Werner K. Stiefelís Pursuit of a Practicum of Freedom
Spencer Heath MacCallum
by Spencer Heath MacCallum
On June 8th,
we lost to cancer a unique freedom fighter, scientist, inventor,
and entrepreneur, Werner K. Stiefel, 85 years old, of Vero Beach,
Florida, survived by his wife, Marie, and six children. He was such
a private person that not many people knew him.
as an act of faith, as do I, that human social organization in the
future will be stateless. Such an assumption is warranted for the
same reason as the scientist's assumption that the universe is a
cosmos and not a chaos. That is to say, it's a productive
assumption. The scientist can't prove the universe is rational,
but without that assumption, he would make no discoveries. He wouldn't
expend the effort. In the same way, it is productive to assume that
human society which, after all, is very young, is a work in progress
and that we will outgrow/are outgrowing the conflicted behavior
question is how we will outgrow that conflicted behavior,
and therein lies the value of the productive assumption: it prompts
the search for new understandings of the evolving social process.
To engage in such discovery is inspiring, and inspiration lifts
our spirit. It is the fountain of creativity. Perhaps more than
anything else, that is what being human, in the best sense of the
word, is all about.
I made the acquaintance of Werner, who was developing plans to build
a free community. While the community would need to be effectively
governed, it would differ from communities as we know them by being
internally consistent. In no way would its management infringe upon
property rights. There would be no taxation or other discretionary
authority over anyone's person or property.
been inspired and awakened philosophically by reading Atlas Shrugged.
But unlike many Randians, he saw an inconsistency in her tolerance
for the state. He realized that men act in their own interest as
they perceive it, and that is no problem when they are dealing with
their own person and property. But when they acquire discretionary
authority over persons and property not their own, problems arise,
since their perceived interest and that of the owners must at some
point diverge. The private individual then must resist, even to
the forfeit of his life if he cannot prevail, or else live for the
sake of another. The last is irreconcilable with the oath taken
by all in Galtís Gulch: "I swear by my life and my love of it that
I will never live for the sake of another man, nor ask another man
to live for mine." (Atlas
Shrugged 1956: 680).
had experienced Nazi Germany in the 1930s. Unable to rescue any
of the assets from the family soap manufacturing business in Germany,
he and his father and brother set up a new business in the United
States, based on what they carried in their heads. Today Stiefel
Laboratories is the largest privately owned dermatological company
in the world with over 2,500 employees and offices in more than
100 countries. Lubriderm was one of their best-known products. Werner
remained president and CEO until his retirement in 2001.
Shrugged, Werner woke up to a sobering question. When conditions
had deteriorated in Germany in the 1930s, many people had fled to
the United States. But even then, Werner saw symptoms of the same
thing happening in the United States that he had witnessed in Germany.
When the time came, he asked, where could people flee from the United
Taking a cue
from Ayn Rand, Werner conceived of a "Galt's Gulch" (aka "Mulliganís
Valley," aka "Atlantis") somewhere on the oceans, a community on
the high seas outside the political jurisdiction of any nation.
Adopting the name "Atlantis" (not to be confused with Erik Kleinís
project by the same name in the years 19931994, also to promote
a floating sea city, but not apolitical) he set about to make the
dream a reality, using his private resources and not any of those
of the company. His endeavor would prove to be a fit subject for
a heroic novel after the manner of Rand.
Werner purchased a motel near the company's main plant in Saugerties,
N.Y., and invited libertarians to come and live there while they
worked in the surrounding area and, in their free time, helped to
plan the Atlantis Project. He conceived of the project in three
stages. Atlantis I was the Saugerties Motel. Atlantis II would be
a ship at sea, and Atlantis III would be a floating community or
perhaps a community on dredged-up land on some submerged seamount.
The ship would play an indispensable role as supply vessel and living
quarters in the construction phase of Atlantis III.
