On Building New Jerusalem, Fahsands of 'em.

[danieldwilliam]

So, whilst pondering whether the leave Africans to die in their own cesspools or to bravely and selflessly take on the mantel of running their continent question for them I stumbled on the idea of Charter Cities proposed by Paul Romer.

The idea is that a developing country sings a treaty with one or more developed countries to create a city in (more or less) unoccupied land.  The developing nation gives the land for the city and the developed nation gives the rules, the enforcement of the rules and the guarantee that the rules won’t be changed after individuals and corporations have made difficult to back out of investments in the city.

The idea is based on the observation that rules matter. That one of the greatest barriers to developing countries developing is that they have bad and / or indifferently enforced rules that are subject to arbitrary change (1).

To give the city administration a long term stake in improving the lot of its citizens they own all the land and lease it to, well to whomever want to lease it. If they want to increase rents they have to increase the ability of people to pay rent by making them better educated, more productive, healthier, free-er. No gouging because anyone can leave at any time to either return home or move to one of the other Charter Cities.

People, either only from the host country or from all over the world can move in. They accept the rules of the charter city and get on with earning a living.  If the Charter City offers them a better life than they currently have, they will move there. If it doesn’t they won’t. This would be a third option alongside immigration, possibly illegal, to a place that doesn’t necessarily want me or stay in country that has a low standard of living and isn’t improving quickly enough for me.  A hoped for side effect is that with local competition for citizens local despots and kleptarchs, or local trying really hard but struggling to build consensus would pull their fingers out.

The benefits to the host country are that they end up with a well-run, prosperous city nearby which wants to buy its products and services and in turn wants to sell goods and services. The benefits to the administrative country are altruistic and a hoped for reduction in aid costs and security costs. The people who live in the city, well they benefit because they live prosperous lives in a well-run city. If they find they’re not living in a prosperous city, then they leave.

So, I’m wondering what could go wrong? That’s a serious question.(2)

(1) often as a result of the country being a kleptarchy but not necessarily.

(2) and I'd be obliged if your responses did not use the words Libertarianism or Colonialism.  I want to know what's wrong with Mr Romer's idea, not a straw man.

Some Links for those with a more than passing interest.

http://www.prospectmagazine.co.uk/magazine/for-richer-for-poorer/ 

Article by Paul Romer in Prospect

http://chartercities.org/concept 

The Web Page for Romer's foundation.

http://www.guardian.co.uk/science/2010/jul/27/paul-romers-charter-cities-idea 

A Critical - but in my view not very good article in the Guardian. The comments are more useful.

http://chartercities.org/blog/66/new-systems-versus-evolution

 Romer discussing systems.  (If widgetfox is reading this he may also mention hair and shoes)

http://www.freakonomics.com/2009/09/29/can-charter-cities-change-the-world-a-qa-with-paul-romer/

 A bit of a Q&A by Freakonomics

http://chrisblattman.com/2009/10/14/charter-cities-debate-round-2/

Part of a debate between a sceptic of the idea and Romer - the rest are findable.

Comments

[f4f3.livejournal.com]

Not to be overtly legalistic, but...

What law would govern the charter city? The host country, or the administrator. This isn't a rhetorical question - part of the advantages would seem to be lighter touch legislation, to encourage investment. If companies start to misbehave (by polluting or having exploitative employment policies, say) how would disputes be settled? In the same vein, how do you prevent companies taking the grants, moving in, and moving on when they run out? (This is a model that makes lots of sense for the company, and leaves a lot of empty factories for the host city).

Which law governs the inhabitants of the city? If their are clashes in law, how are they settled? This would have implications for free-expression, religious toleration, most of the things which affect private lives. Who polices the city? Host nation, administrator, private police? Ditto for other social services.

There's lots more here, and it's all interesting. Free states and Interzones have always flourished because of their ability to avoid inconvenient laws, on anything from drug use to import/export duties, and have usually become pretty dangerous places to live for the same reasons.

[danieldwilliam.livejournal.com]

Not to be overtly legalistic, but...

I don’t think you can be overly legalistic here. The suggestion flows from the idea that one of the determinates of economic success is the quality of legal system. Not just the rules but their enforcement and stability are important.

As Hernando de Sota would say, with weak property rights people will be less inclined to invest for the future.

Which law governs the inhabitants of the city? If their are clashes in law, how are they settled?

That depends. Mainly on the decisions of the people setting up the charter city. So, for example if a newly independent Scotland was involved in setting on up in Malawi Connell City might use Scot’s Law with appellate functions to the Court of Session, or it might use a Model Code for African States or it might use a mixture of legal codes from different jurisdictions, English contract law, Scots delict, California law on IT. (I’m not convinced that a pick mix approach would be the best way to go but it’s not such an obvious non-starter.

