Thanks to a reader for bringing to my attention this piece by Spencer MacCallum – about the work of libertarian entrepreneur, scientist, and innovator, Werner Stiefel:
“Beginning with Atlantis, Werner’s [Werner Stiefel] goal had been to develop one or a series of freeports at sea that would function much like new countries. His approach had many practical features. Atlantis would start small and grow by increments. Rather than trying to attract a residential population, it would aim at businesses, starting with one of his own plants – Stiefel Laboratories. Businesses would bring their own personnel and their families, and these would require ancillary services, which services in turn would require personnel, and the residential population would grow naturally. This would enable the Atlantis community to develop without fanfare. Promotional advertising of casinos and other recreational amenities of tourism would not follow until much later. Until then, the fledgling community would keep its profile low, almost under the political radar screen. Werner’s approach was also non-ideological, as well. He aimed at attracting effective, entrepreneurial people in business and the professions without regard for their political persuasion or lifestyle.
The most imaginative aspect of Atlantis was that the provision of governmental services would be a business in and of itself, creating value in the competitive market and subsisting on the market revenues those values induced. There would be no need to appeal to philanthropy or to practice taxation. Because the provision of public goods would be a business, specifically that of a multi-tenant income property writ large, taxation of the residents would be intolerable, anathema to the enterprise because destructive of the values on which it depended.
From Werner’s Herculean effort came an intellectual construct that survived Atlantis. His constitution for a free community was a radical departure from all political constitutions.
The need for such a construct arose because Werner was treating his “Galt’s Gulch” as far more than a literary device. He had set about to apply it in the real world. Unlike Ayn Rand, therefore, he could not ignore the question of how it would be administered. There seemed no easy answer. By 1972, he had reached a low point and almost despaired of the project, agonizing over the question of how Atlantis could be administered as a community and yet its inhabitants remain free. What form of government should he choose? Surveying all of history, he found no form of government that would not be prone to repeating the same tired round of tyranny the world had known for thousands of years.
At that point, he came upon the ideas of my grandfather, Spencer Heath, and saw their relevance. Heath had pointed out an advantage in keeping the title to the land component of a real-estate development intact and parceling the land into its various lots by land-leasing rather than subdividing. This creates a concentrated entrepreneurial interest in the success of the development, enabling it to be administered as a long-term investment property for income rather than selling it off piecemeal for a one-time capital gain. Those holding the ground title have an incentive to supply public services and amenities to the place, creating an environment the market will find attractive. To the extent they do so, they can recover not only their costs but earn a profit to themselves and their investors. Heath forecast that in time whole communities would be managed on this nonpolitical basis. He saw this becoming the future norm for human settlements, each competing in the market for its clientele. Community services, he thought, would thus become a major new growth industry.
Heath’s ideas brought into focus a vast and virtually untapped body of empirical data from the field of commercial real estate, namely, the emergence of multi-tenant income properties such as shopping centers, hotels, office buildings, business parks, marinas, and combinations of these and other forms. What all of these have in common is that title to the land underlying a development is not fractionated by subdividing but is held intact. While buildings and other improvements on the land might be separately owned or not, the sites are leased. This preserves the concentrated entrepreneurial interest in the whole development that enabled it to be planned and built initially, and this concentration of interest permits it to be operated as a long-term investment for income. The result is very different from a subdivision, such as a condominium or other common-interest development, which is likely to be governed by a homeowners’ association. A subdivision is an aggregation of consumers looking to their own purposes and not in any sense a business enterprise serving customers in the competitive market.”
My Comment:
From this account, Stiefel comes off as a remarkable man, who rose above the loss of his soap manufacturing business in Nazi Germany to found Stiefel Laboratories in the US. In 2006, it was the largest privately-owned dermatological company in the world.
Some thoughts that occured to me as I read through this:
1. Would the community built up around the profit-seeking competitive enterprise that is the land-owning interest be sustainable from a cultural or social perspective?
2. I imagine that this community would look like Jamshedpur in India, where a large residential community has grown up around a productive enterprise, a state-run steel business. The city seems to provide better public services and be run better, on all counts, than comparable cities in India that are under municipal governments. In Jamshedpur, on the contrary, all attempts at imposing a municipal government, have been defeated by vigorous protests from the residents.
3. Jamshedpur is mostly ethnically Indian. And it’s mostly made up of Biharis, Bengalis and other ethnic groups from the north. (There is also a small but important population from South India). That leads me to wonder whether an entrepreneurial community (for want of a better term) that lacked a similar degree of cultural cohesion might fall apart..