• "Free Cities" takes the Pentagon and the State Department out of the nation-building business and places nation-building in the realm of the private sector.

Last year, the Libyan people rid themselves of a tyrant and international menace. Today, the Syrian people stand poised to do the same. In each revolutionary instance, there occurs a three-act play. The first act is the downfall of the dictator. The second act is the people's efforts at self-rule. The inevitable third act now seems to come in the form of insurgency and violence, with al-Qaeda, the Muslim Brotherhood, and other would-be dictators attempting to undermine any transition to democracy.

Most Middle East power vacuums involve a struggle between democrats and jihadists. There are those in the West who say we must support the democrats. This is true, but how? With troops and weapons? The United States cannot commit itself to costly exercises in occupation and reconstruction time and again. We must develop a more cost-effective strategy, an alternative to nation-building. The State Department might be able to implement new, innovative ideas, such as the Free Cities concept.

The objective of Free Cities is to overhaul U.S. foreign aid as the current system is counterproductive:

The U.S. now gives billions to a foreign government to buy loyalties or feed millions. The foreign government, in turn, takes that aid and puts it to its own misuse. The money is wasted and not invested properly. With dictators, the aid goes to lavish palaces, murals of praise, drugs and women, and military expenditures often used against their own innocent citizens.

The current foreign aid numbers are not pretty. Despite billions of dollars in assistance, the Arab states routinely vote against U.S. interests at the United Nations. This policy has fallen victim to diminishing returns and is in need of a radical change (what Hagerty calls "global welfare reform"). Hagerty quotes former World Bank economist William Easterly as saying "foreign aid results in less democratic and less honest government, not more… People respond to incentives—all the rest is commentary."

This might have been the price to pay during the Cold War, when we would do anything to prevent Soviet expansion in the Third World. But there is no strategic reason to continue it.

Free Cities is based on an example from history: Hong Kong. After the Second World War, the British encouraged Hong Kong to implement free market economics. Taxes were low, regulations were kept at a minimum, and consequently Hong Kong flourished, especially compared to its mother-country, China. In 1984, the British signed an agreement with the Chinese whereby Hong Kong would keep its free political and economic system for another half-century -- a plan called "One country, two systems."

Free Cities would seek to replicate the Hong Kong model elsewhere. It is a revolutionary idea, first enumerated by Ken Hagerty, the president of a global venture investment firm, and Theodore Roosevelt Malloch, CEO of The Roosevelt Group. Newt Gingrich also endorsed the concept in an article for the National Review.

For the Free Cities strategy to work in practice, it would be wiser to reach out to "moderate" autocracies before their downfall and consequent power vacuum. For instance, this strategy has little chance to work in Egypt, now that the Muslim Brotherhood is ascendant and trying to push secularist military government out of Egyptian politics. The same is true of an empowered Hezbollah in Lebanon, and the Islamists in Libya and Syria. To profit religiously, politically and materially, they appear to prefer ideology.

The most applicable way to showcase to the Middle East that democracy is preferable to theocracy, freedom superior to tyranny, is to reach out to an allied state such as Jordan. With Free Cities, the Jordanians could sign a bilateral agreement with the United States. A "free city," perhaps Al Karak, would serve as the Middle East's Hong Kong.

according to Hagerty, Al Karak could implement institutions of "democracy, rule of law, limited government, low taxes, reliable prosecution of corruption, public registration of real property, freedom of faith, speech and press, a merit-based civil service, multiethnic meritocracy, free trade, and an American university." As such, the city would thrive economically, politically, and culturally, just as Hong Kong prospered for so long compared to China. By its very example, Al Karak could undermine the outposts of corruption and dictatorship surrounding it.

Should the Jordanians sign such a bilateral agreement with the United States, they would be bringing in significant amounts of foreign money—not hand-out money, but money earned—thereby surpassing their neighboring states. The Jordanian government could also be undermining the Islamist political opposition by using democracy rather than the more muscular tactics Mubarak used, which only served to make the Muslim Brotherhood more popular.

Free Cities takes the Pentagon and U.S. State Department out of the nation-building business and places nation-building in the realm of the private sector. It is a uniquely American idea, worthy of pursuit in the Middle East.

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