Werner K. Stiefel’s Pursuit of a Practicum of Freedom

By Spencer Heath MacCallum

On June 8, 2006 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.

Werner believed 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 of politics.

The interesting 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 spirits. 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.

Around 1970, 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.

Werner had 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 Galt’s 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).

Werner’s family 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 is one of their best-known products. Werner remained president and CEO until his retirement in 2001.

Reading Atlas 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 States?

Taking a cue from Ayn Rand, Werner conceived of a “Galt’s Gulch” (aka Mulligan’s 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 Klein’s project by the same name in the years 1993″1994, also to promote a floating sea city, but not apolitical), he set about making 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.

A Herculean Effort

Around 1970, 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, to help 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.

At Saugerties”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.

Undaunted, 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 people’s 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 importance of 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, destroying it.

Still undismayed, 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 his 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, however, he tired of dealing with the bureaucracy. With age advancing sharply on him, he put up the island for sale.

To Grow a Free Country

Beginning with Atlantis, Werner’s 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. Moreover, 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. Werner’s approach was also non-ideological. He aimed at attracting effective, entrepreneurial people in business and the professions without regard for 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.

From Werner’s 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’s “Galt’s Gulch” was to be 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, however. 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 of years.

At that point, Werner 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 far into the future as an 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.

Heath’s ideas 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 unified 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 competitive market.

Werner had 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 isn’t it common wisdom? Doubtless a major 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 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. In addition, we are used to idealizing politicians as selflessly motivated, since in public life as we have known it, self-interest and the public interest are opposed. Only in the free-market process are the interests of customers and service providers aligned. Unaccustomed to recipients of public services being customers, it is not easy for us to accept public-service providers acting in their own self interest.

Werner’s Master-Lease Form

Werner saw that the master-lease form would be critical to the success of Atlantis. It would be Atlantis’ 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 couldn’t 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.

Werner’s master-lease form not only survived his Atlantis project, it took on a life of its own. With Werner’s 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. [See A Model Lease for ORBIS, The Voluntaryist, Whole Number 81, August 1996 and accompanying editorial comments.]

Of the many refinements of the master-lease form made by other people, the single most important was that by Michael van Notten (1933-2002) in The 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 have 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.

In adapting Werner’s 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.

Natural-law scholar Roy Halliday wrote of this innovation that it

comes as 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.

In pursuing 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.

[Spencer MacCallum 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). This article first appeared on LewRockwell.com in June 2006, and is reprinted by both permission of the author and Lew Rockwell.]