Arnold Kling takes issue with Mencius Moldbug’s favorable opinion of the corporate city-state. Kling points out (I think; it wasn’t entirely clear) that there is an incentive for groups outside of the government to attempt to take control by force, citing Latin America’s many military coups as an example. All regimes are vulnerable to armed takeover, since there is no higher power to protect their property rights. In Moldbug’s terminology (not sure if it is borrowed from somewhere else), an organization like the US government is a primary property holder, meaning it enforces its own rights by force. Corporate city-states, then, will also be vulnerable to coups. Adding a reference to Neal Stephenson’s Snow Crash, Kling apparently feels he has shown that “you would have violence and instability in the corporate city-state world.”
I don’t think he has. Though it’s true that many governments have been toppled over the years, many have persisted for long periods of time. Kling gives no reason for why a corporate city-state would be less able to defend itself and enforce its property rights than a democracy or a monarchy.
Further discussion happens in the comments on Moldbug’s blog. Brendon objects that the management might prevent citizens from leaving, eliminating the competition between states that we would expect to spur good government. Moldbug argues that this would be unprofitable for the corporation. Explaining the situation in North Korea becomes the focal point; there, a nondemocratic regime has run the country into the ground, seemingly in contradiction to what Moldbub. TGGP mentions the Iron Law of Institutions. Kim Jong Il might not care that his country is poor, if he can maintain his position of power within it. Certainly, the state would get more revenue if the country were rich, but taking the necessary steps to achieve prosperity might bolster opposition to the regime. The behavior of nondemocratic regimes would seem to be determined by what decisions the leadership percieves will yield the best mix of stability and riches. Maybe Dubai and Singapore are relatively successful because the people in those places don’t care much about democratic reform, so officials can focus more on prosperity and less on securing their power.