Crack-Up Capitalism Chapter 5: The Wonderful Death of a State
I grew up in the former Soviet Union. I remember what a map looked like before the 1990s. One big red blob stretching across half the world. Then, almost overnight, that blob split into fifteen new countries. Slobodian opens Chapter 5 with that exact memory. The map at his school changed while he was still in it. Yugoslavia broke apart. Czechoslovakia split in two. New flags everywhere.
For most people, this was scary or exciting or confusing. But for a certain group of radical libertarians in America, it was beautiful. They called it “the wonderful death of a state.”
Why New Countries Excited Market Radicals
Here’s how most people saw the 1990s breakup: politics, nationalism, ethnic conflict. Normal stuff you’d read in the newspaper.
But market radicals saw something different. Every new country born from secession was a new jurisdiction. A startup territory. A place that might offer low taxes, no regulations, and a welcome mat for global capital. Tiny new nations were basically zones. Small enough to run economic experiments. Small enough to compete for investment by offering the best deals.
Slobodian points out that microstates like Luxembourg, Monaco, and Singapore were already among the richest places on earth. So the logic was simple: more small states equals more competition equals more capitalism. The smaller the country, the less it can afford to have a welfare state.
Murray Rothbard and the Dream of Zero Government
The most important person in this chapter is Murray Rothbard. Born in the Bronx in 1926, he spent his whole career developing something called anarcho-capitalism. Not the regular kind of libertarianism where you want a small government. No. Rothbard wanted zero government.
In his ideal world, there would be no taxes (he called taxation “theft”), no public services, no safety net. Everything would be bought on the market. Contracts would replace constitutions. People would not be citizens of any place, just clients of private service providers.
So how do you get from here to there? Rothbard had a plan: secession. If you keep breaking countries into smaller and smaller pieces, eventually the whole idea of a state loses its power. “The more states the world is fragmented into,” he wrote, “the less power any one state can build up.”
He supported every secession movement he could find. Scotland, Croatia, Biafra, Quebec. He even supported Black nationalism in the 1960s, not because he cared about Black freedom, but because he saw separatism as useful. Any crack in the system was good.
The Paleo Alliance: Libertarians Meet the Far Right
Here’s where the story gets darker.
By the 1980s and 1990s, Rothbard and his closest partner Lew Rockwell built what they called “paleo-libertarianism.” The “paleo” part meant going back to conservative basics. They wanted to strip libertarianism of its hippie, countercultural side and mix it with traditional values, racial separatism, and opposition to immigration.
Rockwell ran the Ludwig von Mises Institute in Auburn, Alabama. He also edited Ron Paul’s investment newsletters, which brought in close to a million dollars a year. These newsletters were wild. They mixed gold bug economics with race panic. One issue advised readers living near cities with large Black populations to make sure both husband and wife had guns. South Africa appeared as a cautionary tale about “dewhiteization.”
Rothbard and Rockwell found allies among paleoconservatives and neo-Confederates. Together they formed the John Randolph Club, named after a slaveholder whose catchphrase was “I love liberty, I hate equality.” Members included white nationalist Jared Taylor, anti-immigration writer Peter Brimelow, and Pat Buchanan, whose rhetoric would later sound a lot like Donald Trump’s.
The Neo-Confederate Connection
The neo-Confederates wanted to secede from the United States and create a Commonwealth of Southern States. They took their name from Italy’s Lega Nord party, which wanted to separate northern Italy from the south. Their “New Dixie Manifesto” was published in the Washington Post.
They tried to build a case that white Southerners were ethnically distinct from Northerners. The argument was shaky at best. But it gave them a framework to ride the global wave of secession. Their website linked to independence movements from Lithuania to Flanders to Okinawa. One of the links was to UKIP, the party that would eventually push Britain out of the European Union.
Rothbard supported them. He held a revisionist view of the Civil War. He compared the Union cause to America’s foreign interventions. And he said “the cause of secession may rise again.”
Hans-Hermann Hoppe: Repeal the Millennium
After Rothbard died in 1995, his student Hans-Hermann Hoppe carried the torch. Hoppe took things even further.
Where Rothbard said “repeal the twentieth century,” Hoppe basically said: repeal the last thousand years. He wanted a world of “tens of thousands of free countries, regions, and cantons, of hundreds of thousands of free cities.” Like Europe in the year 1000, before nation-states existed.
Hoppe wrote a book called “Democracy: The God That Failed” that became a bible for the far right. His argument: universal voting was the original sin of modernity because it took power away from “natural elites.” The welfare state encouraged reproduction of the less able. His solution was to split into small, racially homogeneous communities.
The quote that made him famous in far-right circles was this: “There can be no tolerance toward democrats and communists in a libertarian social order. They will have to be physically separated and expelled from society.” He became an internet meme, often shown next to helicopters, a reference to how Chilean dictator Pinochet killed his opponents by throwing them from aircraft.
In 2005, Hoppe started the Property and Freedom Society, which met yearly in a hotel on the Turkish Riviera owned by his wife. The speakers mixed investment advice with racial theory. Richard Spencer, the man who would later shout “Hail Trump” at a rally, gave a talk there in 2010 about a coming world of racial separatism. Peter Thiel was once scheduled to speak but canceled.
But Here’s the Thing: It Was Already Happening
The dream of a new Confederacy never happened. No Southern states actually seceded. So was the whole paleo alliance just talk?
Slobodian says not so fast. Look at what was actually happening on the ground.
Factories were moving to the South where unions were weak and tax breaks were big. FedEx built its hub in Memphis. UPS chose Louisville. Atlanta became the busiest passenger airport in the world. The rural areas around Dallas went from grazing land to fracking land, generating new wealth from shale oil.
And in the cities, something quieter but just as real was happening: gated communities. Las Vegas, where Rothbard and Hoppe both taught, was the fastest-growing city in America during the 1990s. And gated communities were its favorite form of housing. An African American city councilor called them “private utopias.”
Slobodian makes a sharp point here. You don’t need a new flag or a seat at the UN to secede. You just need walls, private security, and your own tax base. The crack-up could begin at home. Gated communities, incorporated suburban enclaves, and privately governed neighborhoods were already doing what the paleo-libertarians dreamed about. Not in some future stateless society, but right now. Soft secession within the state, not outside it.
What I Think About This Chapter
Coming from a post-Soviet country, I have a different reaction to this material than most Western readers. I actually lived through “the wonderful death of a state.” And let me tell you, there was nothing wonderful about it for regular people. The 1990s in the former USSR meant poverty, chaos, oligarchs grabbing everything, and ordinary people losing their savings overnight.
So when Rothbard called the collapse of the Soviet Union “wonderful,” I know he was watching it from a comfortable office in Las Vegas. The people in the wreckage were not celebrating.
But Slobodian is right that the ideas in this chapter did not die. They mutated. The paleo-libertarian dream of racially sorted, privately governed zones did not need a civil war to come true. It just needed gated communities, tax havens, and the slow sorting of people by wealth. That process is still going on today.
This is part of a series retelling Crack-Up Capitalism by Quinn Slobodian (ISBN: 9781250753908). Each post covers one chapter in plain language.
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