Atlantis I Werner undertook to transform those who
had joined him into a seasoned team that could work under any and
all conditions. He gave them the daunting task of building the ferro-cement
ship that would be Atlantis II. The team passed this first test
and sailed the ship south into the Caribbean, where a tropical storm
destroyed it, fortunately with no loss of life.
Werner obtained another vessel and located a spot in the Caribbean
outside any political jurisdiction where the depth was barely four
feet at low tide. He had just completed the arduous task of constructing
four sea walls and was about to begin dredging sand to create his
first bit of artificial land on which to stand while extending Atlantis
III, when a gun boat showed up and leveled its guns at his crew.
Someone had found silver nuggets on the sea bottom nearby and had
cut a deal with Haitian dictator "Papa Doc" Duvalier for protection
from pirates. The gunboat captain, not knowing who these people
were or what they were doing in the area, decided to run them off.
Werner was forced to make a quick decision. Unwilling to risk peopleís
lives, he abandoned the site.
For a permanent
base of operations, Werner then took a long-term lease on a site
in a freeport operated by the Haitian government. But when a copy
of his newsletter, The Atlantis News, fell into an official's
hands and revealed his underlying philosophy, the government forthwith
canceled his lease. From this experience, Werner learned the value
of maintaining a low profile.
He next set
about to create land on the Misteriosa Banks, a submerged seamount
midway between Cuba and Honduras, the same location that self-styled
Prince Lazarus Long would later publicize as the site for his ill-starred
New Utopia. Werner bought and towed to the site an oil rig of the
type that, once on location, could be inverted to stand on three
legs. Before it could be put in place, however, a hurricane blew
it out to sea and destroyed it.
Werner purchased property on Grand Cayman and constructed an attractive
complex for a new center of operations, one that could also serve
as a retreat for the staff of Stiefel Laboratories. This garden
setting still exists. It became, among other things, the office
of the Atlantis Trading and Commodity Purchasing Service (ATCOPS),
which Werner had already established as the forerunner of the Bank
of Atlantis. ATCOPS made profits for many clients, including me,
over the years and struck an attractive silver coin, the deca, so-called
because it contained a decagram of silver.
From this base
at Grand Cayman, Werner bought an island off the coast of Belize
and built improvements on it, his ultimate goal being to negotiate,
if not full sovereignty, then at least a grant of freeport status
from the government of Belize. Eventually, he tired of dealing with
the bureaucracy. With age advancing sharply on him, he put up the
island for sale.
a Free Country
Atlantis, Wernerís goal had been to develop one or a series of freeports
at sea that would function much like new countries. His approach
had many practical features. Atlantis would start small and grow
by increments. Rather than trying to attract a residential population,
it would aim at businesses, starting with one of his own plants
Stiefel Laboratories. Businesses would bring their own personnel
and their families, and these would require ancillary services,
which services in turn would require personnel, and the residential
population would grow naturally. This would enable the Atlantis
community to develop without fanfare. Promotional advertising of
casinos and other recreational amenities of tourism would not follow
until much later. Until then, the fledgling community would keep
its profile low, almost under the political radar screen. Wernerís
approach was also non-ideological, as well. He aimed at attracting
effective, entrepreneurial people in business and the professions
without regard for their political persuasion or lifestyle.
The most imaginative
aspect of Atlantis was that the provision of governmental services
would be a business in and of itself, creating value in the competitive
market and subsisting on the market revenues those values induced.
There would be no need to appeal to philanthropy or to practice
taxation. Because the provision of public goods would be a business,
specifically that of a multi-tenant income property writ large,
taxation of the residents would be intolerable, anathema to the
enterprise because destructive of the values on which it depended.
Herculean effort came an intellectual construct that survived Atlantis.
His constitution for a free community was a radical departure from
all political constitutions.
