What Planet Are These People On? Part the Second.

Interesting, and depressing, article in the Guardian about the latest idea from the US economist Paul Romer. So what is this idea? Charter cities. And what are those? Simple.

Charter cities offer a truly global win-win solution. These cities address global poverty by giving people the chance to escape from precarious and harmful subsistence agriculture or dangerous urban slums. Charter cities let people move to a place with rules that provide security, economic opportunity, and improved quality of life. Charter cities also give leaders more options for improving governance and investors more opportunities to finance socially beneficial infrastructure projects.
All it takes to grow a charter city is an unoccupied piece of land and a charter. The human, material, and financial resources needed to build a new city will follow, attracted by the chance to work together under the good rules that the charter specifies.
Action by one or more existing governments can provide the essentials. One government provides land and one or more governments grant the charter and stand ready to enforce it.

This idea of one ruler ceding territory to another government that then preceeds to build its own city there according to its own rules sounds vaguely familiar. I think it used to be called colonialism. As the Guardian article describes it,

What they need to do, he argues, is give up a big chunk of their land to a rich country. Policy experts from Washington can take over a patch of Rwanda, and invite along GM and Microsoft and Gap to come and set up factories. Poor countries give up their sovereignty in return for the promise of greater prosperity.

They’ve made such a success of this tactic in Iraq and Afghanistan that I can see why Romer wants more of it. Ah, but he has an historical example of his own. Hong Kong.

Q: Are there historical precedents for a charter city?
A: Hong Kong is one obvious example in which two countries worked together to create a new city. In effect, China supplied the land and the people; Britain supplied the rules for a market-based economy together with basic rules such as sanitation, building codes, and civil codes that made the place where the market operated livable. Of course, this did not arise from a voluntary agreement between the Chinese and the British. But looking back, it turned out so well that a country wishing to follow China’s lead might well want to start by cooperating with a foreign country to build a Hong Kong.
The British established the legal and social system in Hong Kong long before most Chinese moved there, but they did not codify this system in a formal charter. A better example of a newly created region with a clear charter is Pennsylvania. William Penn was given Pennsylvania as a dominion. He wrote a charter that included a legal guarantee of freedom of religion. For many migrants, this made Pennsylvania more attractive than other more restrictive colonies in North America.

Romer managed to persuade the former leader of Madagascar to run with his idea, but his being overthrown put a stop to that. Romer’s response?

“Anything that involves land can be manipulated by people who want to rise up against a leader,” he began. “You have to find a place where there’s a strong enough leader with enough legitimacy to do this knowing that he’s going to get attacked. It narrows the options quite a bit. But we shouldn’t give up without trying a few more places.”

Anything that involves a cession of terrritory to a foreign power and/or corporation can upset people. All you need is a leader with enough legitimacy to do this – does legitimacy in this case mean the Weberian take on the state – the unique ability to exercise force? I suspect that it might.

Romer’s big thing is the importance of rules – he seems to be convinced that the right rules can produce prosperity. So build the city, have the right rules, and prosperity will follow, people will move there, and hey presto – global poverty is well on its way to being solved. To say that this seems incredibly simplistic is an understatement. One of the rules that is certainly missing from his account his politics – are these places to be democracies? It certainly doesn’t seem so. And how could they be? The example he likes to use to support his case is a photo of a bunch of teenagers in Guinea doing their homework underneath street lights as there is no electricity at home. His explanation of this?

Q: What kinds of rules keep people from having light in their homes?
A: Here are some simple examples of rules that can keep people in the dark:
Electricity is provided only by a government-owned firm.
Government employees can’t be fired, regardless of how poorly they do their jobs.
The low subsidized price of electricity for the lucky consumers who have access is determined by political considerations.
Under good governance, the people who want electricity in their homes can easily match up with the utilities that want to provide it to them.

Except, of course, if you read the news report he has taken the photo from, you will find that none of these things are the reasons why there is no electricity in the homes of these teenagers. The real reason is in fact something else entirely.

The change is due to the deterioration of power supplies, which started in 2003 when the country’s economy went into freefall.

Anyway, to return to Aditya Chakrabortty in the Guardian.

With a bit more history, Romer might acknowledge that mainland China had other areas that were so dominated by foreigners they too might be described as Charter Cities. Shanghai in the early 20th century had signs reading: No Dogs, No Chinese – and yet it didn’t boom like Hong Kong did. He might also agree that there remains a big debate about how China has got so rich, with World Bank economists recently arguing that it is farming that has done most to reduce poverty, rather than industry.
One result of the great economic crisis is that academic practitioners are finally acknowledging that economic policy is not just a series of equations applied to the real world, but questions that ultimately have a political answer. Yet the old pseudo- scientific blank slate-ism still survives, as Paul Romer’s latest project demonstrates.

Quite. And now that I think about it, I’ve seen how a charter city works, in a Detroit ruled by OmniConsumer Products. And we know how well that turned out.