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I'm not going to fault this piece for being hand-wavy and poorly justified: it is that, but then again, it's a piece of popular journalism which is allowed to b

by shaddi 16y ago

I'm not going to fault this piece for being hand-wavy and poorly justified: it is that, but then again, it's a piece of popular journalism which is allowed to be. So, I'll criticize the broader idea. This article cites China as a model. Hong Kong did not pull the rest of China up as it grew. It certainly played a role, but frankly the communism that took resources from the urban coast and built roads, schools, and other infrastructure in rural areas was more likely a bigger contributor to the massive improvement in (purely economic) standard-of-living for most Chinese. It was in particular /not/ enlightened foreign rule of urban areas that did this. If we accept that all geopolitical entities respond to incentives, it is not clear that direct foreign control of areas of the developing world will produce the ideal outcome for those areas: this will only be the case when the incentives and interests of both the local population (which is not monolithic, btw, but we'll ignore that for now) and the foreigners align; long term prosperity requires that incentives align for both in the long term, which seems terribly unlikely. Moreover, the history of development is fraught with stories stories good-intentioned outsiders failing to make a beneficial impact because they poorly understood the complex local situation, and it's simply unrealistic to assume you can just start with a clean-slate-by-fiat in a "charter city" and build without considering a place's history. I think Romer has a good core idea, one that few people would argue with. Namely, development is not just a matter of fixing the "Production = F(capital & labor)" equation; good governance, good ideas, and good people all are required. While it may be surprising to some, this is an idea that is pretty well understood (at least at a high level) in the development community/industry. My beef with his idea is a flawed execution, and one that I think could be potentially damaging in the long term. These ideas need to come from local populations and make sense for their own contexts. As an analogy, you just aren't going to reproduce Silicon Valley by emulating the Bay Area's regulations and investment level: there is a whole history that made it the way it is. Attempts to do so are kind of doomed from the start, so it's better to focus on creating new centers of prosperity that make sense for the local context. I don't think foreigners are well positioned to do that. --- Another point to make, the Millennium Villages Project had a similar premise to Romer's. The idea was that solving the problems of poverty in particular villages through strong international partnerships would lead to spillover effects throughout the surrounding areas. Everything I've heard about it is that the results have been alright, but not really that great. Besides a bit more of a heavy-handed foreign-involvement approach, I'm not sure if the "charter cities" idea really is that different than MVP and hence it's not clear how it will overcome the obstacles MVP faced. Edit: William Easterly is quoted here. He has an awesome book, "The Elusive Quest for Growth", that discusses a lot of non-intuitive reasons why development efforts have historically failed. I would highly recommend it.

noilly 16y ago
At the same time, Hong Kong served as a model for China to emulate when it gradually liberalized its economy, beginning with the SEZs in coastal southern China in the 1980s. I think charter cities could be a novel way of easing people who have lived in generally corrupt and economically distorted environments into better institutions. Westerners take for granted that the trust embedded in the social contract and the civic and economic habits that emerge from this trust are not a given in many places (i.e. trust that the government/criminal entities/rent extractors will not capriciously bend things to their advantage).
- shaddi 16y ago
  Of course, that is clear. However, declaring a Charter City won't magically erase corruption and other structural causes of poverty, and bringing in a foreign party to impose governance brings its own set of issues / has historically not worked out well. Something closer to the lines of SEZs seems to capture the best of both worlds and makes more sense to me. It's a way to encourage liberalization (which we'll accept as a purely good thing for now, though obviously there is debate on that), bring in improved regulation, and provide some foreign expertise which could be helpful. It also aligns incentives a bit better, since it specifically focuses on business, rather than all aspects of governance (it's easier for us all to get along when we're in a mutually profitable relationship).
  - anigbrowl 16y ago
    The problem with a SEZ is that most people don't want to be industrialists, so an industrial park doesn't seem all that exciting unless you own a slice of it. At best, for ordinary folk all it does is jobs. That's a good thing, but there's more to life than just working. A city, on the other hand, is somewhere to live. Poorer residents might work the exact same hours for the same pay, but living in the same place that they work means they're getting indirect benefits like physical and legal infrastructure. They're not just bussed into the SEZ to work in the morning and bussed out again in the evening, back to their 3rd world existence where they may have few economic or political rights. A SEZ on its own only produces goods, but a city produces people and lifestyle and cultural wealth, and thus fills an aspirational function. People go to big cities to pursue their dreams and make money, even though they know it may be expensive and difficult. A SEZ with nobody living inside it is just a place to work, and reduces the people who work there to commodity labor with no stake in the longer-term future of the place.

by shaddi 16y ago

noilly 16y ago

At the same time, Hong Kong served as a model for China to emulate when it gradually liberalized its economy, beginning with the SEZs in coastal southern China in the 1980s. I think charter cities could be a novel way of easing people who have lived in generally corrupt and economically distorted environments into better institutions. Westerners take for granted that the trust embedded in the social contract and the civic and economic habits that emerge from this trust are not a given in many places (i.e. trust that the government/criminal entities/rent extractors will not capriciously bend things to their advantage).

shaddi 16y ago
Of course, that is clear. However, declaring a Charter City won't magically erase corruption and other structural causes of poverty, and bringing in a foreign party to impose governance brings its own set of issues / has historically not worked out well. Something closer to the lines of SEZs seems to capture the best of both worlds and makes more sense to me. It's a way to encourage liberalization (which we'll accept as a purely good thing for now, though obviously there is debate on that), bring in improved regulation, and provide some foreign expertise which could be helpful. It also aligns incentives a bit better, since it specifically focuses on business, rather than all aspects of governance (it's easier for us all to get along when we're in a mutually profitable relationship).
- anigbrowl 16y ago
  The problem with a SEZ is that most people don't want to be industrialists, so an industrial park doesn't seem all that exciting unless you own a slice of it. At best, for ordinary folk all it does is jobs. That's a good thing, but there's more to life than just working. A city, on the other hand, is somewhere to live. Poorer residents might work the exact same hours for the same pay, but living in the same place that they work means they're getting indirect benefits like physical and legal infrastructure. They're not just bussed into the SEZ to work in the morning and bussed out again in the evening, back to their 3rd world existence where they may have few economic or political rights. A SEZ on its own only produces goods, but a city produces people and lifestyle and cultural wealth, and thus fills an aspirational function. People go to big cities to pursue their dreams and make money, even though they know it may be expensive and difficult. A SEZ with nobody living inside it is just a place to work, and reduces the people who work there to commodity labor with no stake in the longer-term future of the place.