This is a fascinating look at what happens when you make everything local. This is the SHTF mentality that could get small communities through tough times – as it has in this drug-cartel ridden area of Mexico!
A Libertarian Paradise in…Mexico? by Dan Mitchell
I’m sometimes accused of being too radical, though I take that as a compliment (including the time a British journalist wrote that I was “a high priest of light tax, small state libertarianism”).
In reality, I’m actually a moderate. I don’t want to eliminate all government, just the 90 percent that is ineffective or counterproductive. 
As a result, some of my friends accuse me of being a squish, which is probably a fair characterization since I only scored a 94 out of 160 on Professor Bryan Caplan’s Libertarian Purity Quiz.
In my defense, I say let’s get rid of all the programs and departments that clearly shouldn’t exist (such as Transportation, Housing and Urban Development, Education, Energy, and Agriculture), and then we can have a fun discussion of whether the private sector can take over things like roads, policing, and the military.
And it does seem that many so-called public goods actually can be handled by the market. I’ve written about private roads and private money, for instance, but the example that really caught my attention was the private, church-run city in Nigeria.
And the New York Times has a fascinating story about similar developments in Mexico.
Fifteen-foot stone turrets are staffed by men whose green uniforms belong to no official force. Beyond them, a statue of an avocado bears the inscription “avocado capital of the world.” And beyond the statue is Tancítaro,
an island of safety and stability amid the most violent period in Mexico’s history. Local orchard owners, who export over $1 million in avocados per day, mostly to the United States, underwrite what has effectively become an independent city-state. Self-policing and self-governing, it is a sanctuary from drug cartels as well as from the Mexican state. …Tancítaro represents a quiet but telling trend in Mexico, where a handful of towns and cities are effectively seceding, partly or in whole. These are acts of desperation, revealing the degree to which Mexico’s police and politicians are seen as part of the threat.
I can’t resist commenting that the reporters should have written that police and politicians “are the threat” rather than “are seen as part of the threat.”
The Mexican government is a grim example of the “stationary bandit” in action.
Anyhow, back to our story about de facto secession and privatization.
…such enclaves…you will find a pattern. Each is a haven of relative safety amid violence, suggesting that their diagnosis of the problem was correct. …The central government has declined to reimpose control, the researchers believe, for fear of drawing attention to the town’s lesson that secession brings safety.
Tancítaro is not the only example of a quasi-private town.
Rather than ejecting institutions, Monterrey’s business elite quietly took them over… C.E.O.s would now oversee one of the most central functions of government. …they circumvented the bureaucracy and corruption that had bogged down other police reform efforts. Crime dropped citywide. Community leaders in poorer areas reported safer streets and renewed public trust… Monterrey’s experience offered still more evidence that in Mexico, violence is only a symptom; the real disease is in government. The corporate takeover worked as a sort of quarantine.
Wow, who would have imagined the New York Times would ever have a story stating that “the real disease is in government.”
Sadly, the story goes on to say traditional politicians are now regaining control in Monterrey, so the period of good governance is coming to an end.
In an ideal world, the central government would allow towns to formally secede, and those towns could then contract to have private management. But that’ll never happen since politicians wouldn’t want real-world examples showing the superiority of markets over government.
For now, we’ll have to settle for ad hoc and unofficial secession and privatization.
P.S. We can also hope that Liberland succeeds.
P.P.S. While today’s topic is de facto secession of local governments, my support for decentralization makes me sympathetic to regional secession. See, for example, Scotland, Liechtenstein, California, Italy, Belgium, and Ukraine.
P.P.P.S. I did once write about the “libertarian paradise of Argentina,” but that was mostly in jest.