The need for
such a construct arose because Werner was treating his "Galt's Gulch"
as far more than a literary device. He had set about to apply it
in the real world. Unlike Ayn Rand, therefore, he could not ignore
the question of how it would be administered. There seemed no easy
answer. By 1972, he had reached a low point and almost despaired
of the project, agonizing over the question of how Atlantis could
be administered as a community and yet its inhabitants remain free.
What form of government should he choose? Surveying all of history,
he found no form of government that would not be prone to repeating
the same tired round of tyranny the world had known for thousands
At that point,
he came upon the ideas of my grandfather, Spencer Heath, and saw
their relevance. Heath had pointed out an advantage in keeping the
title to the land component of a real-estate development intact
and parceling the land into its various lots by land-leasing rather
than subdividing. This creates a concentrated entrepreneurial interest
in the success of the development, enabling it to be administered
as a long-term investment property for income rather than selling
it off piecemeal for a one-time capital gain. Those holding the
ground title have an incentive to supply public services and amenities
to the place, creating an environment the market will find attractive.
To the extent they do so, they can recover not only their costs
but earn a profit to themselves and their investors. Heath forecast
that in time whole communities would be managed on this nonpolitical
basis. He saw this becoming the future norm for human settlements,
each competing in the market for its clientele. Community services,
he thought, would thus become a major new growth industry.
brought into focus a vast and virtually untapped body of empirical
data from the field of commercial real estate, namely, the emergence
of multi-tenant income properties such as shopping centers, hotels,
office buildings, business parks, marinas, and combinations of these
and other forms. What all of these have in common is that title
to the land underlying a development is not fractionated by subdividing
but is held intact. While buildings and other improvements on the
land might be separately owned or not, the sites are leased. This
preserves the concentrated entrepreneurial interest in the whole
development that enabled it to be planned and built initially, and
this concentration of interest permits it to be operated as a long-term
investment for income. The result is very different from a subdivision,
such as a condominium or other common-interest development, which
is likely to be governed by a homeowners' association. A subdivision
is an aggregation of consumers looking to their own purposes and
not in any sense a business enterprise serving customers in the
just such a working community in his Saugerties Motel Atlantis
I. Here he administered all the community services contractually
on an ordinary, businesslike basis. Pragmatic businessman that he
was, he realized that here was his desired form of government
a proprietary, free-market government in which there was no violation
of property rights. All relations were contractual, negotiated among
the parties. The only thing lacking that we are accustomed to find
in a community is a city hall exercising taxation and other discretionary
authority over the inhabitants and their property. All Werner needed
was to preserve this form of organization and move it out to sea.
Why had no
one thought of this before? Why isnít it common wisdom? Doubtless
the reason is that the dynamic, evolving market process is recent
in human history, at least to the degree that we know it today,
and our understanding of it is only beginning. Boston's Tremont
House, regarded in the industry as the first modern hotel, was built
only 175 years ago. All subsequent forms of modern, multi-tenant
income property have evolved since then. Only with the advent of
modern technology and business practice, including all the various
supportive institutions of banking and finance, insurance, communications,
market prices, modern accounting methods, and so forth, could a
community fully take the form of a competitive business enterprise.
that the master-lease form would be critical to the success of Atlantis.
It would be Atlantisí social software, as it were, capable of generating
an elaborate but internally consistent web of relationships, all
spelled out in the wording of the leases, subleases, sub-subleases,
etc. The sum of the agreements in effect at any given point in time
would be the written constitution of Atlantis. They could be as
specialized and distinct as circumstances might warrant, so long
as they did not contradict any part of the master-lease form.
Without a body
of legislated rules to fall back upon, the master-lease form would
have to provide for every conceivable contingency. Werner gave me
the task of drafting it. It was a moment of truth. But I couldnít
dodge the assignment, since I had studied the question from the
broad viewpoint of social anthropology and had published the first
description of multi-tenant income properties as a distinct class
of social phenomena (The
Art of Community, Institute for Humane Studies, 1970). No
mere theoretician, Werner assigned me a 2% equity in the venture.
form not only survived his Atlantis project, it took on a life of
its own. With Wernerís approval, it was published in several iterations,
giving many people an opportunity to criticize it and offer improvements.
