“But to the extent your agency demands access in order to once again transform Shelby Park into ‘an unofficial and unlawful port of entry’ […] your request is hereby denied.”
With these words, in a letter published on January 26th, Texas Attorney General Ken Paxton denied the Biden administration’s demand for Texas forces to vacate Shelby State Park. The mandate came after weeks of escalating disputes between Texas and the federal government over immigration enforcement and border protection.
Earlier this year, Texas claimed to be under an illegal immigrant “invasion” which, under Article I of the Constitution, grants the State the right to self-defense. It installed razor wire along several crossing points in the Rio Grande and moved to patrol the area with state troopers. Since then, several states — most traditionally Republican — have piled in, pledging support for the Lone Star State.
In a 5–4 decision on January 22nd, the Supreme Court authorized U.S. border patrol agents to cut the razor wire Texas had installed. Weeks have gone by and not only does the razor wire remain up, but the Texan attitude towards the administration is also growing more defiant.
While addressing the illegal immigration crisis is essential, it is unlikely that either side will escalate the dispute further. The crux of the feud, however, lies here: Texas openly and directly chose to challenge the supreme law of the land. It stood on the face of a Supreme Court ruling and said: “No. If you want it, come and cut it”.
This essay, however, is not about the border crisis or the feud between the Biden administration and the Texas government. Those topics have been covered extensively in the media and countless blogs. I use the ongoing tensions as a grounding example of the trend at the heart of this essay: the internal undermining of national sovereignty in Western liberal democracies, significantly hastened by technology.
At the center of a sovereign nation-state lies the Leviathan, the Social Contract: The idea that individuals surrender parts of their freedoms to the state — implicitly or explicitly — in exchange for rights, protection, and benefits. These are what I call the pillars of the Social Contract: The State grants you rights and sets limits to your freedom (laws); it gives you benefits such as healthcare, infrastructure, and education; and it promises to protect you from external threats or internal attacks on your rights through its monopoly on force.
Through this bargain, nation-states achieve social order. For instance, in an unlawful world, a man may judge himself rightful owner of his neighbor’s possessions and choose to seize them by force. Under the social contract, however, the monopoly of justice and force lies with the State. Only the state can judge; only the state can enforce.
Most people don’t recognize their acceptance of the social contract because it is largely implicit. It seems natural; just the way society works. But the contract permeates every aspect of society. Individuals implicitly accept the social contract by simply residing within a nation-state, whether by birth or relocation. But, in rare cases, individuals accept or refuse the contract explicitly — either directly via referendum or indirectly via representatives. Examples include the drafting of a new constitution, the willing annexation of a new territory, or, conversely, the act of secession.
Secession is the refusal of the three pillars of the social contract. It is the belief that the governing principles of the nation no longer represent the values of their people; that the benefits granted by the state are no longer needed; and that the protection of their people can be provided independently.
A brief review of global polarization trends shows how easily the first pillar of the social contract can be refused or disagreed with. The other two pillars — benefits and protection — are far harder to reject. Nation-states tend to have greater economies and militaries than any of their constituents. Back to the Texas example, despite its strong economy, the Union’s economy is still larger — even without Texas. The same applies to its military.
But we are in the wake of an age where the cost of refusal will be significantly lower. An age of acceleration, asymmetry, and concentration. An age where small groups will wield exponentially more moral, economic, and military power. An age of secessionism.
Historically, secessionist movements have come as responses to systematic oppression. People associated in their disapproval of their sovereign nation-state, rallied behind a shared identity, and chose to fight for their values and independence. Since religion, work, and one’s neighborhood served as the primary — and often only — option for association and shared identity, they were also the only communities where a strong enough separatist sentiment could emerge.
But this has changed dramatically in the last 10 years. For instance, the total number of subreddits has grown 32x since 2012, Discord now has over 19 million servers, and “community startups” have become an entire field of venture capital investment. Think of any fringe idea, taste, or habit, and chances are there is a community for it online. This is not only for secessionism itself as a community but for myriad communities predicated on a shared interest. Biohacking, gun ownership, pro-choice — these groups could, if the cost of refusal is low enough, orchestrate to reject their existing social contract not out of oppression but out of the desire to create a society built on their shared values.
Imagine an independent city-state that allows most forms of human bioengineering, attracting billionaires eager to invest in life-extending treatments. Something not too far from this is already taking place off the coast of Honduras in the private city of Próspera. The city (which, by the way, also has an online Reddit community) has raised over $90M from tech billionaires through Pronomos Capital — a venture capital firm dedicated precisely to funding “startup” cities.
