Some years ago I suggested that Greece should try to solve its problems by selling some of its islands (If Greece wants my money then I want their islands!). The idea was picked up some German parliamentarians but otherwise (not surprisingly) sank rather quickly. Now, in another part of the world of debtors facing ruin, a similar island-idea has been launched. The trouble spot I am referring to this time is the city of Detroit. This old gem at the border between USA and Canada, once called Motown (after its huge motor industry) by cognoscenti and Rock City by the rock group Kiss filed for bankruptcy some weeks ago. This was the largest bankruptcy of a US municipality ever.
What is the promising idea I am talking about? Well, a group of billionaires, with Rodney Lockwood at the lead, is proposing Detroit to sell off Detroit's downtown island ”Belle Isle” to them. In return, they would promise to turn the island into a private city-state! This private bastion of free market capitalism would have a population of 35000 people, print their own money, write its own laws and so on.
To me it sounds like a wonderful idea. Just the kind of thing that could turn around a city such as Detroit that otherwise seems destined to fall further down its self-dug hole. A thriving Monaco at the centre of an, actually fairly healthy down-town area, could be just the kind of motor Motown needs to power its problem-struck belt of suburbs out of its current misery. Of course, nothing will ever come out of this idea! It never does. Instead the state of Michigan (with the help of Washington DC and the Fed) will have to continue tax and inflate their citizens to bail out Detroit from the worst of its pains and leave the rest of its aching body to a continuing descent into rent seeking, conflicts of interest and agency problems. As always....