There is a model for government to turn around struggling economies throughout the world. It includes respect for private property rights, light touch regulation and a simple way to collect taxes. The alternative is continued economic turmoil.
The next challenge for governments throughout the world after dealing with sky-high energy prices and the aftermath of the COVID-19 pandemic is the possibility of “stagflation.” CNBC reported on June 21, 2022, about a survey of the economists in prominent global and regional financial institutions: “80% of economists in the same survey named stagflation as the greater long-term risk to the economy, according to the Securities Industry and Financial Markets Association. The next biggest risk they identified was deflation, with 13% of respondents.” As inflation is enraging Americans, the world is on the brink of a marriage of inflation and economic stagnation.
One way for the government to combat this is to promote pro-growth policies that will incentivize investment in areas that have a friendly legal framework for business development. On the other hand, bad government policies about private enterprise typically led to even more economic stagnation, inflation and underemployment. North Korea, Cuba and Venezuela, for example, have been suffering for decades under oppressive governance. Their regimes have zero respect for property rights and economic freedom, leading to stagnation. And as the specter of stagflation looms ever larger in the Western Hemisphere, too many of us are forgetting what good governance looks like.
But an emerging community of entrepreneurs and workers on the island of Roatan in Honduras could soon change that by reviving respect for good governance — if extremists don’t destroy it first.
Ground zero is Prospera — a Honduran Zone for Economic Development and Employment on Roatan. The goal of the ZEDE is to establish an area with a governance structure that promotes human flourishing through rapid economic development, job creation and innovation. What that means is strong property rights, reasonable regulation, employee-owned social benefit funds and one-page tax returns.
So far, they are succeeding. And that success has made it a target.
Prospera ZEDE has drawn over $80 million in investment. Together with the two other ZEDEs based on the mainland of Honduras, nearly a quarter billion dollars in private investment has been drawn to the most unlikely of places. That has meant thousands of jobs for the Honduran people, with tens of thousands more anticipated under conditions of legal stability. For the American people, this means reducing the pressure for those workers to migrate to the United States; why move thousands of miles when you can have a good job at home? It also promises greater stability for the region and a reduction of the influence of narco and human traffickers.
How is this small miracle happening? Prospera ZEDE relies on the private sector to deliver governance as a service with the actual consent of the governed — no one is forced to live or work there. Instead, each resident has an actual, enforceable contract for services with the government. Governance is thus furnished without political intrigue, feather-bedding or favoritism. And by deeming all governing officials literal fiduciaries who owe the highest duty of care and loyalty to the governed, this governance structure solves the twin problems of abusive bureaucracies and improper corporate influence.
Naturally, Prospera is driving both leftist extremists and international elites nuts. They are out to eradicate the idea of ZEDEs by terminating them and making sure no more spring up in other developing nations. Local elites oppose ZEDEs because they don’t want any new competition. And the hard left looks unfavorably on any structure that promotes property rights and consent of the governed because they favor collectivism and the idea that government, not the people, needs to make decisions relating to sovereignty, property and individual rights.
If Prospera is squashed by this unholy alliance of elites and ideologues, we can expect continued misery for the Honduran and American people alike. But it must be allowed to prove itself because the example set by the zone points the way forward to prosperity. In the microcosm of the ZEDE, we are witnessing nothing less than a battle for the future of the Western Hemisphere.
Governments are approaching a fork in the road where they can choose prosperity or the road of heavy government spending, regulation and high taxation that will lead to even more economic malaise. It would be smart for government officials to study the example of Prospera to take the lessons learned there to battle stagflation and an angered populace.
• Peter Mihalick is former legislative director and counsel to former Reps. Barbara Comstock, Virginia Republican, and Rodney Blum, Iowa Republican.
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