book. It follows this group of market radicals around the globe for half a century as they look for the ideal container for capitalism. The journey leads from Hong Kong to the London Docklands to the city-state of Singapore, from late apartheid South Africa to the neo-Confederate American South and the former frontier of the American West, from the war zones of the Horn of Africa to Dubai and the world’s smallest islands, and finally to the virtual realm of the metaverse. The proponents of crack-up capitalism envisioned a new utopia: an agile, restlessly mobile fortress for capital, protected from the grasping hands of the populace seeking a more equitable present and future.