How libertarian law plans to capitalize on a pandemic

When coronavirus crept across the world in early February, talk of how different nations were dealing with the virus came to resemble the Olympics for state capacity. Which country had the authority, the supplies and the expertise to “crush the curve”? A balance sheet of national progress marked out a bleak race to the horizon, enumerated in case numbers and death figures.

Although the focus over recent months has remained on leaders in crisis mode and the central agencies delivering forecasts and quarantine measures, local authorities have also played a prominent role during the pandemic. Chinese mayors, US governors and Indian chief ministers have coordinated local responses, taking responsibility for populations and even locking horns with national politicians.

Most people would read the pandemic as a sign that populations and nation states should band together, and for the people “at the head of the rope” to pull even harder, to use the metaphor favoured by the French president, Emmanuel Macron. But there are others who see matters quite differently. They spy opportunity in the crisis, and wager that we might be able to ride the wave of the pandemic into a new tomorrow, where the virus shatters the global map – and undermines the power of democratic nation states.

The US is ground zero for this type of thinking. Across the country, regions have broken up into “compacts”, with states competing against each other for life-saving ventilators and PPE. The atmosphere is one of competitive federalism, where states are reconfigured as economic units bidding in a marketplace. Washington’s state governor, Jay Inslee, accused Trump of “fomenting domestic rebellion” for his calls to “liberate” individual states; governor Gavin Newsom termed California a “nation-state.” One Maryland governor confessed to keeping Covid-19 tests in an undisclosed location under armed guard, in part to prevent their seizure by central state authorities.

Although North America’s economy is gradually reopening, the virus is still rampaging through its population. What will economic recovery look like in the midst of a pandemic? The president’s economic advisers have some ideas. In an analysis released at the end of April, Arthur Laffer and Stephen Moore, two of Trump’s closest economic confidants and authors of the book on “Trumponomics”, predicted that “blue” Democratic states would be slower than “red” states to recover, because of what they saw as their pre-existing excess of regulations and taxes.

Their analysis divided the US map into “laggard anti-growth” states and “momentum pro-growth” states. The former have minimum wages, pro-union laws and state income tax; the latter are free of such regulations. In the established mode of disaster capitalism, Laffer and Moore’s analysis appears to see the pandemic as a way to compel “anti-growth” states to adopt ever lower tax rates in order to attract mobile capital and labour. It suggests those who resist will not be bailed out by redistribution from the central government, but left to languish in a deserved economic depression. The effect is reminiscent of social Darwinism, applied as a philosophy of government.

The most articulate cheerleader for this kind of post-pandemic libertarianism is Balaji Srinivasan, the electrical engineer and former general partner at Silicon Valley venture capital fund Andreesen Horowitz. Since the pandemic began, Srinivasan has foretold a redivision of the world map into “green zones” that have controlled and contained the virus and “red zones”, which have not.

“We are entering this fractal environment,” Srinivasan recently told a virtual summit organised by the Startup Societies Foundation, “in which the virus breaks centralised states”. The virus does not stop at the border, so nor will this process of fragmentation. As regions seal themselves off to prevent contagion, “you can drill down to the state, or even the town or county level”, Srinivasan observed, noting that any state without the virus under control will “face defection” in an intensified contest for talent and capital. After the pandemic has passed, “nations are going to turn into effectively vendors and entrepreneurs and relatively mobile people will be applicants”, he predicted.

It’s easy to imagine how a particular breed of investor could see this pandemic as an opportunity that will accelerate existing trends. The loose attachments that investors feel towards this or that nation will grow even looser as capital becomes more mobile, and a sorting process will separate the productive few nations from the malingering many. States that don’t fall in line with the demands of this investor class will be starved by the voluntary expatriation of the wealthy, with their assets and abilities in tow.

If you assume this is merely a pessimistic vision, you’d be wrong. In fact it accords with a long-cultivated ideology that Srinivasan shares with a group of like-minded venture capitalists and entrepreneurs, who subscribe to variations of the radical libertarian philosophy known as “anarcho-capitalism”. The idea at its root is that a wealthy class of investors and entrepreneurs should be free to exit nation states and form new communities whose members can choose which rules (and tax laws) they’re governed by – as if those rules were products on a store shelf.

For like-minded libertarians, the colour-coded zones used in public health to control the virus are the blueprint for a new political economy. Since Srinivasan began discussing the framework, colour-coded zones have been rolled out to control the virus in Malaysia, Indonesia, Northern Italy and France; the strategy was also considered as a model for biocontainment in the White House in early April. As of early May, India has divided its 1.3 billion people into a patchwork of green, yellow and red zones, with different freedoms and restrictions based on each.

The red-green zone schema has already informed the strategies of global investors. In April, Henley & Partners, the global citizenship broker, released its annual ranking of national passports for mobile investors, and predicted that coronavirus would spark a dramatic shift in global mobility. Its chief source forecast that “as the curtain lifts, people will seek to move from poorly governed and ill-prepared ‘red zones’ to ‘green zones’, or places with better medical care.” In early May, it reported a 42% increase in applications for new nationalities, compared with the previous year.

Nobody can tell what the world will look like after the pandemic. But what we can be sure of is that some investors appear to be already placing their bets on a vision of the future where the wealthy are freed from tax constraints. As nations are divided into different zones according to their respective stages of viral and economic recovery, the well-off could follow Elon Musk’s recent threat to relocate from California to Texas, voting with their feet for locations that elude redistributive taxation. In our post-pandemic future, the flight to safety, away from contagious “red zones”, could be a flight from the nation state as we know it.