Friday, August 7, 2009

Paul Romer argues for “charter cities”

Paul Romer argues for a new method to alleviate poverty. It is based on stimulating economic growth (thus reducing poverty overall) by developing “charter cities”, which is a city-scale administrative region governed by a coalition of nations and has a rules-based system that will attract investors and people who want to live in a stable, secure and progressive society. It is like creating commerce hotspots and stable (rules-based) cities like like Hong Kong (administered by British until 1997) or several key costal hot spots like in China. He argues for creating new cities where people can go to escape from bad rules and governance and opt in to new and better ones.

From TED blog:

He shows a picture from NASA of the Earth at night, clearly showing the electric lights of cities and town. He points out that North Korea looks like a black hole compared to neighbors, and reminds us that North Korea and South Korea began identically but made choices that led to very divergent paths. He points to the Caribbean. He shows how dark Haiti is compared to the Dominican Republic and that they're both dark compared to Puerto Rico. Haiti warns us that rules can also be bad when governments are weak, as opposed to the strong government of North Korea.

Romer asserts that we must preserve choices for people and operate on the right scale. A village is too small and a nation too big. Cities give you the right balance. The proposal is he conceives of is a charter city with investors to build infrastructure, firms to hire people and families who will raise children there. All he wants is some good rules, uninhabited land and choices for leaders, which he thinks should translate to partnerships between nations.

I wonder how the issues related to sovereignty and occupation would be resolved with this new model. Also, if implemented, for how long will this model, which seems more or less like an export-based or trading hub model revolving around SEZs last? Everything is hinged upon having a political will and consensus, which by the way are the most difficult things to have in most of the developing countries. If it were so easy, then aid would have worked better, leaders would have been more responsive to their voters than to donors, governance would have improved, the probability of conflicts and coups would have decreased drastically, market-friendly policies would have actually been implemented in reality, and a democratic, people-centered process have flourished. There would be no need for any special cities with special facilities and characteristics.

More about Romer and his new initiative here.