The idea is that the laws inside the city are settled using the legal system of the city and those outside the city continue to apply. The usual difficulties of cross-border transactions apply and I guess are resolved in the same way as such disputes are settled in the rest of the world. There must be a lot of them in the EU.

There’s something here about regulatory arbitrage, the whole moving to an economy with lower legal standards. Whether that applies here depends I think from which way you are viewing the set up. If what happens is that established operations in the West are moved to charter cities to avoid inconvenient legislation than that would be a less good side effect of the charter city. I think quite a lot of that is happening anyway with a shift of factories to Asia. Charter cities don’t change the trend, but they do change who benefits from the flip side.

The flip side is that for e.g. the Africans moving to Connell City they are moving to heavier touch economy, one that respects property rights and contracts of employment, where if you do the work you get paid and the government don’t just take your farm off you if you run it well. The idea is to attract African labour to new start up enterprises by using better law to guarantee that everybody actually gets what they bargained for.

So, I’m not sure that the attraction is necessarily lighter touch legislation encouraging investment. The main attraction, as presented, is that there is a lot of cheap labour, a lot of under-utilised labour, that would be better off if it could move to an economy that had better governance.

If companies start to misbehave (by polluting or having exploitative employment policies, say) how would disputes be settled?

There’s a question here about whether workers’ rights or environmental protection rules (broadly) are something you get once your economy is rich enough to afford them, or if they are a driver of economic growth or if they are neutral but good to have. The answer rather depends on the circumstances. In the example of Connell City it would be hard to justify using Scotland’s minimum wage but having Scotland’s regulations on unfair dismissal might be a really good thing.

The ultimate owner of the land is the City Corporation. They only lease the land to business and households. So, if a company was polluting more than it had agreed it would the City Corporation would presumably have an incentive to terminate the lease. If a company had exploitative employment practises a) that doesn’t help the City Corporation as they can’t increase the rents for housing if the workforce is dirt poor (and therefore continue to be an expense for the sponsoring nation rather than a self-funding aid project) b) exploitative employment practises aer not necessarily good for business, for other business, Starbucks have no incentive to move in to sell coffee if all the workers in the city are dirt poor and working 24 hours a day, c) unionisation and competition for labour and d) workers are free to leave, either to return to their original homes or to go to another Charter City with better employment laws.

[danieldwilliam.livejournal.com]

In the same vein, how do you prevent companies taking the grants, moving in, and moving on when they run out?

There are no grants. Or there are not necessarily any grants. The idea is to move away from aid through grants. There could be grants if the host or sponsoring nations wanted their to be but grants don’t seem to be expected. The idea is that private firms who want to build a factory finance it on their own. The main selling point for the investors will presumably be that there lots of cheap workers just bursting to walk off the farms into factories and start sewing t-shirts. What attracts the business to invest is a) access to cheaper labour b) but still with the reassurance of robust, functioning legal systems.

This would have implications for free-expression, religious toleration, most of the things which affect private lives. Who polices the city? Host nation, administrator, private police? Ditto for other social services.

Yes it would. I envisage policing being done as a branch of the sponsoring nations police force i.e. Connell City has a Constabulary in the same vein as Lothian and Borders, probably funded in the first instance by Scotland and staffed by Scottish officers until the city was up and running enough to pay for its own policing and hire its own officers (presumably trained in Scotland).

I think the key point is that all of these things are subject to negotiation at the founding stage of the city (and subsequently) and that competition between cities is a key part of making them all behave well. Would Scotland be involved in setting up a city that allowed religious persecution? Certainly not. Would Scotland require that Connell City have socialised medical care? It might not but it would probably hint pretty strongly that it’s a good idea. A charter city set up by Texas (Bush City) would make a different offer. If you were an African peasant farmer thinking about moving to the city which would you chose?


Free states and Interzones have always flourished because of their ability to avoid inconvenient laws, on anything from drug use to import/export duties, and have usually become pretty dangerous places to live for the same reasons.

Definitely recognise the danger that a charter city could become a pretty murky sort of a place. Perhaps no murkier than large parts of Africa or South America or Asia are already. It’s easy to say that people could just leave, but it’s probably much easier to say than to do and where would people go if all of the charter cities turned into shady interzones of convience. It might just bet that the idea ends up moving lots of people from subsistance farming to not great to live in cities. But that appears to be what is happening anyway.

[rosathome.livejournal.com]

Is this a computer game?

[danieldwilliam.livejournal.com]

It does sound like it could be, or perhaps ought to be.

and, having just had this pointed out to me as something of interest pehaps it will be soon.

http://blogs.valvesoftware.com/economics/it-all-began-with-a-strange-email/