The Myth of “Startup Cities”

How Techno-utopias Repackage Corporate Colonialism

Mar 13, 2025

The island of Roatán, Honduras—home to Próspera, a new Silicon Valley elite “startup city.” Source: CC.

We’re often told that globalization, investment, and tech-driven innovation brng prosperity. The story goes like this: forward-thinking entrepreneurs, free from government red tape, create bustling innovation hubs—“startup cities”—where economies thrive and wealth trickles down. But history tells a different story.

From Cold War-era Special Economic Zones (SEZs) to today’s privately governed charter cities, these enclaves have always served a different purpose: not to uplift local economies, but to insulate corporate interests from democracy itself. The latest iteration—Silicon Valley’s obsession with “startup cities”—is just the newest version of an old game. If anything, it perfects the model, offering investors an escape hatch from national laws while selling the dream of progress.

In this article, I focus less on the infrastructural mechanics of these enclaves (i.e. the importance of cloud and ICT) and more on the broader framework of techno-statecraft—the strategic ways in which technology, capital, and governance are intertwined to reshape territorial control. Understanding the ideas and interests driving powerful tech elites is crucial because these ideological blueprints are shaping projects all over the U.S. and the world. In the future, I’ll bring together both the infrastructural and political dimensions, but first, it’s important to grasp the vision these actors are advancing.

Cold War Zoning

During the early parts of the Cold War, major corporations faced a dilemma: how to extract resources and cheap labor from developing nations while sidestepping the messy consequences of industrial overproduction—that is, making too much than can be purchased by Americans back home—even with a boost in home production under the American Dream. This wasn’t a new headache—the U.S. and other wealthy nations had wrestled with it since before World War II. Their solution? A two-pronged approach: network coordination and territorial strategy.

First—network coordination. Think backroom deals, policy shaping, and multilateral organizations stacked with corporate leaders. The International Industrial Conference, the Pacific Basin Economic Council,¹ and the Trilateral Commission weren’t just networking clubs; they were designed to align investment-receiving nations with corporate priorities, minimize trade disputes, and ensure multinational firms kept the upper hand.

Next—territorial strategy. SEZs or “Free Trade Zones” emerged as the spatial fix—modern iterations of colonial trading posts, minus the flags. This wasn’t anything entirely new—the Dutch East India Company once had its “factories,” North America had its trading forts, the British had their treaty ports in China, etc. The mid-20th-century SEZs operated under a similar logic: carve out spaces where foreign investment could flow freely, shielded from inconvenient regulations. Of course, outright foreign control was politically unpalatable, so host countries maintained nominal oversight, crafting SEZs as a compromise between sovereignty and subjugation.

Ireland led the way with the Shannon Free Zone in 1959, and others followed, like Taiwan’s 1966 Kaohsiung Port Export Processing Zone that set the model in Asia. It wasn’t just a free trade zone or a tax haven—it was hybrid and flexible, capable of blending industrial production, deregulated commerce, and other benefits. The model spread across the Pacific Basin and beyond, but with it came a new problem: the infrastructure investments required often dwarfed the regulatory capacity of the zones themselves, leaving many governments to foot the bill.

As Cold War battle lines shifted and industrial investment in Asia became less risky, a pressing question arose: what happens when non-aligned countries decide they’ve had enough? What if they start restricting resource extraction, enforcing labor protections, or demanding fairer investment terms? For U.S. corporate strategists, this was alarming. Higher raw material prices were one thing, but nationalization of foreign-owned assets? That was a full-blown crisis.

Enter the International Industrial Conference (IIC). In 1957, its inaugural session, hosted by Stanford Research Institute and Time/Life magazine, was chaired by Henry Luce, who famously coined the term “American Century.” Discussions were wide-ranging, but largely pertained to issues of corporate strategy.² RCA’s CEO, David Sarnoff, took the stage to predict a future shaped by “self-operating machines,” foreshadowing the automation revolution. The gathering’s main aim was to bring together corporate elites to strategize how to curb this “multiplication of nationalisms.”³ Their solution? Reinforce the links between corporate and government policy to ensure investment conditions remain favorable. These were no idle discussions. The IIC was setting the terms for a global economic order in which technology and investment rules were shaped behind closed doors.

One of the IIC’s most audacious proposals came from Hermann Abs, a German banker with a resume that included re-industrializing West Germany after World War II—and, before that, helping finance the Third Reich’s continental empire. He pitched what he called a “Capitalist Magna Carta,” a legal framework to protect foreign investors from the whims of national governments. Time magazine hailed it as the most celebrated idea of the conference. The pitch? Establish an international court to adjudicate investment disputes, ensuring that corporate profits remain insulated from annoying things like democratic decision-making.

