Unlike other businesses, the state has a monopoly on law-making and the use of force. Wouldn’t the consumers be at the mercy of profit-maximizing monopoly that is not kept in check by the competitors?
The competitors of a state are other states. I expect that one of the consequences of turning a state into private business will be that smarter state will sell off parts of the territories, just as corporations today do spin-offs. That will mean multiplication of a number of states by a big factor. These will become new competitors too.
Yes, some private states might be “taken over”, or bought out by other states or corporations, but that is all good as it only represents shareholders voting with their property: they can either keep it or sell it at the price that seems too good to turn down.
I believe that all in all the number of existing countries in the world will be much bigger than today, because it is much easier to manage smaller countries in a profitable way. Also, in search of profit a lot more power and decision making will be delegated to the local level than it is now.
Privatized for-profit state would offer far superior services and value for the money than their “tragedy of the commons” competitors. We all see huge difference in what we get for our money from government-run businesses compared to far superior privately owned competitors.
It is also consistent with property rights principle to allow the owner full control of his property, or the monopoly over it. By international and domestic law, a state is essentially the owner of all its territory, and I believe that where their property is concerned, owners SHOULD have full decision-making rights as well as full enforcement rights.
Another reason not to be afraid of private for profit states is that even today the non-profit states are already trying to get as much tax income as possible. The only reason that they do not all have 100% tax rate is because they know it would bring in less total money than a lower and more reasonable tax rate (see the Laffer curve). The same reasoning will work with a for-profit state.
Some people believe that it is the fear of voters that stops politicians from charging even higher taxes, but that is an illusion. As we all know, politicians are constantly promising one thing and delivering another, and yet they still manage to be reelected.
What does the slogan “Own Your Country” mean?
As citizens, we speak of our country. We die in wars for our country, we pay taxes to our country, we vote to chose leaders of our country, we are told that our country is there to serve us, its citizens. We, the citizens, are the principals of our country, our country is there to provide services to us.
But, strangely, we, the citizens, the principals, actually do NOT own OUR countries. Well, I say we should!
Each citizen should get an equal share of ownership of the legal entity that our country is. This would be a huge wealth transfer to the “99%” and source of dividend income once the state starts turning a profit.
People will start buying and selling these shares and we will have a stock price of the country’s share. The value of these shares will increase as the waste and corruption in government goes down, and decrease as it goes up.
What would happen with citizenship rights and privileges of people who sell their shares? Can people who buy these shares come to work and live in that country?
Buying and selling of the shares should only affect the financial part connected with the share ownership, while everything else remains the same. Neither citizen loses any other of his rights to live and work in the country, nor can the buyer circumvent the existing immigration and labour laws.
Is something like this even possible? Could it work in real life? Are there any actual cases of private for-profit cities or countries in the world?
Actually there are quite a few private, for-profit, cities and countries today, and most are very successful. I think that should be enough of a proof for the most paranoid “what if” scenarios.
As far as private cities there are very successful examples in the US and abroad:
Private countries were common throughout most of the history, and some lasted many centuries. They were all sort of “sole proprietorships”, far too fragile system for such a big business that a country is. Most of them went bankrupt during major wars and revolutions in nineteenth and twentieth centuries. They are called absolute monarchies, and only a few exist today, the Vatican and a few Arab oil rich countries:
The main problem of absolute monarchy, from my point of view, is that the monarch himself is “stuck” with his property and it is much more difficult for him to get financing than it should be. Yes, the Russian Czar did sell Alaska to the US when he needed cash, but equity financing in the form of selling the shares of ownership in his business was unimaginable because the whole theory behind the system was that he was a ruler chosen by god.
Ability to sell shares, or even the whole business, is a crucial ability that would allow the country to always have owners who believe they have more profitable ideas and are ready to put the money where their mouths are.
Therefore, absolute monarchies are NOT what I propose, but if someone does come along and pays the shareholders the prices high enough that EVERY shareholder wants to sell to him, then I would say it’s a fair deal.
How would the life specifically change if it became the law that citizens own shares of the country?
In the beginning, nobody would notice any change, except that the people who needed the cash most urgently but had no way to get it, would sell their shares (probably for a low price). That seems unjust, but the people selling the shares would be doing it to be better off, otherwise they would not sell.
