Crack-Up Capitalism Chapter 8: A Business Clan in Somalia
What happens when a Dutch libertarian lawyer decides that war-torn Somalia is the perfect place to build a tax-free paradise? You get one of the strangest chapters in the history of free-market thinking.
Chapter 8 of Crack-Up Capitalism by Quinn Slobodian (ISBN: 9781250753908) tells the story of people who looked at a country with no government and thought: finally, a blank canvas.
The Man With a Plan for Every Continent
The main character here is Michael van Notten, a Dutch lawyer born in 1933. He started his career working for the European Economic Community in Brussels, the kind of boring bureaucratic job you would expect. But something changed. He became a hardcore libertarian, joined all the big think tanks (Hoover Institution, Heritage Foundation), became a member of the Mont Pelerin Society, and even translated Hayek and Friedman into Dutch.
In 1978, he came up with his signature idea: the T-zone. Tax-free, deregulated zones that would spread across Europe and force governments to compete for businesses and people. He wanted to populate these zones with Hong Kong emigrants. Picture it: a million Chinese people spread across twenty European countries, creating “a hundred little enclaves” that would push three hundred million Europeans to abandon social democracy.
Brussels shut that down fast.
So van Notten looked further. He tried drafting a libertarian constitution for Aruba. That failed too. Then he tried planning a coup in Suriname, literally advising rebels by shortwave radio from his house in Holland. He kept his secret constitution for Suriname locked in his sister’s attic, marked TOP SECRET. When they opened it after his death, it proposed zero taxes and fully privatized state functions.
This guy did not give up easily.
Somalia: The Libertarian Promised Land
By the early 1990s, Somalia had collapsed into civil war. The government was gone. The UN sent thirty thousand troops. To most people, this was a disaster.
But to van Notten and the libertarian world, Somalia looked like an opportunity. The Mises Institute published articles about being “stateless and loving it.” Here’s the thing: Somalia already had something that looked a lot like what anarcho-capitalists were dreaming about. The traditional Somali clan system operated on its own set of laws called xeer. No central government. No parliament. Just clans with their own judges, rules, and a system where crimes were settled through compensation, not prison. If someone hurt you, their whole family paid your family.
Van Notten called this system “kritarchy,” meaning rule by judges. He wrote a full constitution for a country without a state. He believed Somalia could become “the first country in the world not to be ruled by the democratic dictatorship of 51 percent of the vote.”
And then he had his wildest idea yet.
The White Somali Business Clan
Van Notten married a Somali woman named Flory from the Awdal region in the northwest. Through her connections, he met with Somali elders and pitched his vision. Their response was unexpected. “Gather with your business friends and form a new clan,” they told him. They even suggested a name: Soomaali ‘Ad, meaning “White Somalis.”
So van Notten tried to create a business clan. Not based on blood ties but on contracts. Foreign businesspeople would form their own clan, lease territory from local clans, and operate under Somali customary law. The “manager” of this free port would be like the head of a Somali family, settling disputes the way a shopping mall manager handles tenant problems. No democracy. No voting. Just a network of contracts.
He found an intellectual partner in Spencer Heath MacCallum, an American anthropologist whose grandfather had theorized that hotels and resorts were the last outposts of true self-ownership in America. MacCallum expanded the idea to shopping malls and mobile home parks as models for future governance.
Together, they leased land from a local clan, named it Newland, and planned to build their anarcho-capitalist mini-society.
Freedonia: When Fantasy Meets Reality
But they needed money. Van Notten partnered with an American businessman named Jim Davidson to build private toll roads. They registered the Awdal Roads Company in the tax haven of Mauritius.
And here the story gets really funny.
Their company website had a link to something called Freedonia. Clicking it took you to the “Principality of Freedonia Embassy.” Freedonia turned out to be the pet project of a group of young men from Texas. They had their own currency, their own flag (green satin with a yellow saltire), and photos of their “treasury secretary” and “minister of defense” posing in US Marine-style uniforms in someone’s wood-paneled basement.
Freedonia was a nation without a territory. Their plans ranged from building an island in international waters to claiming land on the Moon and Mars.
In 1999, Prince John (by then a college student) connected with van Notten, who promised him land in Somalia’s Awdal region.
But in January 2001, reality hit back. A Somali living in Toronto faxed a printout of the Freedonia website back to Somalia. When local authorities found out that some Americans were claiming they had been given a stretch of coastline for their imaginary country, the deal was killed. Van Notten and Davidson were deported.
The teenage Texan monarch’s offshore tax haven was not meant to be.
Was Somalia Actually Better Off Without a State?
Here’s where the chapter gets more serious. Slobodian points out that the question of stateless Somalia was not just a libertarian fantasy. It posed a real puzzle for scholars.
After the government fell apart, some surprising things happened. GDP grew. Exports increased. Life expectancy improved. The Somali shilling kept working as currency even without a central bank. Mobile phones spread faster than in many African countries with governments. Libertarian scholars published papers arguing Somalia was “better off stateless.”
But here’s the problem with that story. The most successful part of Somalia was the part where a new state was built the fastest: Somaliland.
Just months after Somalia’s government dissolved, the northern region declared independence as the Republic of Somaliland. It set up government ministries, collected taxes, and held elections. In December 2002, half a million people voted in the first multiparty elections since the 1960s. Power has been transferred between parties peacefully ever since.
Van Notten’s own wife’s clan had helped create Somaliland. Members of her clan served as vice presidents in the government. The “stateless paradise” that van Notten was selling to foreign investors was, in reality, inside a functioning state.
The Dubai Connection
The real story of what worked in Somalia was not about clans or libertarian experiments. It was about Dubai.
The port of Berbera in Somaliland had been a trade hub for over a thousand years. After state collapse, it exported more than it did the decade before. In 2021, a new terminal opened with a half-billion-dollar investment from Dubai. Mobile phone networks, payment systems, electric generators: all came from companies based in Dubai. Even the planes used by Somali airlines were parked in Dubai at night.
The recipe for economic success in the age of globalization was not the Somali clan model. It was becoming an outpost of Dubai.
What I Think About This Chapter
This chapter reads like a novel. A Dutch lawyer plotting coups by shortwave radio, a concrete ship sinking in the Bahamas, Texan teenagers creating a country in their basement, and a proposal to form a “White Somali” business clan. It would be funny if it was not also about real people in a real war zone.
The bigger point Slobodian makes: libertarians cherry-picked from Somalia’s story. They celebrated the absence of government while ignoring that the most stable, prosperous part of the region was the one that rebuilt its government first. And the real money came not from libertarian experiments but from a wealthy emirate across the water.
Reality is messier than theory. And people living through actual state collapse are usually not celebrating their freedom from taxation.
Book: “Crack-Up Capitalism: Market Radicals and the Dream of a World Without Democracy” by Quinn Slobodian (ISBN: 9781250753908)