WHAT WOULD IT BE LIKE for a corporation to not only run an entire city, but to have built that city from scratch, to its own specifications, according to a planned, privatized model of everyday life?

The blurring of the lines between the public and private sectors is nothing new. Indeed, modern America is defined by for-profit prisons and privatized charter schools, not to mention the expansion of a privatized health insurance system (i.e., Obamacare) and the outsourcing of military and intelligence operations to such corporations as Xe (Blackwater, among other names). But the United States has yet to relinquish control of an entire city to a corporation. Our municipal governments function fairly well: the city collects our garbage; a call to 911 will summon emergency personnel. Children will leave a public school knowing how to read and write, and we have a court system that offers a somewhat fair venue for redressing grievances and abuses of power. The post office delivers our mail every day (albeit while on the brink of fiscal insolvency).

Honduras, by contrast, does not currently have a government capable of servicing the people’s needs. The country is grossly unstable. President Porfirio Lobo took over in a right-wing coup in 2009. Honduras hovers near the bottom of many international indices measuring quality of life: it has a Gini coefficient only slightly better than Haiti’s (this a measure of income inequality), the world’s highest number of murders per capita (someone is 21 times as likely to be murdered in Honduras than in the United States), and an average annual spending power of only $4,300 per person (purchasing power parity), which places it below the Philippines and the Democratic Republic of Congo and just above India and Iraq, according to the World Bank. In short, Honduras is the sort of place where handing over control of a municipal government to a group of foreign investors might not seem like such a bad idea.

Were it not for an 11th-hour legal challenge by the Honduran Supreme Court, Groupo MGK, a consortium of “professionals with top expertise in law, governance, security, free zone design, real estate development, urban planning, health care, entrepreneurship and more,” would have begun laying the foundations for an entirely new city in Honduras. Groupo MGK is a combination of American libertarian activists (like Michael Strong) and policy advisors, including high-profile members of Porfirio Lobo’s administration, and is apparently funded by Silicon Valley venture capitalists and Latin American real estate moguls. Sinister as these folks may sound, they have a vested interest in stabilizing the region and improving the lives (at least in an economic sense) of their charges. Whether this will come at the expense of the dignity of the population remains to be seen.

For now the project is on hold, and the company is searching for a more compliant local government. Jamaica is apparently a strong contender. Greece has been mentioned too. This was the closest anyone has come to creating an entirely privatized city. Groupo MGK is determined to make it happen.

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Honduras would have been an ideal location for the “free city.” Although ostensibly a democracy, the country is so unequal that the entrenched elite have permanently gamed the system in their favor. They own monopolies on all the major utilities and businesses and are able to charge unfair prices, receive subsidi...