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October 27, 2009

How could we measure well-being in a crisis? Some thoughts from Korea

October 27, 2009

Charter Cities – visionary, naive or bonkers?

October 27, 2009
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Charter Cities are a proposal to build cities from scratch in the world’s poorest nations, outsourcing their design and government to rich countries. Visionary, naïve or plain bonkers? Probably a bit of all three.

They are the brainchild of US economist Paul Romer, who explains his idea on this (20 minute) video.

He’s serious – last year he gave up his professorship at Stanford to devote himself to selling his big idea. He argues that if poor people like the cities, they will migrate there, creating a ‘global archipelago of economic powerhouse city states’ in the words of a Boston Globe piece.

Here’s one example, from the Charter Cities website

‘For decades, the Unites States and Cuba have been parties to a treaty that gives the United States administrative control over a portion of Cuban territory straddling Guantanamo Bay. In a new treaty signed by the United States, Cuba, and Canada, the United States could give up its treaty rights, and Canada could take over local administration for a defined period of time.
An administrator appointed by the Canadian prime minister would be responsible for setting up and enforcing the rules that apply in this special territory. The legal protection and institutional stability that the Canadians provide would attract foreign investors and foreign citizens to the city.

As the city grows, the Cuban government would gradually allow freer movement of people and goods between the land it governs and the charter city. At the same time, supporting cities and suburbs would grow up on the Cuban side of the city’s boundaries. The charter city itself would eventually return to Cuban control.

In this case, a treaty creating a special administrative arrangement already exists and Hong Kong provides a model for how a city might be governed. An interesting variant would be one in which several countries (e.g. Canada, Spain, Norway, Mexico, and Brazil) stand in place of Canada alone.’

To me, this all feels like part of an understandable but slightly alarming series of ‘lament of the technocrat’ calls for experiments in greenfield development. Politics, institutions and societies are messy, unpredictable and frustrating, so academics in particular come over all Founding Fathers and board the latest intellectual Mayflower in search of a nice ‘clean’ experiment: think Jeffrey Sachs and his Millennium Villages, or Paul Collier and Independent Service Authorities.

As for this latest grand vision.

The innovate, pilot and replicate model works in some cases (eg China)
Effective states are certainly needed at the city and local level, as well as national
To some extent the proposal recognizes the rise of subnational units within globalization

This is ahistorical: the key to China’s pilot/replicate model was an effective state. How would charter cities do anything other than suck talent and resources away from nation states?
Hong Kong is pretty sui generis – about the only example of success built on laissez faire. According to Ha Joon Chang every other country required hands-on industrial policy and state intervention to develop
Apolitical: Even if it works, you end up with some kind of modern city amid Mad Max chaos – does he really think the city can just build a wall and keep the chaos at bay? It’s a bit like Paul Collier thinking you can give the money to technocrats in ISAs to spend, and no-one will notice!

I’ve asked around, and had a few comments back. Becky Buell, an ‘exfam’ (former Oxfam) colleague who now works on urban issues at MIT’s Green Hub, has this to say:

‘It’s interesting to note a “back to the future” element to all this.  The idea that somehow cities can be planned at all was largely abandoned by the late 70s as urban growth and informality outpaced and out-smarted the urban master planner.  There seems to be a rebirth of attempts to come up with new forms of master plan that are ambitious in scope, but that are different from past efforts in that they see a minimalist role for government, and put the private sector at the center of planning and delivery.  The Charter Cities and the World Bank’s recent Eco2Cities concepts are examples of this, with differing degrees of government leadership and management in the two examples.  The most important gap in all of these is the absence of an analysis of power dynamics, and the likely failure of any attempt at planning that doesn’t recognize and work with this.  The other big gap, I think, is the lack of perspective on the informal sector, where the vast majority of people in developing countries live and work.  Any plan that does not consider this vast world will again repeat the structuring of fragmented, segregated societies.’