These communities have the autonomy to set their own civil law and government; but, generally, still must abide by the sovereignty of its “host” nation. While charter cities were first proposed only 15 years ago by economist Paul Romer, they have grown to become one of the hottest trends in techno-libertarian circles. Books have been written about this movement, millions of dollars are flowing in by some of the most esoteric VCs — Pronomos alone has invested in 8 of these new cities, and countless startup societies are being built, with some proposals extending even to floating cities.
These cities, built around a culture of cutting-edge technology, are far more than urban developments. They are incubators for new forms of government and social organization that challenge the foundations upon which nation-states have been built. This is not a futuristic discussion, it is happening now — private governments are among us, coexisting, for now, with national sovereignty.
There have not been any major instances where the interests of the host nation have gone crashing against the interests of the charter city. But there is little reason to think this will continue to be the case. Cracks are starting to appear. For instance, Próspera workers get paid 7x the national GDP of Honduras. This is fantastic for the workers of the city, but slowly undermines the credibility and structure of an already fragile Honduran government.
Charter cities are established in special economic zones (SEZs), each with its own level of autonomy. SEZs, in turn, tend to be created in areas with weak economies and fragile central governments. There are notable exceptions, but a quick look at the list of SEZs worldwide yields a significant concentration in developing nations in Central America, Africa, and parts of Asia.
As charter cities continue to attract billions of dollars in investment and economic activity, it will not be long before their economies far outsize that of their host nation. Soon enough, the technological concentration in charter cities — spanning advancements in cybersecurity, drone technology, and artificial intelligence — could empower them to also surpass their host nations in military capabilities. This divergence is not merely administrative; it represents a fundamental challenge to the host nation. When a charter city’s technological power allows it to assert autonomy over all the pillars of the social contract, it becomes a matter of time until its residents find the traditional state’s offer of protection, rights, and benefits far less compelling. The Union is still far bigger economically and militarily than Texas; but for how much longer will Honduras be bigger than Próspera, Nigeria than Itana, or Vanuatu than Satoshi Island?
Worse yet, could the secession of a charter city from a small country inspire fringe secessionist movements in larger democracies like the United States and Brazil? Given the current climate of political polarization, social inequality, erosion of institutional trust, and, above all, concentration of power, this scenario may not be as far-fetched as it seems. In the United States, the revenue of the top 10 companies accounts for over 10% of the nation’s GDP; 66% of the wealth in the country is controlled by the top 10% of earners; the bulk of AI research and development is concentrated under 5 companies, with R&D budgets that far outsize that of the federal government; and the top 10 military contractors in the U.S. owned 74% of America’s military spending.
This is asymmetry. From Honduras to Vanuatu, to the United States — a handful of people are amassing more economic resources and, in some cases, far greater forces than entire nations. Technological development, particularly in AI and bioengineering, will only further accelerate this trend. With the cost of rejecting the social contract becomes decreasing, all that is missing is a catalyst.
For many, this is the end goal: New Nations predicated on libertarian values and technological progress. For others, charter cities and “The Network State” are a cult and a danger to democracy worldwide. I tread cautiously through the middle. I think governance innovation fostered by charter cities is a net positive, and I feel hopeful about a future where these communities become a center for scientific research and technological progress. But I know these movements slowly erode our current nation-state system, edging us closer to a techno-feudal future. A nepotistic and possibly despotist post-sovering world of loosely connected city-states, privately governed by your favorite tech billionaire and their entourage. That, to me, is nothing short of dystopia.
The autonomy and technological empowerment of charter cities pose not just a challenge to the sovereignty of their host states but to the very principles of democracy. The concentration of power and wealth in these communities can lead to governance models that prioritize private interests over representation and equality. Contrary to what many in the nation-building movement claim, this represents the ultimate centralization. Centralization of resources, wealth, surveillance, and justice in the hands of a few. This concentration of power could set a precedent that undermines democratic norms not only within these cities but globally.
This essay is not an attack on the network state movement; nor is it a blind defense of nation-states. It is, chiefly, a warning against the erosion of democracy coming from asymmetric concentration of power. Many problems need fixing with our current nation-state system. But it has proven to be, so far, the best protector of democracy.
The allure of a technologically advanced society can’t blind us from the need to preserve democratic accountability and the equitable distribution of power, plunging humanity into a new age of techno-feudalism where the many are governed by the few. Private governments, private justice systems, and private policing are a dangerous flirt with dystopia. The challenge, then, is to ensure that our quest for progress rests on democratic principles, where the social contracts of the future reflect the will of the people. Anything less than that is regression.
Sam Padilla
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