But because Werner was leery of prematurely drawing the attention
of the world's governments to the idea of private settlement of
the open seas, it carried no reference to Atlantis. It appeared
as a purely heuristic exercise in the free-market provision of community
services in a made-up setting called "Orbis," one of a hypothetical
cluster of settlements in outer space.
Of the many
refinements of the master-lease form made by other people, the single
most important was that made by Michael van Notten (19332002)
Law of the Somalis (Red Sea Press, 2005). A Dutch lawyer
who married into the Samaron Clan of Somalia and lived with them
for the last twelve years of his life, Van Notten launched the Somali
Freeport project to develop a large, multi-tenant income property
provisionally called "Newland" on land leased from the Clan. He
conceived of Newland as a purely private business venture with no
flags, anthems, or any of the ritual panoplies and paraphernalia
associated with political nations. If successful, it would become
something like a small, latter-day Hong Kong, offering a business
and professional environment free of all burdensome bureaucracy
and taxation. Located in their own back yard, so to speak, it could
become for the Samaron their stepping stone to full cultural, economic,
and technological participation in the developed world. Traditionally
a stateless people, the Samaron aspired to such participation if
it would not entail their being dominated by a political government,
their own or any other.
Wernerís master-lease form to Newland, Van Notten made a significant
addition. He sketched out and incorporated in it a detailed set
of natural-law principles and supporting procedural rules. This
would enable a system of law to be in place from the beginning of
the development, from which point it could evolve of its own accord.
It would be a system of law, moreover, to which all members of the
community, including administrative and service personnel, would
have freely consented in their lease agreement or terms of employment.
scholar Roy Halliday wrote of this innovation that it
close as anything I have seen to establishing the framework for
a civil society consistent with liberty and natural rights. The
idea of incorporating a description of natural rights into the
master lease for a proprietary community is brilliant. It satisfies
both the strong natural rights advocates . . . and the skeptics
who believe rights are created by contracts. The lease contract
provides a way to specify how rights are to be enforced.
his vision of freeports at sea, Werner Stiefel put into motion in
a practical way a plan for a wholly proprietary, nonpolitical public
authority. Here was his answer to the question of how to have public
administration and yet each and every person be fully empowered
over his own person and property. He believed that humankind would
outgrow government as we know it today. Perhaps what is most intriguing
and heartening about his formula for an internally consistent, open
social software is that it is not conjectural, but is extrapolated
from a century and a half of empirical data gleaned from observation
of the marketplace.
iteration of Werner Stiefelís master-lease form, his practicum
of freedom, appears as Appendix C in Michael van Nottenís The
Law of the Somalis. His notion of entrepreneurial, non-political
communities has raised many interesting questions. Here are some
of those questions and how Werner might have answered them:
Q: What about
the possibility of warfare developing between such communities?
Might not the need to establish a defensive force lead to state
A: Look at
experience. You don't find hotels taxing or drafting their guests,
or shopping malls their merchants, to fight a hotel or shopping
mall across the street. In Wernerís lease agreement, moreover, an
insurance requirement makes it costly for members to behave in ways
that would endanger its political neutrality.
Q: What would
prevent the land-owning interest becoming tyrannical and taxing
and the fact that it is in business to serve its clientele. Aside
from the fact that an impoverished customer is a poor customer to
have, "taxation" is precisely defined and forbidden in the lease
agreement. For the proprietors to break the lease agreement in this
or any other particular and then to disregard the law would be self-defeating,
as the consequences would quickly cascade and undo the enterprise,
leaving it open to being acquired by new interests who could manage
it better and restore its profitability.
Q: The costs
to a tenant of leaving a remotely situated settlement are likely
to be high. Might not this high cost tempt the land-owning interest
to unilaterally raise rents, thereby in effect imposing a tax?
