Free-Market Idolatry and Hatred of Democracy Go Hand in Hand

The wildest fantasy of hypercapitalist ideologues isn’t to expand democracy but to avoid its reach or even snuff it out.

Billionaire Peter Thiel speaks during the Bitcoin 2022 Conference at Miami Beach Convention Center, April 2022. (Marco Bello / Getty Images)

After reading historian Quinn Slobodian’s new book, you are not likely to think about capitalism the same way. As one blurb aptly put it, the story is “head-spinning,” and, by the way, great fun to read. Slobodian is a professor of the history of ideas at Wellesley College and bearer of one of my favorite Pynchonesque names on the internet, along with Match Esperloque and Con Skordilis. His style and subject matter call to mind the recently departed Mike Davis.

Slobodian’s book gets off to a great start, because it speaks to one of my pet peeves about the US left: we tend to think of public policy in exclusively national terms, as if we were a unitary state like France. The reality is that the US federal system, with over ninety thousand local governments, is the most decentralized in the world save for Switzerland. US states are sovereign entities with substantial independent authority; local governments are creatures of their respective state governments.

The key governmental unit in Crack-Up Capitalism is the zone, a space set apart from a country’s standard taxes and business regulations. The archetypal zone is Hong Kong, a favorite model of Milton Friedman and his Chicago School colleagues. Contrary to laissez-faire nostrums, Friedman appreciated the militant defense of “free markets” by the Hong Kong government.

There are thousands of zones throughout the world. The United States put its toe in the water in the 1980s during the Reagan Administration, proposing “enterprise zones” as a solution to urban blight. These have never amounted to much, though not for state and local governments’ lack of trying. Enterprise zones have mostly been an opportunity for business firms to practice locational arbitrage, moving in operations they would have carried out elsewhere for the sake of tax breaks and lax regulation. In fact, such arbitrage is part of the plan, the idea being to erode state restrictions by presenting competitive advantages in zones.

It turns out there is a vast intellectual history behind this libertarian gambit, which Slobodian ably documents. As you might expect, the Mont Pelerin Society (founded in 1947 by a group of right-wing intellectuals famously worried that socialism would engulf the world) is a key player, and neoliberalism (the subject of Slobodian’s previous book, Globalists) is shown to be a deeply libertarian project, in the anarcho-capitalist sense.

It’s a bit disconcerting to learn that all the tech billionaires, not just Peter Thiel, betray some weakness for this hard-right worldview. Our new economic elites are not your grandpa’s. As Slobodian notes, “A hundred years ago, the robber barons built libraries. Today, they build spaceships.”

The idea of a market for government itself, founded on a multitude of locational choices, underlies the libertarian dream. Freedom, in this would-be utopia, flows from the ability of individuals to choose the laws under which they live. Businesses — unshackled from government restrictions — grow without limit, and citizens prosper. Economic islands of a global archipelago flourish by trading with each other.

Commitment to this hypercapitalist model has been much more concerted in other parts of the world. Crack-Up Capitalism features stories of Singapore, Somalia, the United Kingdom, the United Arab Emirates, and the Bantustans of South Africa. In each case, national governments put substantial weight behind the formation of zones.

Perhaps the most novel form of the zone is one that exists completely in cyberspace. Think about the transformation of Facebook into Meta, or virtual currency like Bitcoin (originally intended to sidestep the government-regulated banking sector). Blockchain technology — used for a wide variety of trading and contracting — fits the bill too. Virtual zones’ freedom from government regulation stems from policymakers’ difficulty in keeping pace with new technologies, as well as the enormous sums of money the tech mammoths can use to influence public decisions.

Milton and Rose Friedman (Natalia Bargel)

Returning to planet earth, the joker in the deck of free libertarian enclaves is the absence of competition in the labor market. Zones are rife with exploitation of migrant workers who are taken in but afforded no citizenship rights, shipped to work by buses with barred windows, and returned to residential camps enclosed in barbed wire. The worst cases are found in places where democratic institutions are weak or absent to begin with. The working classes of the world have their hands tied when capital is concentrated in deregulated zones that prohibit labor groups of any kind, even social organizations. Zones snuff out civil society.

Zones are not, cannot be, economic autarchies, completely isolated from commerce with outside economic entities. In particular, as noted above, they rely on imported, captive labor and are largely the location for trade in goods produced elsewhere. (Cryptocurrency and virtual worlds like Meta are based on server farms that operate in metaspace.)

At the same time, zones hollow out the economic basis for welfare states by segregating and shielding capital from taxation. Wages are ground down and themselves provide limited sources of public revenue.

Actually Existing Zones

In an important respect, the libertarian bona fides of really existing zones are ambiguous. To be established and defended, zones require states. The government’s role in the economies of zones can be considerable. In Singapore, for instance, all land is owned by the state. Elsewhere, enclaves can require protection from the outside world. In China, state direction of economic activity is ubiquitous. Basic infrastructure in some zones essential to economic life is provided by the state.

More broadly, however, beyond nation-states, big international alliances and national governments seem as strong as ever. The Russian invasion of Ukraine is fortifying the US-led North Atlantic Treaty Organization. The Chinese, Indian, Japanese, and Brazilian states show no sign of dissolution. The same can be said for the European Union. Brexit could be looked at as an attempt to zone the entire UK. It was certainly spoken about in that fashion by Leavers, going back to the leading Euroskeptic, Maggie Thatcher. But the UK’s post-Brexit experience has not been a happy one.

We could reconcile this reality with zone fever by pointing out that there is a division of labor in the interests of capital. The top-level alliances maintain fiscal and monetary regimes that block the advance of social democracy. The local zonal authorities prevent democratic agitation at the base. (It doesn’t always work, as the uprising against plans for zones in Honduras attests, but similar schemes remain afoot in neighboring crypto-crazy El Salvador.)

We can also apply this framework to the United States. Elite pressure keeps the brakes on social welfare of all types and substitutes “culture war” battles for elementary needs for health care, education, and the like. A cheap welfare state leaves more income for the wealthy to nourish their own gated communities and central business districts. Meanwhile, the superrich are said to be building luxurious bolt-holes in remote places like New Zealand, when they’re not fantasizing about leaving the planet altogether. It all adds up to economic segregation, which in the United States is also racial segregation. Actually existing libertarianism happens to be pretty racist.

The crack-up of capitalism is really the dissolution of the state and, along with it, the capacity of a democratic polity to engage in collective action against real threats, such as pandemics and climate change. Such a capability is not easily replaced. As Slobodian recounts, that was the ambition of the deeper thinkers behind Donald Trump, such as Steve Bannon, and we could say it is the program of Florida’s execrable governor, presidential hopeful Ron DeSantis.

Crack-Up Capitalism is an important guide to the current struggle over how the ruling class rules. And Slobodian ultimately raises the question of whether there are cracks in the system, or whether the cracks are the system.