Charter Cities

February 5, 2010

To Prospect last Monday morning for a breakfast seminar with economists Paul Romer and Paul Collier. We were there to discuss Romer’s idea of ‘charter cities’: a new form of aid in which a poor country invites a rich country to set up a city-size development zone, which it runs according to rich-country rules.

This might sound slightly eccentric – what’s wrong with just giving money? But both Romer and charter cities are worth taking seriously. In the 1990s, Romer was one of the originators of endogenous growth theory, which is now the basic framework for thinking about how economies evolve. He’d spent the past week in Davos, pushing the charter cities idea around. And during breakfast Paul Collier, one of the best development economists in the world, also gave it a qualified thumbs up.

Romer’s basic idea is simple. Strong rules and institutions help economic growth; so do cities. The world is urbanising: but in the global south, most people are packed into chaotic cities, often in slum neighbourhoods, which lack good governance and basic infrastructure. So poor countries need to set up new, city-size special economic zones with robust rules and institutions. Charter cities would allow partner countries to come in and run these cities for the common good, in theory accelerating economic growth and providing the basic housing and infrstructure citizens in poor countries need.

Collier gave the idea cautious support, although he warned it was ‘three leaps in one’ – running against development orthodoxy, and not easy to implement. Most people will live in cities in the future. In the south, coastal megacities will thrive because they have both scale and physical access to the global economy. Equally, good governance is critical to long term growth. There is already an international market in rules: in African partner countries, China typically uses dispute resolution agreements that refer to English law.

Much of the discussion focused on politics, and the need to set rules and local buy-in. I made three more urban points. First, if successful charter cities are coastal (like Hong Kong or Shenzhen Special Economic Zone), what can landlocked countries do? Romer suggested that a third country could as a ‘host’ – which works in theory but makes implementation very complex.

Second, would extending existing cities be a better solution? We know that agglomeration economies are basically non-linear. So if we accelerate the growth of successful cities, we get bigger economic returns than growing new ones from scratch. Romer thought both options would work: Lagos is currently masterplanning a new city alongside the existing one, potentially doubling its population.

Third, how long would it take for new cities to grow? Brasilia was founded in the mid-Sixties and is still under-developed, with big tracts of empty space. There was some discussion about this: Paul Collier pointing to very rapid urbanisation in the UK and US during the late 19th century.

I left feeling at least partly convinced the charter cities idea could work. Chinese cities like Shenzhen or (in theory) Dongtan show what might be achieved within a single country with top-down (and non-democratic) government. However, in the rest of the world implementation is probably going to be a lot messier, and the results less clear cut. However, it’s probably worth a shot. As Haiti begins post-earthquake reconstruction, Dominican Republic (or French)-sponsored charter cities might be a useful tool in the box.

4 Responses to “Charter Cities”

  1. Openworld Says:

    >>if successful charter cities are coastal … what can landlocked countries do?

    They can create free zones/free cities that cater to fast-growing global markets for telework and “remote services.”

    As long as market-sensitive learning systems are put in place — and/or liberal work visa systems are introduced — Charter Cities can flourish in landlocked as well as coastal regions.

    More on quickstarting such reforms through small, scalable demonstration areas is at http://www.openworld.com and http://entrepreneurialschools.com .

    Best,

    Mark Frazier
    @Openworld @peerlearning

  2. Alice Says:

    This vision is dangerously technocratic, think about the politics; ‘charter’ cities sound similar to colonial cities.

    If rapidly urbanising cities have insufficient housing and infrastructure, why not enable the existig state to provide those services? Civil servants in low-income countries are under-utilised – all the ODA goes to NGOs and there have been massive public sector cutbacks. In the scrabble for ODA, government ministries look outwards to donors instead of turning inwards, to collectively deliberate over national development plans. This plan undermines local governance and a sense of national vision for development.

    Also, just because people come to a city with a charter declaring new rules it doesn’t mean those rules will be accepted. Cultures evolve, and behaviour responds to certain incentives. If you don’t change the other circumstances – like neoliberal dogma and power/aid relations generated by the IFIs – many practices will continue, regardless of charters.

    There’s a certain appeal of thinking we can start from scratch and use know-how of the west, but that technocratic vision ignores power relations.

  3. squareglasses Says:

    Mark – interesting point, and thanks for the link. A question back – would those sectors be enough to sustain an urban economy?

    Alice – yes, politics and power issues weren’t really in the discussion on the day. Even on a technocratic level I would worry about two power issues: a) a race to the bottom, with rich countries shopping around charter cities for the deal that best suited their national interest b) the rich country reneging on charter rules at a later date. … ps. can you define ‘neoliberal dogma’?


  4. […] the moment – instant cities,  floating cities and Paul Romer’s Charter Cities (which I discussed a while back). Last week’s Economist even showcased a whole series of prototype ‘cities for […]


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