A: The lease
agreement provides for such an eventuality by underwriting a member's
cost of returning with his personal belongings to his place of origin
or moving to another place of his choosing, and recompensing his
losses associated with the move. However, for the proprietors to
violate their agreement in the first place, especially with competition
factored into the equation, would be tantamount to relinquishing
their business. In practical terms the likelihood would be remote,
for they would also face insurance cancellation or raised premiums,
and their mismanagement would be an invitation to others to seek
to acquire a controlling interest. Such considerations may be academic,
however; for the intent in both Atlantis and Newland was to develop
as much competition as possible as quickly as possible. A start
had to be made with a single freeport where there are none now,
but the object was for it to become a model that would be imitated.
Q: How could
a system of law evolve and grow and yet be codified in the master-lease
A: The lease
agreement provides for periodic review of the law and allows it
to be amended by the unanimous recommendation of a panel consisting
of the proprietors and five judges who have practiced continuously
in the community for more than five years, and during each of those
years earned the highest certification from a major consumer rating
Q: If the land-owning
interest has the right to inspect tenants' premises in the interest
of health and safety, might not this right be abused?
A: The proprietors
need not engage in inspections or policing. Because all members
of the community would be insured against legal liability as a condition
of their lease, inspections would be left to the insurers who, owing
to the competitive nature of their business, could be depended upon
as a rule to treat their customers with courtesy. Should a tenant
be found to be endangering others, his insurance would be revoked
by the insurer who understandably would not want to pay for liabilities.
This would put the tenant in violation of his lease, and he would
soon find himself on his way out of the community unless he succeeded
in rehabilitating himself. An insurer who engaged in collusion,
on the other hand, if he failed to reestablish himself, would find
himself answerable to the law, boycotted by other insurers, left
with a ruined reputation, and in all likelihood banished.
Q: Would zoning
be imposed to prevent the community from growing in a disorderly
A: A lease
obligation of the land-owning interest is to assist existing and
prospective leaseholders in making rational land-use decisions by
seeing that they have access to all relevant information. This would
include not only a wide variety of economic data, but inputs from
neighbors who might, for example, be anticipating changes in their
own uses, and from technical people such as architects, planners,
and engineers. The assumption is that most inappropriate land-use
decisions result from inadequate information, and that where information
is available, nonconforming uses will be small enough in number
and extent as to be tolerable. The result would not be an absence
of community planning, but rather dispersed, or polycentric, planning.
This does not mean that the proprietors could not themselves directly
undertake or promote community improvements. They could do so, and
in so doing, they would have a distinct advantage over taxing authorities.
They would have quantitative feedback, a yardstick by which to measure
and evaluate proposed changes, since land revenues are a direct
measure of how attractive a community is for existing and prospective
Q: Would libertarians
be given preference over non-libertarians as prospective community
A: No. Neither
Werner Stiefel nor Michael van Notten conceived of their projects
as ideological. Their sole aim was to come up with something that
could work. In both Atlantis and Newland, the ultimate protection
for residents was that the community would be operated as a business,
and hence more rationally than it might otherwise. If it were operated
on any other basis ideological, charitable, or whatever
there would not be this protection. The impersonal, rational pricing
mechanism of the market process is the ultimate safeguard of justice
in a civilized community. A further protection in the lease agreement
was a provision that the land-owning interest should be adequately
insured to compensate losses or inconvenience to tenants resulting
from its own violation of any of the terms of the lease.
Q: If anyone
at all is free to offer police and judicial services competitively
in the market without licensing, what will prevent abuses?
A: Each person
in Newland agrees in his lease agreement to observe the law, the
terms of which are spelled out. This commits him when performing
judicial, military, or police work, to follow established procedural
rules to safeguard the rights of community members.
Q: What happens
to someone who can't pay his rent through no fault of his own?