The “unjust” part, if there was one, happened before they even got the shares and sold them, and thus solved their problem. But, we don’t know, maybe the price in the beginning would be over hyped, so maybe the first to sell would get a better deal than those that speculated and held the shares till later on. In any case, the price discovery process is of extreme importance and it would take some time until the stock price stabilized.
I imagine that there would not be any noticeable differences in everyday life too quickly. We would still have the same political leaders, but it would be clear that they are now business managers.
They would understand that too, and would start to think of cutting waste and other ways of showing the shareholders that they are good business managers. They would have to present more numbers and less fairy tales when proposing new policies and to start thinking what the new policy might do to the stock price. Now, isn’t that something?
We would still have the same police, the same courts, all the same government agencies, you would not notice anything different in the beginning. But very soon, the very same politicians that we have now, would start looking for ways to get the stock price up. Cutting waste would be one huge opportunity to increase the price of stock.
Today, waste is just ugly to look at, but we don’t get to see it expressed in numbers that affect us directly, as in the price of our own stock, as specific, numbered damage to our own wallets. Today we feel all the waste is happening to someone else. We don’t see what it does to us specifically, because we don’t have the share price.
The slow court system would not be good for the price of stock, so politicians would have a reason to do something about it. Stupid laws that create unnecessary bureaucracy with more cost than gain would be sought out and repealed. Huge military expenses would have to be justified with more numbers and less talk. Laws that help the economy and employment would be created because they would drive the stock price up.
The size of government could shrink if it would be determined that it costs more than it brings in. These employees would have to find work in the private sector which would enjoy a surge in hiring as the business climate improved by government chasing profit for the country. That cycle would repeat itself until the country became profitable.
Would those born in the future also get shares with their citizenships?
It’s a non-essential issue and I assume that it would be handled differently in different countries. One option is that shares are issued to citizens only once, and that every newly born citizen could only gets shares as inheritance or by buying them, just like everything else.
Another option is to give a share to every new citizen, but there are also many other, more complex schemes. This is something that every country would decide based on the feelings of the citizens at the time. The important thing is that any way that privatization of the state is done it will be a huge step forward for everyone, because life will get much easier and more profitable for all.
What is the principal-agent problem and why is it mentioned in your proposal?
The principal-agent relationship is when you hire someone to do things on your behalf and in your interest. You are a principal hiring an agent every time when you hire a lawyer, see a doctor, hire a handyman, elect a government official.
Very often agent’s interest conflicts with the interest of the principal, and therefore principal must be very careful about actions of his agent. This is a real life problem that ALWAYS requires vigilance on the part of principal, and it is never an easy job. In politics, and in organizations where there are many small principals like large public corporations, agents can easy misuse the advantage they have over weak principals.
However, in private corporations, that advantage is far smaller as the shareholders can opt out by selling the shares to those that believe that they could have better ways of dealing with agents. Usually it boils down to a threat of firing the agent quickly, due to the large number of shares under one's control. That “detail” has huge consequences in handling agents with more success.
What if a private for-profit country decides to close the borders in order to stop its people from leaving?
Not allowing people to leave is something that communist countries have been known for, and they are neither private nor for-profit, but at the opposite extreme. Soviet Union, Cuba, North Korea, Albania, the whole former Eastern Block, etc. were all failed countries and failed economies that considered profit a very dirty word.
These communist countries were so failed that they had to keep the citizens as prisoners within their borders. Privately owned countries will not imprison citizens because they will be far more effective in creating strong economy and would have much better use of free people.
Their problem might be how to stop all those that want to enter to take advantage of life in a prosperous country. But even if we imagine that someone could try such a crazy policy as preventing people from exiting, the big drop in stock price would show them it was a mistake. The price of stock would drop because people would lose confidence and start thinking how to get themselves and their money out from such a crazy place. Many would start selling and the price of stock would plummet.
What if bad people buy 51% of the shares and start imposing terrible laws and the citizens cannot outvote them anymore?
Many bad people already own majority stock in some well-known corporations, but everybody tries to be good towards their customers as that’s how profit is made. Many hotels were or still are owned by the mob, yet they do not beat up the guests. They try to be as polite and useful as anyone.
Owners care for their property because they invested a lot of money in it, and they try to provide valuable service to customers so that they can charge more and profit more. If some other investor thinks that he has better ideas he will offer a good price to the shareholders and take their places.