As Michael Gove gave evidence to a select committee inquiry this week on the new and seemingly ubiquitous special economic zones popping up around the country, it’s worth taking a deeper look into the people and the ideology behind them.
A special economic zone (SEZ) is an area within a country which has, to varying degrees, a certain autonomy from the laws of the surrounding ‘host’ country. This can relate to law surrounding employment, planning and tax liability but can also expand into areas of justice, education and property. SEZs take various forms from industrial parks, freeports, agricultural zones, and larger economic areas.
Special economic zones in the UK
The recent appearance of SEZs in the UK in the form of ‘freeports’ or ‘investment zones’ has caused some concern. During her brief tenure in Downing Street, Liz Truss announced the creation of an unlimited number of SEZs all over the country with every local authority being encouraged to apply. This policy of unfunded SEZs put her at odds with the Treasury but she pledged to continue regardless, suggesting personal as well as business taxes could be slashed within the boundaries of the SEZs.
Despite the dramatic crash and burn of Truss’s premiership, SEZs remain a key element of government policy, and with so many councils across the country in dire financial straits, it’s hard for them to refuse financial incentives and functions being picked up by the private sector. But to many, this seems like yet another example of the transfer of public money to the private sector at the taxpayer’s expense.
Lack of transparency
Largely owing to investigations by Richard Brooks at Private Eye magazine, deals at Teeside freeport were brought to light by which public land potentially worth millions was sold to friends of the mayor, Lord Houchen for £1 per acre. The clearing of this land was funded by the taxpayer and the land value rocketed. £50mn profit was distributed to the private shareholders in the first year of business.
Gove announced an inquiry, not by the usual public body, the National Audit Office, but an independent one. There have been concerns about government interference in watering down the findings of the report. Gove has denied any knowledge of this, and did not even read the Teeside freeport accounts before giving evidence on Wednesday of this week.
Elsewhere in the UK, West Country Voices hosted a meeting in November 2023 entitled ‘You now live in a freeport area; what does it mean and does it matter?’ concerning the Plymouth and South Devon freeport, chaired by George Monbiot. On the panel was Jacqui Hodgson, Green Party councillor for Totnes and Dartington, who expressed frustration at the fait-accompli nature of the freeport project, the outer boundary of which has been expanded to absorb the whole of Dartmoor.
Public consultation was practically non-existent and requests for information were too often refused, citing commercial sensitivity. The council were invited to send a representative to assuage the concerns of the local population who suddenly found themselves living in a freeport area having had no say in the decision and with no explanation as to what that means for them. The council did not respond to the invitation.
Low regulation nation
The situation that residents within the Plymouth and South Devon freeport area find themselves in is by no means unique. Multiple cities and towns, and surrounding villages, across the land are now within freeport outer boundaries. In random order, Edinburgh, Ipswich, Derby, Loughborough, Nottingham, Hull, Scunthorpe, Dagenham, Hornchurch, Purfleet, Barking, Liverpool, Bolton, Wigan, Prescot, Dartmouth, Tavistock and Plymouth are just some of them. In addition to these towns, the boundaries encroach into our protected nature reserves and national parks, the North Yorks Moors, Dartmoor, the New Forest, the whole of the Isle of Wight, and the Suffolk Coast and Heaths area of natural beauty amongst others.
On top of the freeport zones, the new investment zones will take up swathes of the Midlands and the North. They are designed to house investment zone tax sites with a stated tax incentive boundary limit of 600ha (6 square kms) but surrounding this area there will be a wider investment zone ‘core’ and an even broader investment zone ‘ecosystem’, collectively known as a ‘cluster’. The government investment zone policy prospectus states that “we do not expect this activity to be limited to a fixed red-line boundary but … targeted to the needs of the cluster”.
These zones, when viewed alongside the freeports ranging from Plymouth in Devon to Cromarty Firth in Scotland, leave barely a county in the UK, a part of which hasn’t been transformed into a private sector tax break zone.
SEZs in other countries
SEZs have existed for years but recently they are becoming more common especially in developing countries, often with authoritarian governments such as China, Saudi Arabia, and areas in East-Africa and South-East Asia. Sarah Moser, assistant professor at McGill University in Canada, argues in her essay on start-up cities, that there is evidence that SEZs all too often have “negative impacts including ecological disasters, little respect for human rights, no accountability to any public and unprecedented corruption”. She also recognizes the fact that “government regulations are being dismantled or circumvented in these zones at an unprecedented level”.