A: To prevent
his or his dependents' becoming a burden on the community, as well
as to protect creditors, each member agrees to insure himself or
herself against loss of life, property, or earning capacity due
to accidental injury or other calamity.
Q: Since insurance
plays such a pervasive and important role in Newland, the firms
relied upon must be real and reputable. Will the proprietors license
would be tantamount to restraint of trade and would be subject to
abuse. Instead, the lease agreement provides that any required insurance
be purchased from firms carrying the highest certification from
a major consumer rating service. In this way, market competition
will ensure that tenants rely upon reputable insurers.
Q: If someone
is insured against every eventuality, might he become less careful
in his behavior?
so. On the other hand, his insurability, on which his very presence
in the community depends, will suffer if he is careless or neglectful,
and his premiums will rise accordingly.
Q: If people
lease, they won't participate in any increase in land value. Will
this be a deterrent? Will some people be priced out of the market
by rising land values?
A: Not necessarily.
The value of their home or any other improvements they might own
apart from the land will benefit from general increases in land
values. This will also be less speculative than in a subdivision,
since a firm with experience and resources will be dedicated to
the enhancement of land values in the neighborhood. In addition
to safety of their investment, they will be purchasing the positive
amenities and quality of life that can only be offered by such a
firm. Such genuine amenities are seldom found in a subdivision,
where the residents are left to fend for themselves as best they
might through a compulsory-membership association. For business
tenants, such services and amenities will make their site more productive
of revenue. Lastly, when rents are periodically revised to the market
value of the site, members receive a discount as preferred tenants.
Q: How would
legal enforcement work if someone ignored a court?
A: We could
reasonably expect that, in a free-market setting, arbitration companies
would come into existence and offer a complete line of dispute handling
services, competitively priced. A malefactor who ignored or refused
a call to arbitration would lose the judgment by default. His insurer
would pay restitution to the injured parties and then likely revoke
his policy, putting him in violation of his lease. Unless he found
another qualified insurer, he would soon find himself on his way
out of the community. If he were considered dangerous, the consortium
of insurance companies presumably would have ways of dealing with
him since they would have the most at stake in preserving the safety
of life and property in the community. By the same token, the consortium
could be expected to join in conducting a defense of the community
in the unlikely event of an armed threat.
Q: Why bother
to write such detailed agreements? Why not allow a community to
evolve of its own accord, perhaps guided by an enlightened administrator
like John James Cowperthwaite, the architect of Hong Kong's freedom?
A: There are
two reasons, quite aside from the fact that Hong Kong's freedom
was only partial and precarious, and that the presence of an exceptionally
able financial minister at a time when he could be effective was
a historical fluke not likely to be repeated. The first reason is
that in the absence of statutory law to fall back upon, the agreement
must provide for any contingency that might arise. The second is
that, unlike political communities, the provision of public goods
here is an entrepreneurial undertaking, a competitive offering in
the market. Planning is essential to business success. Rarely does
a business venture succeed without a well-considered business plan.
Q: Some readers
of Wernerís master-lease agreement have expressed concern over the
potential for erratic bureaucratic behavior on the part of managers
due to their insulation from any effective control by the owners
in a legal corporation. Does this have implications for the structure
of ownership of a community such as Atlantis or Newland or its corporate
A: The lease
agreement requires that signatories be personally answerable for
their actions, denying them any special status before the law by
virtue of their membership in or employment by any organization.
To comply with this may require that the owners of an Atlantis or
a Newland organize not as a corporation but as a limited partnership,
and it may call for special arrangements between corporate tenants
and their officers. This is a major unanswered question.
MacCallum [send him mail] is a
social anthropologist living in Mexico, where he played a key role
in the economic development of the pottery village of Mata Ortiz.
He wrote The
Art of Community and edited and contributed to The
Law of the Somalis: A Stable Foundation for Economic Development
in the Horn of Africa (Red Sea Press, 2005).
© 2006 LewRockwell.com