Money Monday: Discussing MKG Group’s Experimental Free Market City in Honduras
September 24th, 2012
Minarchists have long argued that prosperity is best achieved through the limitation of government power. However, when government interventions lead to economic chaos, politicians typically clamor for more government. As a result, state power tends to grow larger over time, regardless of its guilt in hamstringing the economy. Virtually no examples of true free market societies exist in modern times.
Now, thanks to a partnership between Honduras and a travel consultancy company called MKG Group, limited government is being put to the test in a serious way. FoxNews is reporting that the government of Honduras will allow MKG Group to create an experimental new city with a super-limited government. The only tax will be on property, and regulations will be limited to a contract-based torts system derived from Texas state law. There will be no taxes on income, capital gains, or sales.
The Ultimate Tax Haven
In an era when businesses often have to deal with several categories of taxes from multiple layers of government in order to create jobs in most civilized parts of the world, one would imagine that companies might rush to set up shop in a city with only a single property tax. The lack of capital gains taxation would encourage a flood of capital investment as the world’s wealthy could keep more of what they earn by banking in this experimental new municipality.
Does MKG Group intend to create the Central American alternative to Dubai? One would assume by its designation as a travel company that it may wish to turn this new Honduran city into the ultimate vacation getaway. However, the low taxes and innocent-until-proven-guilty tort-style regulations might make it an attractive location for businesses of all shapes, sizes, and types. In time, this new city may become a booming metropolis.
An Ideological Debate Put to a Real-World Test
MKG Group’s CEO Michael Strong indicated that the plan is to ensure that the new city is the “most economically free entity on Earth.” While the implementation will prove whether or not this goal is achieved, it is certainly an innovative and noble effort. MKG Group is putting its money where its mouth is by dropping $15 million on infrastructural development in the soon-to-exist city.
Technically, businesses in the city are required to employ Hondurans at a certain percentage, so it’s not a truly free market in that sense, though it’s hard to tell whether or not that rule will cause significant distortions in the labor market. Regardless, MKG Group and Honduras are providing a real world experiment through which humanity can explore the debate between those who believe in economic central planning and those who are more confident in the ingenuity and innovation of free people.
Who will be proven right in the end? Will this new free city become the economic anchor that Honduran leaders and MKG Group executives expect? Will it become the selfish, greedy, and exploitative warzone that authoritarian apologists claim will occur under free market conditions? Only time will tell, but with no capital gains, income, or sales taxes, it certainly seems like a great place to start a business.
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