Small government and free-market capitalism are about to get put to the test in Honduras, where the government has agreed to let an investment group build an experimental city with no taxes on income, capital gains or sales.
Proponents say the tiny, as-yet unnamed town will become a Central American beacon of job creation and investment, by combining secure property rights with minimal government interference.
“Once we provide a sound legal system within which to do business, the whole job creation machine – the miracle of capitalism – will get going,” Michael Strong, CEO of the MKG Group, which will build the city and set its laws, told FoxNews.com.
Strong said that the agreement with the Honduran government states that the only tax will be on property.
“Our goal is to be the most economically free entity on Earth,” Strong said.
It’s a fascinating experiment, though we can’t quite call it a novel one — this is, after all, a more extreme version of what Hong Kong does on a larger scale. And therein lies the rub. While there are a few minor shortcomings in the mechanics of this project (there’s already some protectionism in the new city’s labor laws, for instance, with businesses forced to meet quotas for native-born Honduran employees), the bigger concern is that it will be a lonely success.
Hong Kong, for instance, is consistently deemed the freest economy in the world, a trait that has led to it having a higher per capita GDP than the United States. Were this simply an argument on the merits over whether free markets work, the jury would be in. But this is no academic seminar. In less economically free nations, ideology may inform some of the hostility to capitalism, but the bigger issue is that opening up markets takes the power to select winners and losers away from government — a bridge too far for many politicians. Embracing economic freedom in the fashion of the Honduras experiment is laudable. But the hard work is not in allowing capitalism to succeed; it’s in convincing politicians to give it the chance to do so. That’s the biggest accomplishment here.