Honduras Might Try Charter Cities

From the Charter Cities blog:

The government in Honduras is convinced that a charter city could be the safe playing field, with new rules, where Hondurans of all backgrounds can come together and put their skills to work with the financial resources, expertise, and technology available in the rest of the world.

I first read about charter cities last June, and I still see it as an incredibly important idea. Some of the best criticism of the idea I’ve read is from Ranil Dissanayake on the Aid Thoughts blog. This quote (from here) seems to sum up his argument:

Romer’s approach is wrong not because he thinks rules are important or that countries should invite rich Governments to enforce them, but because Romer thinks he already knows the rules, and that they can be imported anywhere. That’s not how it works. In a recent post I pointed out how different rich countries are from each other. That’s partly because their rules, evolved over hundreds of years in some cases, are specific to each of their own contexts. Romer doesn’t see this. He just sees the rules of today, and imagines that they can be peeled off a society and pulled over a new one, like a one size fits all t-shirt.

Firstly, I’ve yet to read that Romer thinks he “already knows the rules”, especially down to the details. From the early mention of the Honduras experiment, it seems unlikely that Romer, the Charter Cities organization, or foreign governments will be deciding all the rules. Secondly, some rules are much more important for success. E.g., Dissanayake mentions the variance in rape law between the U.S. and France, but these differences have little influence on economic progress (Koreans once all had similar, if not identical, cultural laws and norms, but changes in those aren’t what held North Koreans back), and immigrants in both countries easily accommodate either law. There are large chunks of the “rules” that could be left up to the host country or designed around the culture of the populations most likely to migrate there.

Also I think the incentives are right for allowing cultural enclaves some variance in their social laws if it reduces ethnic tension, since this would be destructive to land value (reducing the rents the host country can collect), to productivity (making investors unhappy), and to the credit of the organizations making the rules.

In short I think Dissanayake significantly underestimates the willingness/ability of people in poverty—and willing to move to escape it—to accept culturally different rules. I think in richer countries we’ve come to see cultural rules as so important because we can afford to.

Since I didn’t post it before, here’s the TED talk (19 min) on charter cities from 2009:

The Hard Road Ahead

I’m starting to believe the only way out of this recession and national deficit is through tough choices that offend the ideologies of every political party:

  • higher taxes for everyone
  • spending cuts, including the military
  • bailouts for state/local safety nets that ease real human suffering, not select industries
  • finding and migrating to foreign aid measures that actually work
  • renegotiating way-above-market public pensions inked during the golden bubble years
  • forcing big banks to cramdown city/county debts that arose due to fraud
  • downsizing the massively expensive and world-leading incarceration industrial complex, perhaps by depoliticizing the CJS
  • reducing barriers to starting up new businesses, especially rent seeking at the local/state level
  • stimulating the wedding industry by ensuring the freedom of everyone to marry

Now who in Congress is up for all that?

Charter Cities seem better than foreign aid

The Atlantic has a great piece on Paul Romer and his push for “charter cities”. I agree completely with Romer that fair laws with economic liberties is the only way to support economic growth. While probably true in the old world, very few countries remain impoverished simply because of geography. Tyrants plague the people of North Korea; lawlessness, corrupt states, and trade-hostile laws impoverish many others. We should not end foreign aid where it’s needed, but charter cities sound like one of the only ways to make it uneeded.