I’ve seen progressives derisively refer to a “libertarian paradise” in Somalia, where the government is largely absent. While it’s true that Somalia is a good example of the importance of having enough “state capacity” to protect property rights, even Somali anarchy has some unexpected benefits. Here is The Economist:
Thirty years ago, making a phone call from Somalia meant crossing the border into better-connected Kenya or Ethiopia. Yet by 2004 the lawless nation had more telephone connections per capita than any other east African country. Today, the Somali state is still fragile: insecurity is rife and government services are poor. But mobile data in Somalia is cheaper than in Britain, Finland or Japan—and the signal is good, too. . . . How has dysfunctional Somalia managed to develop such an outstanding telecoms network? The answer lies in the state’s very weakness. Three decades of chaos and conflict have forced hundreds of thousands of Somalis to flee their country. Those who have stayed depend on them: the diaspora sends home around $2bn a year, roughly double the government’s budget. An extensive phone network was needed to handle those vast remittance flows. In Somalia’s radical free market, the invisible hand did the rest. The upside of a lack of government is that there is no need to pay for licences or to bribe corrupt officials to get the job done.
Social media is filling in for the failing state in other ways, too. WhatsApp groups serve as virtual courts, for instance, where clan elders, rather than corrupt or distant judges, resolve disputes. These online groups have revenue-raising powers; members are required to make monthly contributions, which are then used to offer payments if someone is short of money, or as a kind of health insurance to pay if they or a family member are ill.
In areas such as protecting property rights, state capacity is very useful. In other areas, the best thing the state can do is to get out of the way.
If you are willing to devote 41 minutes to a very interesting YouTube video, you will see a good explanation of my version of libertarianism. The video shows how Hong Kong’s government delegated responsibility for the construction and operation of a subway system to the private sector:
Is the hero of the story a highly competent government? Or is it the private firm that built and runs the system so effectively? As long as it works, who cares?
READER COMMENTS
Craig
Jun 22 2025 at 11:21am
I’ve seen the Somalia trope brought up periodically by leftists. Any time it is brought up there should always be a note that Somalia was a failure of Siad Barre’s ‘scientific socialism’
David Seltzer
Jun 22 2025 at 7:02pm
Scott: a bit a of history from a former NYC resident. New York city officials forced a buyout of the privately owned Interborough Rapid Transit (IRT) Company and the Brooklyn-Manhattan Transit (BMT) Corporation in April of 1921. The issue, a nickel. Fares costing a nickel produced profits, employment and cheap transportation around the various boroughs. In their infinite wisdom, the deep thinkers in the municipal government forced the private owners into economic ruin by denying them fare increases that would have provided additional needed revenues to upgrade service, maintenance and newer cars. Financial survival depended on revenues generated by fare goers. When the owners were denied fare increases, cost control in the face of fixed revenue meant fewer routes and deferred maintenance. The NYC Subway deficit is currently over $600,000,00. Fewer riders. Less safe and better substitutes provided by UBER and LYFT . A cautionary tale to say the least.
Craig
Jun 22 2025 at 8:19pm
Interesting as usual DS, as an aside I recall seeing references to the IRT on the subway infrastructure.
Scott Sumner
Jun 22 2025 at 9:02pm
Thanks, that’s an excellent example.
Mactoul
Jun 22 2025 at 11:50pm
Somaliland, the internationally unrecognized independent territory neighboring Somalia, is also a good candidate for relatively liberal economics.
Brandon
Jun 23 2025 at 11:20pm
Tyler Cowen linked to an article on “state capacity libertarianism for Somaliland” awhile back. Ah, here it is (pdf).
steve
Jun 23 2025 at 10:46am
Per family who recently returned from living in China it was their perception from the Chinese with whom they talked that a large part of what made it possible to build subways and everything else was that eminent domain was just a given since there is no private ownership of land. I would also suggest you read Brian Potter’s Construction Physics piece on building large projects around the world. In the EU, not exactly libertarian paradise, projects are much cheaper. Some of that is from less govt interference but a lot of it is because they have just a few companies that move from country to country to do the projects ie they have a lot fo experience. In the US the big projects almost always go to the lowest big by local companies.
Also, while it’s kind of nice that Somalia has cheap phones I always like to think in terms of is it a place I would like to live or anyone I know would want to live. Somalia does not qualify, even with its lack of government. Just a reminder, if a couple of local warlords decide they want to knock out the local transmission towers no one is going to stop them.
Steve
nobody.really
Jun 23 2025 at 11:35am
On the flip side….
On the Origins of the State: Stationary Bandits and Taxation in Eastern Congo
“A positive demand shock for coltan, a mineral whose bulky output cannot be concealed, leads armed actors to create illicit customs and provide protection at coltan mines, where they settle as “stationary bandits.” A similar shock for gold, easy to conceal, leads to stationary bandits in the villages where income from gold is spent, where they introduce illicit mining visas, taxes, and administrations. Having a stationary bandit from a militia or the Congolese army increases welfare. These findings suggest that armed actors may create “essential functions of a state” to better expropriate, which, depending on their goals, can increase welfare.”