The Prosperity States Initiative: A Policy Lesson from When Harry Met Sally

The views expressed in this article are those of a subject matter expert and do not necessarily reflect model policies adopted by the American Legislative Exchange Council.

According to various reports recently published by the Cato Institute, Fraser Institute, Legatum Institute, the Swiss Liberalis Foundation and the Heritage Foundation, the United States clearly no longer ranks among the top ten freest countries in the world. At best we are among the top twenty, although some rankings show us slipping even lower. Hidden behind this bad news is the fact that the decline in the U.S. freedom ranking has not been stopped by the increasing numbers of center-right think tanks working diligently on incremental reforms. Instead, the trend of decline appears to have accelerated since the 1980s.

No doubt our culture and political society have grown increasingly inhospitable to individual freedom and limited government, but that’s not enough to justify our failure. It is time to rethink the dominant approach to reform in the United States. That’s why a growing coalition of innovative think tanks and experts, including Compact for America, NeWAY Foundation and Federalism in Action, are advancing the Prosperity States Initiative. This movement recognizes that the “Special Economic Zone” (“SEZ”) concept—the idea of delivering a full package of free market reforms in a designated area—is the most powerful policy reform for reversing the loss of freedom.

There is no more powerful and proven vehicle to establish deep, free market reform in an adverse political or cultural environment than the SEZ. Done right, an SEZ generates near-term concrete benefits from freedom. Within a few years, an SEZ allows its advocates to win the policy argument by pointing to clear results.

After all, what really brought down the Soviet Union? What transformed China into an economic powerhouse? It was proof of the freedom concept in a manner that could not be denied. The boundless consumer goods and neon lights of West Berlin convinced millions of East Berliners and Russians about the benefits of Capitalism and the failures of Communism. Likewise, the explosive growth of Hong Kong from a rocky island into a world financial hub shocked the conscience of Deng Xiaoping into supporting deep free market experimentation in the minor city of Shenzhen and three other mainland enclaves.

SEZs generate a powerful “When Harry Met Sally Effect.” The captives and leaders of Communism saw what freedom could do and said, “I’ll have what she’s having.”

By appealing to the “monkey brain” rather than the intellect alone, an SEZ can quickly overcome decades and even millennia of embedded anti-freedom ideology. There is no other way to explain the success of Dubai, the King Abdullah Economic City or Singapore against the cultural morass of the Middle East and South-East Asia. And far from permanently entrenching a special privilege for an anointed few, the desire to imitate a system that so plainly generates prosperity actually propels ever more universal and widespread reform—far more quickly than any incrementalist model has.

Today, nearly the entire Chinese mainland enjoys the core free market reforms initially adopted in only four backwater cities in 1980—just as the developed world pivoted to imitate Florence during the Italian Renaissance and, later, Anglo-American free market capitalism during the Nineteenth and Twentieth Centuries.

Similarly, based on a legal framework akin to what Florida offered Walt Disney in exchange for transforming swampland into the Magic Kingdom in the 1960s, the Prosperity States Initiative creates a legal framework for citizens to adopt a full suite of free market best practices for their local community upon passage in one state. Yet unlike the special privilege accorded Disney, the Prosperity States Initiative is a framework that all residents of a state may opt into. Passage of the legislation in two states forms a sovereign contract that guarantees the preservation of those reforms from future legislative meddling. The formation of a sovereign contract or “compact” also provides a platform for securing congressional approval to “upgrade” state-of-the-art free market reforms to the status of federal law.

The Prosperity States Initiative thereby creates an optimal free market policy environment from the grassroots-up and with leadership outside Washington. It promises to spawn Disney Worlds of Capitalism to stand as beacons of light against the coming darkness. Even more powerfully, it unleashes the “When Harry Met Sally Effect” that has been proven to topple dictatorships and spread prosperity around the world.

In Depth: Federalism

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