Tom Goodfellow, an LSE doctoral student, emailed this after a debate with fellow LSE urbanists:

‘At the moment it certainly seems like a recipe for the creations of islands of poverty or islands of wealth (depending on the country in which the charter city is ‘hosted’) which could not easily be integrated into the surrounding society even if they were to attract people and investment, as Romer assumes they would. On the one hand, the example of a city in Australia built specially for Indonesian workers sounds like labour migration designed in such a way as to maximise negative social consequences; Romer states that public services and welfare support in the city would be ‘comparable to those in Indonesia’ (i.e. considerably lower than for people in the rest of the country in which the city is located) and Indonesians in the city ‘would be subject to the same immigration controls whether entering Australia from this zone or from Indonesia’. This smacks of the deliberate creation of ghettoes and even echoes of Apartheid townships!
On the other hand the creation of cities in poor countries by rich governments such as Canada is no less dubious. Firstly it is very unlikely that any sovereign developing country will voluntarily relinquish sovereignty over a city of any size for both economic and political reasons. And even if this does somehow happen, the huge amounts of private sector finance necessary to get industrial cities of the kind Romer envisages off the ground would likely lead to protected pockets of wealth that largely flows out of the country generating little benefit for the host nation state. Moreover, given the weight of private interests involved the idea that the city would somehow naturally return to the control of the host nation-state after a period of time sounds highly improbable (not unlike the Marxian idea of the state ‘withering away’…)
Meanwhile, having highlighted the evils of slums as one reason for creating these new cities, Romer says of the Cuban example that ‘supporting cities and suburbs would grow up on the Cuban side of the city’s boundaries’…in other words, the presence of a wealth and employment generating city would create huge slums outside the island of great institutions, which doesn’t move us on very far at all. Don’t need to build a charter city to create gated communities surrounded by squalid slums, just go to South Africa, Nairobi, Brazil, wherever!’

Chris Blattman has also blogged on this, Paul Romer has responded to his criticisms here, and Chris, in determined search of the last word, has responded to Romer’s response here.


  1. I’ve already gone through this idea with a fine comb first, and then a bayonet on Aid Thoughts:

    It’s got two revolutionary concepts to it, but it’s ridiculous and unworkable in the final analysis because it’s so apolitical and unhistorical. His ‘understanding’ of Hong Kong is barely coherent when you consider HK’s actual history. The ‘Charter’ he claims HK to have had came in 1984, some 120 years after British occupation, and well into HK’s economic growth, and in practice it doesn’t work anything like how it was first envisaged.

    (As an aside, HK is not as free market as most observers seem to think: it has a pegged exchange rate for example).

    I go into some depth about the flaws in his use of HK as an example (I was born and raised there). I also look at some of the other glaring problems of the charter cities that he doesn’t address in nearly a satisfactory enough manner: community cohesion and the development of culture, with the possibility of conflict; the realities of immigration by the poor (who he claims could just leave if the cities don’t work out – though he doesn’t specify with what money); and the provision of public goods.

  2. Success-sharing paths to offset predatory power and ease political risks for Charter Cities are explored here:

    Quickstart scenarios for planting seeds of scalable free economic zones/Charter Cities are discussed here:

    Opportunities to shift development risks to the private sector are discussed here:

    – Chris Blattman blog

    Look forward to continuing the conversation on Charter Cities and kindred ideas.


    Mark Frazier
    @openworld (twitter)

  3. I like the tone of this post. Between your title, starting with “He’s serious” and giving so much space to the downsides, you expose how ridiculous the idea is (at least that’s my read). I generally agree with Ms Buell and Mr. Goodfellow’s points, and I have already made similar arguments on Blattman’s blog.

    Considering the obvious weaknesses, I am surprised this idea gets so much attention. I assume it continues to be discussed because you are all so kind? You don’t want stifle ideas by criticizing them to the point of dismissal?

    Let’s be honest though, you can leave out the “visionary,” charter cities are naïve or plain bonkers.

  4. Incredible as it may seem, politicians in Honduras are really thinking that the charter cities are the solution to ALL our problems here. Right this moment, Paul Romer is presenting his “great idea” to the Honduran Congress and they are discussing the approval of the charter cities in four strategic places (cardinal points!!), one of them will be placed next to a reservation area in La Mosquitia, imagine that… Any ideas on how we, hondurans, can prevent this from happening?

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