Charter Cities

One of the longest running and most puzzling questions of economics is how best to foster growth and improved living standards in woebegone regions of the globe such as sub-Saharan Africa and parts of Southeast Asia. Stanford economist Paul Romer, who is renowned for his work on modern growth theory, has recently developed what he believes to be a promising new approach to this problem: charter cities.

Essentially, these would be urban areas that would be created in undeveloped nations and administered not by those nations' governments but rather by the governments of successful Western nations. If this sounds rather neo-colonial, it is. Romer repeatedly cites the British experience in Hong Kong as a model for this approach, and predicts that the outcomes will be similar to what has happened in China over the past two decades. Upon witnessing the prosperity and growth of these charter cities, the national governments of underdeveloped nations will be compelled to experiment with other special economic zones just as China did in response to the success of Hong Kong's liberal economic and political structures. Over time, this will lead to the liberalization of the entire nation as more citizens and policymakers realize the obvious gains to be had from such an approach.

This sounds like a great idea in theory, but I am skeptical that it could work in practice. The most pressing problem would, of course, be finding Western countries to administer the charter cities. Without the promise of economic gain for themselves, it's hard to imagine the US, France, or even Sweden lining up to take on the challenge of developing and governing urban areas in alien lands that are, in many cases, hundreds of years behind the Western world.

But even if there were nations willing to take control of charter cities, I have my doubts about whether they would be able to achieve much success. For every Hong Kong, there's an East Timor or a Belgian Congo that stands out as an example of epic colonial mismanagement. Even if one were to argue that Western governments have advanced past the colonial stage of rapacious greed, there is the fact that governing in lands with different customs, geographies and social systems can prove to be immensely difficult. The US has seen this in Iraq and Afghanistan and to a lesser extent in territories like Puerto Rico--no matter how steady your versions of democracy and capitalism may be, there are certain factors unique to every culture that must be taken into account when imposing your particular system upon it. One very simple example of this would be language: How could Western nations possibly expect to find enough translators to administer multilingual cities in Madagascar, Cambodia, Afghanistan, and wherever else?

Moreover, there is the problem of funding. Would the Western nations administering the cities be expected to foot the bill with their own tax dollars? Because, if so, it's easy to see that those dollars would be the first ones to be cut from those nations' budgets. This situation already affects the West's own cities, which tend to be disproportionately harmed by budget cuts during times of recession. Charter cities would be even more severely impacted since politicians could easily demagogue about how tax dollars are being wasted abroad while people are out of work at home.

I'm not willing to entirely rule out charter cities as a means of economic and political development abroad--especially since I haven't yet read Romer's own words about the idea, other than what he is quoted as saying in The Atlantic--but I still think a better approach is to identify legitimate governments that already exist in the developing world with which the West can work to promote growth and development.