By 1966, this idea materialized as the International Center for Settlement of Investment Disputes (ICSID), housed within the World Bank. This new investor-state dispute settlement (ISDS) mechanism functioned as a legal shield for corporate interests, allowing foreign firms to sue national governments over regulations that threatened profits. The Guardian later described ISDS as a “colonial zombie apparatus”—an apt label for a system designed to sustain the extractive logic of empire, minus the formal annexations. Initially underutilized, the ISDS system exploded in relevance with the rise of digital infrastructure, perfectly aligning with Abs’s dream of a “borderless world.”

Network Statecraft

Silicon Valley, that self-proclaimed engine of progress, was built within this Cold War framework—a world where technology was weaponized to reinforce corporate territoriality. The collapse of Soviet socialism and China’s return to global markets marked a turning point. By the late 1990s, transnational corporations, armed with advanced ICT systems for real-time management, were directing a quarter of global GDP. Foreign direct investment (FDI) soared, jumping from $503 billion in 1980 to $13.6 trillion by 2008.

Telecom infrastructure in developing countries became a gold rush. In the 1990s, FDI in telecommunications grew tenfold, dwarfing traditional manufacturing investments.⁴ It wasn’t just about phones and satellites—it was about wiring entire nations into transnational production networks.⁵ Hundreds of billions of dollars poured into these projects, cementing telecom as the nervous system of globalization.

Then came the dot-com crash. But unlike past economic collapses, this one didn’t put a dent in the trend. Instead, digital finance took center stage. By 2008, as the global financial system unraveled, just as ICT-enabled financial services had become the second-largest driver of tech spending in the U.S., just behind the tech sector itself.⁶ The same digital tools that enabled global production also facilitated reckless securitization and algorithm-driven market manipulation. The results? Systemic risk disguised as innovation.

Yet, by 2012, transnational corporations were responsible for coordinating four-fifths of all global trade. But as networks grow, so do their vulnerabilities: supply chain shocks, regulatory risks, and labor disputes can become increasingly unmanageable. Despite these risks, the logic of the network remained unstoppable. Digital infrastructure has become the foundation of 21st-century capitalism. ICT spending wasn’t just a cost—it was a survival strategy. And with that, the dream of a “borderless world” persisted, even as political realities continued to complicate it.

What began as Cold War-era corporate statecraft had evolved into a sprawling, self-perpetuating system of investment zones, legal mechanisms, and digital networks overseen by a growing ecosystem of international institutions. Manuel Castells and Martin Carnoy termed this emerging institutional fabric, the “network state.”⁷ The network state wasn’t just a metaphor. It was an institutional reality, hardwired into the rules of global capitalism.

And now? The latest iteration is being sold under the banner of “Startup Cities” and charter urbanism, where private investors seek to build entire cities from scratch, freed from the constraints of national governance. The SEZs of the past were created to attract foreign capital; these new enclaves are designed to run entire societies on corporate terms. If history is any indication, the people around them may not have much say in the matter.

Prosperity for Some

This technological and economic restructuring materialized in the form of ICT-enabled SEZs, the most notorious being Próspera in Honduras—a hopeful tech enclave of the Global North lodged within the Global South. Próspera emerged from the legally dubious Zonas de Empleo y Desarrollo Económico (ZEDEs), or Zones for Employment and Economic Development. The ZEDE framework wasn’t just another neoliberal experiment; it was born in the wake of the 2009 military coup that ousted Honduras’s democratically elected President, Manuel Zelaya. The new regime, led by Porfirio Lobo Sosa (later accused of corruption tied to narcotrafficking), was openly aligned with corporate and foreign interests, eager to transform Honduras into a playground for global investors. Enter Paul Romer, the economist and “charter city” evangelist, who envisioned outsourcing governance to wealthier nations as a fast track to development.⁸

In 2011, Lobo attempted to establish Special Development Regions, but the Honduran Supreme Court struck them down, citing sovereignty concerns. That roadblock didn’t last. The following year, Congress, under Juan Orlando Hernández (later convicted of narcotrafficking), simply removed dissenting Supreme Court justices and replaced them with ZEDE-friendly appointees. By 2013, the constitutional amendment enabling ZEDEs was rubber-stamped, opening the door for corporate-controlled enclaves.

Hernández then assembled a team of ideological foot soldiers, including Reagan-era figures like Mark Klugmann and Grover Norquist, to oversee ZEDE expansion. Meanwhile, Erick Brimen, an Arizona entrepreneur who had failed to establish libertarian “prosperity zones” in the U.S., saw his opportunity. By 2017, Brimen had planted Próspera on Roatán Island, a venture underpinned by U.S.-based Honduras Próspera, LLC. The enclave effectively functions as a corporate city-state, operating beyond the reach of Honduran civil law. It boasts its own court, governing council, and tax structure, catering to digital nomads, venture capitalists, and crypto-libertarians seeking refuge from regulation.

