As you’d expect from the name, a charter city is a city governed by a charter. Sounds simple, but it’s a surprisingly powerful way to let people choose to move someplace that is well governed.
A fanciful example helps illustrate how a charter city might develop. An existing treaty between the United States and Cuba currently gives the United States administrative control over a piece of sovereign Cuban territory straddling Guantanamo Bay that is twice the size of Manhattan.
Imagine that the United States and Cuba agree to disengage by closing the military base and transferring local administrative control to Canada. Canada works with Cuba to draft a charter for this special zone and promises to enforce its terms. Under this charter, a new city blossoms. It does for Cuba what Hong Kong, administered by the British, did for China; it connects Cuba to the global economy.
To help the city flourish, the Canadians encourage immigration. It is a place with Canadian judges and Mounties that happily accepts millions of immigrants. Some of the new residents could be Cuban émigrés who return from North America. Others might be Haitians who come work in garment factories that firms no longer feel safe bringing into Haiti. The new city gives the Haitians their only chance to choose to live under a system of law that offers safety and opportunity.
Initially, the government of Cuba lets some of its citizens participate by migrating to the new city. Over time, it encourages citizens to move instead to a new city that it creates in a special economic zone located right outside the charter city, just as the Mainland Chinese let its citizens move into Shenzhen next to Hong Kong.
With clear rules spelled out in the charter and enforced by the Canadian judicial system, all the infrastructure for the new city is financed by private investment. The Canadians pay for the government services they provide (the legal, judicial, and regulatory systems, education, basic health care) out of the gains in the value of the land in the administrative zone. This, of course, creates the right incentives to invest in education and health. Growth in human capital makes income grow very rapidly, which makes the land in the zone even more valuable.
This scenario shows what is possible. In practice, the personalities and politics of the relationship between the United States and Cuba make it highly unlikely that this potential will be realized. The first charter city is more likely to be set up in a host nation that has lots of land and has not been able to attract on its own the kind of foreign investment needed to create millions of entry level jobs in manufacturing for its citizens. There are many candidates. The structure of the charter could be very different, perhaps with several partner nations in place of just one. The benefits could be just as large.
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Why would Cuba be a good candidate? Why not have the charter city in a “bottom billion country”…let’s say Haiti? I guess the impact on poverty reduction would be greater.
— Slim Shady · Jul 28, 12:37 AM · #
It is my understanding that the US position on Guantanamo Bay is that “only mutual agreement or US abandonment of the facility can terminate the lease”. They (Cuba) dispute that of course, but it doesn’t seem to matter.
So if the US “stays” (perhaps with a small military presence in a corner somewhere), with the highly credible promise of quick action from the mainland if Cuba tries to violate the US definition of the treaty, then we don’t need Cuba’s permission to set up a “charter city”. This could go on forever.
Then we could have whatever administrators we wanted. I vote for Singapore. Ask them to set up something similar to what they do right now in Singapore, clearly establish and enforce the law, and then invite in corporations and immigrants. I’d explicitly invite a mixture of Chinese, Indians, and Lebanese since they seem to be the world’s best overseas entrepreneurs. Also invite Cuban-Americans. Not that I’d exclude anyone else, but an active effort to bring in those folks would do wonders in my opinion. They don’t need Cubans to cross the border for it to work, although I suspect many would simply swim over, especially once the skyscrapers started going up.
Then let the fun begin. Maybe the US would learn something, not just Cuba or Haiti.
P.S. @Slim Shady: I suspect getting permission from most countries to set up a charter city, and not “invade it” during the next regime change in the host country, may be problematic, but maybe not. Anyway, it is close enough to Haiti that I suspect it would quickly be swarmed with Haitians if all goes as advertised. In fact, Haiti might be almost entirely emptied, literally, at least over time. They only have about 9,000,000 people, something that could easily fit in a skyscraper city that was well run by Singapore
— happyjuggler0 · Jul 28, 07:20 PM · #
If a charter city were created without SOME restrictions on immigration, it would soon be destroyed by an abundance of Haitians. Cruel to say? Racist? I certainly do not mean it either way, but the fact — the rather unpleasant fact — is that the vast bulk of Haitians are poorly educated. Without immigration restrictions, those uneducated Haitians would be the most likely to wish to go looking for something better than the grinding poverty of their home. They may be extraordinarily hard working, they may be as honest as anyone has ever been, they may be as compasionate as Mother Theresa, but without the education needed for working in a modern technological city, their number would destroy the city. The truth is, the people of Haiti are the world’s current experts at creating Haiti, just as the Singaporians are the experts at creating Singapore. A vast influx of Haitians (without serious cultural, behavioral and educational changes) will never create a Singapore; it will create a Haiti.
— Jason Calley · Jul 30, 07:18 AM · #
Jason Calley,
Romer’s thesis behind Charter Cities is that it is the insitutions that are the difference between successful countries and poor countries.
If the Charter city in question has rules that aren’t open to public vote, and has law enforcement that is efficient, then it ought not to matter if it was populated by 9 million Haitians plus others.
The trick is to create institutions that lay the groundwork for prosperity, and for them to be viewed as credibly enforced in the future.
However it is also worth pointing out that the Charter cities are not only an end in themselves, they are an example for their neighbors on what they too could do if only they changed their rules. Ideally those neighboring countries would then indeed change their rules, and prosper as a result. If they did so, fears of being swamped with “the wrong people” would seem to be overblown.
