Charter Cities: a Road to Prosperity

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Poverty issues are becoming more and more prevalent. Our leftist «friends» keep blustering about how only they can fix it, but in reality, the only result of their actions from the 1990s and this day is reducing the countries under their management to African level. In France, the business flees the country in droves. Venezuela, turned into a dump by insane prohibitions, is crime-ridden. The life in Nicaragua is far worse now than it was during the Somoza regime. In Argentina, the inflation and lack of competitiveness of the industry is undermining the country’s economy further and further. The list goes on.
The leftists do have a success of sorts on their conscience; though whether it can be called a success is open to debate. They have built, or rather rebuilt, a quasi-soviet alliance with near-dictatorial Russia as its leader. This clumsy union of tyrannies is hardly a solution to poverty issues, however.

1400057322_future_cities_whitelabelAn interesting (and not politically correct) solution to this social disease was proposed by a young and talented economist, Paul Romer. His concept of Charter cities can be described as creating enclaves of the First World in the Third World countries. Romer himself describes this as «creating new Hong-Kongs». His idea is simple: a high-tech city is erected from the ground up in an underdeveloped and poverty-stricken country; it is independent from the country’s government or economy and is essentially ruled by a group of shareholders (large multinational corporations). This city adheres to its own set of laws and is controlled by a board of directors under the supervision of a neutral country with an impeccable reputation (Romer usually suggests Canada or Switzerland). It adopts the Great Britain judiciary system.
The «Sovereign nation states» advocates and the Third World «own-way» idealists usually raise objections on this point. However, systems considered «irreplaceable» and «national sovereignty guarantees» in the past have been successfully replaced by international and cosmopolitan ones). Panama and Ecuador had successfully replaced their respective national currencies by the US dollar, the majority of the European countries had embraced euro. The Atlantic magazine notes that joining WTO is a surefire way to import the First World economic structures. If that’s the case, why not to go all the way and replace the whole of corrupted and inefficient structures with the system of private agreements? «What structures and mechanisms need to be introduced to developing countries for them to follow the rules that are accepted in the developed world?» — asks Romer.

The most prized resource in the modern world, states Romer, is human intellect. Natural resources are now less valuable than intellectual. Charter city’s «brain gain» would allow to create a flourishing First World enclave in the country in question. Men and women who were trying for years to immigrate to USA, Canada, Britain or continental Europe would be able to live and work in these cities without abandoning their relatives and friends. This would also cut down on the unlawful migration to the First World – people would no longer need to go through humiliating processes like the «proof of solvency», nor would they have to fight the bureaucrats or forge legal documentation.

One of the most important feature of a Charter city administration is its transparency. The main cause of modern poverty is government’s corruption and omnipresence. In most societies the governments have kept total power while maintaining the facade of weakness. They have no competition. Any large business or similar structure could be destroyed and prohibited by the government with ease. The reverse is not true: no power in the country could lawfully constrain the government.

2008699_600The importance of creating such city from scratch cannot be overstressed. Romer goes as far as to claim that this is fundamental. Introducing the idea of transparency, open economy, «rule of law and contract» is immensely difficult. The Third World mentality, with its religious structures, institutional inertia, corruption, even run-of-the-mill logistic inefficiency of an already existing city, could ruin the idea of a Charter city. Imagine the Charter city of tomorrow, something like Singapore of Hong Kong, based in Brazilian Rio or Argentinian Buenos Aires, with their squalor, inefficient transport system, welfare housing and favelas. Clumsy «social governments», with their cumbersome bureaucracy and powerful propaganda machines, would handicap a Charter city. People would demand habitual «security» and welfare from the state, «new Hong Kong» would try to explain that the law of the land is not applicable to the city, there would be rioting in the streets, the federal government would dissolve all the treaties and the Charter city would collapse into another «innovative region» under the control of national government structures. The rest is as predictable as a child’s tale: no country or company would invest money into such «ill-conceived» project, and bringing in the British judiciary system would be unlikely at best. Such was the case in Honduras, where Romer’s project was turned into another «free trade zone». (The Honduran experiment and Romer’s reasons to abstain from it are discussed in the next article).

Another reason to create a Charter city from scratch is to guarantee voluntary participation in the city’s life. Those who can’t stand the capitalistic city of tomorrow won’t go there; was this Charter city to emerge out of a preexistent city, there would be trouble with those who live there and do not approve of the new course. Romer’s motto, “Boots, not ballots” means that the Charter city citizens would vote with their feet, not ballots, confirming their choice simply by relocating to a Charter city. The question of the city’s democracy is still open: the right to decide who can vote would be in the hands of an appointed governor and the city’s trustees. Law and order in the city would be upheld by private security firms. This private security law enforcement plus well thought-out immigration policy (city government would be able to filter the newcomers judging by the population’s and city’s best interests) would keep the city safe.

Benefits for the country that would realize such a project would be huge. First of all, the country’s national security problem would be solved immediately. No one in their right mind would attack a country with such global corporate ties. Secondly, the stream of investments would improve the quality of life and would allow to develop the national business; the popularity of the government that had handed the control of the city over to transparent transnational committee would be at all times high. Thirdly, Charter city would pay land tax. It has to be moderate so the Charter city wouldn’t have to smother its population with brutal taxation, but it would be paid. Fourthly, professionals coming to the city to work would drastically improve the intellectual potential and the population quality of the country. Next, the scientific and technological advances would revolutionize the country – a Charter city, while independent from the federal government, would need to work with the outside world, negotiate contracts, co-operate with the neighboring companies. Also, a Charter city would need a technologically developed infrastructure and logistical system, all of which would be also used by the country. For example, a Charter city would need many drive-ins and restaurants, which, in turn, would need modern roads, storages, agriculture and industry, thus developing the governments’ territories. If the country with a Charter city on its territory could come to terms with the city’s administration, the investments in food and energy industry would be assured. Lastly, a Charter city would have to provide a wide range of economic services; in the absence of competition it could become a powerful financial node for the interests of the corporations, national government, regional businesses and large banking systems.

Two countries – Chile and Peru – had accepted the liberalization of their economics and made concessions to transnational companies and banks. Both of them have flourished for many years; more than that, the global financial crisis passed them by. This was also the fate of Singapore, where the liberalized economy helped achieve prosperity and an unprecedented rise in the standards of living. It is unfortunate that both the Latin-American «jaguars» and the Asian «tiger» achieved this through dictatorship or US military intervention. Charter cities are a huge step towards the economy liberalization and the removal of the incompetent government influence. Will it be possible to realize this project within a democratic framework, or will the world need new Pinochets and Lee Kuan Yews? Only time will show…

Kitty Sanders, 2014

You can also read this article here: RLN.FM.

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