Yet, Próspera has not been welcomed with open arms. In 2021, Xiomara Castro, Honduras’s first female president, rode a wave of anti-ZEDE sentiment to victory. Her administration, backed by a new Congress, wasted no time repealing the 2013 ZEDE law in April 2022, calling the zones a direct assault on national sovereignty. The backlash from foreign investors was immediate. Honduras Próspera, along with other international players, turned to the World Bank’s ICSID and the ISDS (the “zombie colonial apparatus”), filing claims demanding billions in compensation. By early 2023, Honduras was staring down 15 ISDS claims, four of which alone totaled $12.3 billion—a figure nearly double the nation’s 2022 public spending. And if Honduras loses? There’s no appeal.

Despite these financial threats, the Honduran government has held its ground. In September 2024, the Honduran Supreme Court officially ruled the ZEDE framework unconstitutional. Yet, the fight is far from over. Withdrawing from ICSID wouldn’t erase the claims against Honduras, underscoring how international investment treaties systematically favor multinational corporations over host nations, particularly in the Global South.

Source: “Prospera Campus Land,” SoIn Effect Visual

Source: “Residents of the Brisas de la Candelaria community march to protest ZEDEs. Choloma, Cortés. October 29, 2021.” Photo by Antonio Gutiérrez, Contracorriente

Who Gets to Rule the Cities of Tomorrow?

Próspera is more than just another tax haven; it’s a case study in how Silicon Valley billionaires use financial and technological muscle to rewrite the rules of governance. The investor list reads like a who's who of techno-libertarian ideologues: Peter Thiel, Sam Altman, Marc Andreessen, and Patri Friedman—the grandson of Milton Friedman and founder of Pronomos Capital. Pronomos, a venture fund dedicated to creating “charter cities,” envisions urbanism as a product, one that can be designed, sold, and scaled. Próspera also drew early backing from an “anonymous SpaceX-affiliated investor,” further blurring the line between high-tech utopianism and corporate neocolonialism.

This isn’t just about Honduras. Próspera is part of a broader Silicon Valley push to carve out autonomous enclaves where venture capital, not democratic governance, sets the rules. Crypto-libertarian startups and charter city experiments are proliferating, peddling a vision of governance where citizenship is transactional, labor is precarious, and crypto is king. Próspera may be the most infamous of these projects, but it won’t be the last.

As these experiments unfold, the real question isn’t whether they’ll succeed—it’s who gets to decide the terms of the future. I’ll be tracking these developments closely. Stay tuned.

References:

For example, the Pacific Basin Economic Council worked to promote deregulation in its member states and privatize government telecoms, among other things. See Pacific Basin Economic Council. “Short Statement on Administrative Barriers,” 1997. https://www.pbec.org/archive/policy/1997/admin%20short.htm.
Subsequent IIC meetings were kept low-profile and well-attended, as “[e]xecutives saw that they could attend with few worries about attracting unwanted attention.” See Nielson, Donald L. A Heritage of Innovation: SRI’s First Half Century. SRI International, 2004: 13-8.
“The Challenge to Enterprise.” SRI International, no. 20 (1971).
World Bank. “Information and Communications for Development: Global Trends and Policies.” Washington, D.C.: World Bank, 2006.
Yeung, Henry Wai-Chung. “Regional Development and the Competitive Dynamics of Global Production Networks: An East Asian Perspective.” Regional Studies 43, no. 3 (April 1, 2009): 325–51. Henderson, Jeffrey, Peter Dicken, Martin Hess, Neil Coe, and Henry Wai-Chung Yeung. “Global Production Networks and the Analysis of Economic Development.” Review of International Political Economy 9, no. 3 (January 1, 2002): 436–64.
U.S. Census Bureau. “Information and Communication Technology Survey.” Cision PR Newswire, May 20, 2010. https://www.prnewswire.com/news-releases/information-and-communication-technology-survey-94458954.html.
Carnoy, Martin, and Manuel Castells. “Globalization, the Knowledge Society, and the Network State: Poulantzas at the Millennium.” Global Networks-A Journal Of Transnational Affairs 1, no. 1 (January 2001): 1–18.
Romer would later become the chief economist and senior vice president of the World Bank from 2016 to 2018. For more information on Charter Cities, see Charter Cities Institute, November 9, 2021. https://chartercitiesinstitute.org/

Techno-Statecraft

Discussion about this post