— happyjuggler0 · Jul 30, 02:37 PM · #
Happy Juggler, thanks for the response, and believe it or not, there is much that I agree with in your post. Indeed institutions do make a HUGE difference. I don’t know if you are familiar with Hernando de Soto Polar, but his research into the effects of stable and documented property rights is a wonderful example that shows how legal and cultural recognition of ownership can move whole populations from poverty toward prosperity. I would even add that property rights is in itself a force that encourages people to become more skilled and educated. I think though, that it is important that we re-enforce basic human rights — such as property rights – and then allow people to create their own society.
I applaud the effort and thought that has gone into the Charter City idea, but I cannot agree with a top down approach, ie, one that creates a structured, ordered environment and then expects to fill such an environment with poorly educated people who have limited experience with either modern technology or urban social interaction (including ideas of property rights).
I had the great sorrow to see the failure of the Pruitt-Igoe complex in the late 60s. If those high rises had been peopled by tenants from Singapore I expect that they would still be standing. If you want the Charter City idea to work (and I like the basic idea!) then you must have SOME limits on who and what sorts of people come there to live, especially early on. If you get the first generation to adapt, then you have a much better chance of allowing greater latitude in later choices.
Just my opinion…but I think that history and experience support it.
— Jason Calley · Jul 30, 07:56 PM · #
If Canada runs it, it will wind up as a vile suppurating sore, much as the USA ruined Haiti with its benevolent imperialism, the international community destroyed Rhodesia, and so on and so forth. The common factor of economically successful cities that have recently transitioned from third world to first world, as Singapore, Hong Kong, Dubai have, is that the people running them were by modern political standards, ultra reactionaries. The guys running Dubai probably think King George was a pinko.
The only economically successful country in Africa, now that South Africa is being flushed down the sewer after Rhodesia, is Botswana, a pretend democracy run by traditional black feudal overlords and foreign white capitalists.
— James A. Donald · Aug 6, 12:50 AM · #
Rather than having Canada running it, which would probably & not wrongly, be thought of as rather similar to the USA why not have it run by Singapore/Hong Kong. Those, both being ex-3rd world states would be seen as more friendly, a better example & indeed do have more experience at running this sort of thing than Canada.
A further option would be to insist that, since this is a free trade area, there be no legislative restriction on the zone’s money circulating in Cuba (& vice versa but I suspect nobody would want to). The least inflationery currency would likel;y come to predominate to the benefit of all.
In many ways this proposal is reinventing the way trading cities have been built up since time immemorial (Carthage, Alexandria, Venice, the Hanseatic League, Bombay, Hong Kong & Singapore) ruled either by themselves or far away countries & culturally atuned to abroad.
I can imagine such cities being run by publicly quoted companies owned across the world.
— Neil Craig · Aug 6, 07:59 AM · #
Rather than having Canada running it, which would probably & not wrongly, be thought of as rather similar to the USA why not have it run by Singapore/Hong Kong. Those, both being ex-3rd world states would be seen as more friendly, a better example & indeed do have more experience at running this sort of thing than Canada.
A further option would be to insist that, since this is a free trade area, there be no legislative restriction on the zone’s money circulating in Cuba (& vice versa but I suspect nobody would want to). The least inflationery currency would likely come to predominate to the benefit of all.
In many ways this proposal is reinventing the way trading cities have been built up since time immemorial (Carthage, Alexandria, Venice, the Hanseatic League, Bombay, Hong Kong & Singapore) ruled either by themselves or far away countries & culturally atuned to abroad.
I can imagine such cities being run by publicly quoted companies owned across the world.
— Neil Craig · Aug 6, 08:00 AM · #
The reason for doing it in Cuba is that various folks really want Cuba to succeed.
Haiti – not so much.
However, there’s a more practical reason.
The idea is essentially “we’re going to show the savages how to be modern”. Given that, Cuba’s police state apparatus is likely to come in handy.
— Andy Freeman · Aug 10, 01:06 PM · #
Is free immigration really a problem? Without a job, you’re likely to return to where you came from. And as the city fills up, real-estate prices are going to flush out those who cannot afford to live there anymore.
The only problem I see is the city being filled up by unemployed immigrants. To prevent this though it might be better to only offer permanent immigration to those who already have a job offer in the city.
— John L · Sep 3, 12:03 AM · #
I liked the concept of Charter Cities when I first read about the idea in Forbes. But after reading these blog posts I’m wondering what’s the point? I understand why the U.S. would like a Charter City in Cuba in the hope of implementing democracy and a market economy but to think that its success would spread throughout Cuba simply because it’s located there would depend on whether or not Cuba decides to change its rules. If they haven’t changed the rules on by now, I don’t think a Charter City is going to make it happen. I imagine a little Miami with its immigration problems in Cuba.
As for developing nations, if they want successful economic growth they can implement new rules on their own. What’s stopping them? Why wait for a Charter City to instigate change? Change needs to come from within. Our world is open enough for any nation to sort out the good ideas from the bad ideas, and make changes. There are plenty of countries willing to help and companies eager to invest if they started the ball rolling on their own.
Charter Cities sound great—a very low-tax environment that encourages investment, personal development/higher education, open immigration of talented people, etc. Too bad Detroit isn’t on a coast and too cold in the winter.
— Shari P. · Sep 23, 12:17 PM · #