Crack-Up Capitalism Chapter 2: City in Shards - Hong Kong's Breakup
Chapter 1 showed how Hong Kong became a model for free market thinkers around the world. Chapter 2 asks a different question: what happens when you try to copy that model? Slobodian takes us to London, where Thatcher’s government tried to build mini Hong Kongs inside British cities. The result was not a free market paradise. It was a city broken into pieces.
Cities Were Always Zones
Slobodian starts with a historical fact. Cities have been legal islands for centuries. In the Middle Ages, entering a city made you subject to different rules. There was a German saying: “City air makes you free.”
The City of London, that old “Square Mile” financial district, is a leftover from this tradition. It has its own mayor, its own governing body that predates Parliament, and here is the wild part: businesses get to vote in its elections. About 32,000 business votes versus only 9,000 human votes. One scholar called it “London’s own Vatican.” A Vatican of capitalism.
After World War II the City became a place to hold dollars “offshore,” beyond US regulators. As the British Empire dissolved, a “Second British Empire” rose in its place, made of tax havens: Cayman Islands, Bermuda, Singapore, Dubai. The City of London was at the center.
Enter the Enterprise Zone
By the late 1970s, Britain was struggling. Manufacturing share dropped from one-quarter to a tenth. In 1976, the UK had to borrow from the IMF. Meanwhile, Hong Kong was booming with GDP growth as high as 16.9 percent. Britain’s topped out at 4 percent.
So here is what happened. In 1979, Conservative politicians gathered at a smoky pub called the Waterman’s Arms on the Isle of Dogs. Their idea? Carve off chunks of London, free investors from taxes and regulations, hand control to developers. They called these “enterprise zones.”
The lead speaker was Geoffrey Howe, soon to be Thatcher’s chancellor. He pointed to Hong Kong as the model. A geographer named Peter Hall had the most radical version: take swaths of inner cities, make them “Crown colonies” with no control over money or goods. People inside would lose citizenship protections but gain total economic freedom. Build Hong Kong “inside inner Liverpool or inner Glasgow.”
Keith Joseph, one of Thatcher’s closest allies, wanted areas “where the Queen’s writ does not run.” No taxes. No labor laws. No safety rules. The audience broke into applause.
Stuart Butler from the Heritage Foundation pushed the idea in America, calling it “Hong Kong on the Hudson.” He saw the zone as a “political animal.” Inner-city poverty was a feature, not a bug. “Crisis breeds entrepreneurs,” Butler wrote.
What Actually Happened
Thatcher rolled out eleven enterprise zones in her first budget. Exemptions from planning rules, ten years of no local taxes, capital allowances for building.
But here is the thing. The results were disappointing. Businesses just relocated to chase tax breaks. Landlords raised rents. Headlines read “BUY A BUILDING FOR FREE” and “HOW TO BUILD A TAX HAVEN” and meant it as a positive.
Thatcher’s advisor wanted to turn all of Britain into “one big Enterprise Zone.” But the math does not work. If you drain tax dollars from one part to subsidize another, who pays?
The zones were window displays. Fake storefronts for the free market. But they worked brilliantly as something else: a way to bypass local government and hand power directly to developers. That was the real innovation. Not the economics. The politics.
Canary Wharf: Hong Kong on the Thames
In 1985, the big move happened. Plans were unveiled for Canary Wharf on the old West India Docks. Seventy-one acres. Ten million square feet of office space. Three of the tallest skyscrapers in Europe. The largest real estate development in the world.
Critics noticed it looked like a “virtual carbon copy” of Exchange Square in Hong Kong. Both were built for electronic trading with big open floors for monitors and cables. Both were pushed through by appointed officials and business leaders, no input from regular residents. The London Docklands Development Corporation could bypass local government and ignore housing needs. Its first director openly talked about the “surplus population” of existing residents.
Developers got land at a sixth of market value plus state-funded infrastructure.
The Socialist Counter-Attack
But this was not unopposed. The Greater London Council (GLC), led by left-wing politician Ken Livingstone, had a different vision. They funded a People’s Plan Center, showed up at bingo sessions and toddler groups to ask residents what they actually wanted.
The People’s Plan, delivered to every household in 1984, said residents wanted “more to our working lives, and our children’s, than being porters and lavatory attendants for passing businessmen.”
Thatcher’s response? Abolish the GLC entirely. Norman Tebbit said it straight: the GLC’s socialism “must be defeated. So, we shall abolish the GLC.” Five metropolitan councils in other cities were abolished at the same time.
Usually we think of Thatcherism as breaking unions. But it was also about breaking local government.
London Becomes a Piggy Bank
By the 2000s, London had fully transformed. From trading things to trading money to trading space. Russian oligarchs earned the city the name “Londongrad.” Chinese money poured in.
By 2015, a hundred billion pounds of London real estate had been purchased from offshore. In 2012, 85 percent of high-end residential property in London was bought by foreign buyers. Many homes sat empty. “Buy to leave,” they called it. One consultant said, “We’ve been building the world’s most expensive safety deposit boxes. You just put your valuables in and then never visit.”
The most visible symbol was the Shard, London’s tallest building. The name started as an insult, English Heritage said it would tear through “historic London like a shard of glass.” The Qatari Investment Authority owned 95 percent of it. Smaller “shardettes” were purpose-built for overseas buyers, sold at real estate shows in Hong Kong before construction even started.
Boris Johnson called the super-rich “Tax Heroes.”
Trump and the Zone in America
The zone model crossed the Atlantic. Donald Trump built his career on it. His Grand Hyatt on 42nd Street used a development corporation similar to the one that controlled Canary Wharf. He sold the property to the state for one dollar, which leased it back cheaply. Cost the city over 360 million dollars in tax revenue.
As president, Trump created “Opportunity Zones” in his 2017 tax cut. Investors could put capital gains into designated areas and pay what Trump called “a very big, fat, beautiful number of zero” in taxes. His inner circle cashed in immediately. The zones funded luxury housing in Miami and condo towers with doggie spas.
Hudson Yards in Manhattan got nearly six billion dollars in tax breaks. Developers had drawn a winding line through census tracts from poor areas of Harlem through Central Park to one of the richest neighborhoods in the city, just to qualify for a program meant for distressed areas. A gerrymandered enterprise zone.
Grenfell: The Price of Deregulation
In June 2017, a fire engulfed Grenfell Tower, a social housing building in one of London’s wealthiest postal codes. Where the average salary was 123,000 pounds but one-third of residents earned below 20,000.
Seventy-two people died. The council had ignored warnings about cheap cladding. Safety measures had been cut to reduce requirements for new buildings. The “bonfire of regulations” celebrated to lure developers had led directly to an actual fire. Grenfell stood like a charred gravestone for a dead social contract.
Against the Current
Slobodian closes the chapter with a small image. When Docklands residents organized against the developers, one mentioned he owned a barge. Local artists made a dragon logo shaped like the Thames and stuck it on. In April 1984, a thousand people took part in the first People’s Armada to Parliament.
The metaphor is clear. Canary Wharf floated downstream like a “lost ark,” carried by money and power. The people’s fleet had to travel against the current.
That is the story of the zone in London. Sold as economic freedom, it delivered power to developers, land to oligarchs, and a city broken into pieces. And somewhere in between, regular people are still paddling upstream.
This retelling is based on Chapter 2, “City in Shards,” of Crack-Up Capitalism: Market Radicals and the Dream of a World Without Democracy by Quinn Slobodian (ISBN: 9781250753908). Published by Henry Holt and Company, 2023.
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