Good economics or bad ideology?
SEZs, especially when taken to their furthest extreme, the autonomous privately owned city-state or charter city, are particularly attractive to a brand of right wing libertarian thinking which is globally represented by an affiliated group of powerful think tanks known as the Atlas Network. The Atlas Network was the brainchild of the founder of the Institute of Economic Affairs (IEA) and former battery-chicken farmer, Antony Fisher.
Atlas has developed to incorporate many familiar ‘institutes’, ‘research groups’ and ‘foundations’, most claiming charitable status, which renders the convenient advantage of donor anonymity. Several leaks and investigations have nonetheless managed to trace significant funding back to American libertarian billionaires and top players in industries whose activities have been restricted by government regulation, for example fossil fuels, tobacco, and gambling. Globally, there are between 450 and 500 think tanks in the Atlas Network.
Private city-state champions wield high level influence in Westminster
The Atlas Network has, since 2017, had extraordinary access to the British political establishment. This is well illustrated by the presence of two influential Atlas advocates and charter city enthusiasts, Shanker Singham and Peter Thiel.
Singham was formerly economics director at the Legatum Institute, before leaving to head up a trade unit at the IEA, was accorded unparalleled access to senior British politicians during the Brexit negotiations, much to the bafflement of other negotiators present, and one of his main policy objectives was the creation of ‘prosperity zones’.
In June 2021, he made front page news in the Honduran newspaper La Prensa when he was named as an adviser for charter city inspired Próspera LLC, a private city and SEZ known as a ZEDE (zone for employment and economic development) on the island of Roatán. It was the brainchild of Paul Romer, an American libertarian economist who, incidentally, was Rishi Sunak’s professor at Stanford University.
It had its own political system at a judicial, economic and administrative level and made Bitcoin legal tender. The manner into which it came into being was opaque to say the least with the president who enabled it, Juan Orlando Hernández, currently facing unrelated charges of felony. It fell into disrepute when the newly elected government decreed it unconstitutional following several controversies. In true libertarian style, Próspera refuses to accept the ruling and is currently suing the government for $11bn, two thirds of the Honduran annual budget, for loss of profit.
Singham was a special advisor to Liz Truss before and during her brief tenure in Downing Street and now co-chairs her Growth Commission. He also led the successful bids for the new Welsh freeports.
At the heart of our institutions
Though not directly involved in the British SEZ experiment, Thiel is very keen on autonomous zones outside of central government control. He was a major funder in the Honduran Próspera project. He invested in Próspera via venture-capital fund Pronomos Capital, which itself was seed funded by Thiel.
Pronomos capital exists to raise investment to build private cryptocurrency paradise locations for the mega rich. Thiel has previously invested in seasteading, a scheme to build artificial island cities outside the reach of government, with workers shipped in and out according to need. The recently announced latest venture is called Praxis, an autonomous free market city-state to be created somewhere in the Mediterranean.
In December 2022, Palantir secured a Ministry of Defence contract worth £75mn and last month signed a contract with the UK government worth up to £480mn to supply a new data software system for the NHS.
Refugee policy and SEZs?
Founded in 2017 by Dr Mark Lutter, who is also Director of the Atlas Network’s Centre for African Prosperity, the Charter Cities Institute (CCI) is working hard to create a global network of charter cities, the most autonomous of all SEZs.
In December 2022, the CCI signed a memorandum of understanding with Rwanda establishing a formal partnership to implement the Africa NXT50 coalition and to organise global charter city conferences. The first of these took place in November 2023.
The very same week our government was clambering to respond to the Supreme Court voting down their refugee solution detailed in the Rwanda bill, an Englishman by the name of Michael Castle Miller was on his way to Kigali. He was giving a keynote speech at an event called Africa’s New Cities Summit, hosted by the CCI. Castle Miller shares a place on the boards of several companies with Singham and the topic of his speech was private refugee cities.
Forewarned is forearmed
None of this is to say that the UK is going to be transformed into a collection of private autonomous cities but, it is not unreasonable to pose probing questions as to the logic of the zones in Britain given the philosophical alignment and close links between the deregulatory aims of the Atlas Network and senior members of the Conservative Party.