6 ms·

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

by 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.
  - shaddi 16y ago
    Excellent point -- no simple solutions. It's why this is a hard problem.
notahacker 16y ago
If nothing else, well-run quasi-independent liberal cities with a reputation for lower corruption are very good at attracting foreign investors, and multinational businesses that do more than just extract raw materials. Setting up artificial boundaries that allow the poverty of the rest of the country to be overlooked by visitors also adds to the business-friendly appeal, and despite the cynicism of such an approach could conceivably benefit the poorer parts of the country in the long run. On the other hand Hong Kong is the exception to the rule that developed countries haven't exactly turned the few pieces of overseas territory they still control into beacons of prosperity. And the example of Singapore shows that effective organisation from within can build a viable modern city state from nothing at least as effectively as British-run Hong Kong. There are many factors the two had in common during their period of rapid economic growth; being in the thrall of a paternally-inclined colonialist wasn't one of them.
- anigbrowl 16y ago
  Singapore was run from London until 1959, when it was granted independence (it declared complete independence from the commonwealth in 1963). At that time it already had the highest GDP per capita in Asia; the first Prime Minister, Lee Kuan Yew essentially ruled the country until 1990. Known as Harry to his friends, he attended an elite prep school in Singapore and later studied at the London School of Economics. He developed the institutions that were already present in Singapore rather than having to build them from scratch, and I think most people would agree that his governance was pretty paternalistic. I personally think the British are pretty good at this sort of thing, and I say that as a native of a former British colonial possession myself.
  - notahacker 16y ago
    His governance was very paternalistic; far more so than the pluralist democracy the British would have preferred to leave behind. As much as I'd love our fine educational institutions to take the credit for Lee Kuan Yew, I figure that we'd also then have to take the blame for Saif al-Islam Gadaffi, amongst many post-colonial Prime Ministers, Presidents, Ministers and faction leaders who had the privilege but not the vision. Singapore might have had one of the higher GDPs in Asia at the time of independence, but most of the population lived in absolute poverty - the government-financed apartment blocks, vast industrial estates on reclaimed land and most of the financial centre came afterwards, as did the country's appearance in top ten GDP per capita lists. I don't find it particularly easy to believe that the same >7% average annual growth rate would have been achieved if we were in charge. I think Hong Kong and Singapore are pretty exceptional as former colonial powers go (with a shared characteristic more obvious than British rule being the high proportion of culturally Chinese people) and I am British.
joe_the_user 16y ago
It seems fairly clear to me that China succeeded by inviting foreign investors in, offering them a good deal and keeping them on a tight leash. The last is a big "and". You can contrast China's relative success to the failure of Mexican Maquiladoras. By allowing US companies to set-up shop in fashion that involved no commitment, no building of infrastructure and no requirements to keep capital in the country, Mexico opened itself up for the situation of today, where US companies in Mexico are closing shop and moving to ... China. Edit: China also had the luxury of being so big a market that many investors have the "I can't afford not to be there" mentality. I'm not sure if any other country could duplicate that now.
- protomyth 16y ago
  Mexico has other problems that obscure any direct comparison. Government corruption in Mexico is a big factor as well as having the US on it border providing better opportunity plus the war on drugs.
- yummyfajitas 16y ago
  Failure of Maquiladoras? Could you explain this statement? As far as I know, Mexico has more or less continually grown since NAFTA, and Maquiladoras play an important role in their economy. They certainly are facing competition from much less wealthy countries (like China), but so is everyone else in the industrialized world. http://www.google.com/publicdata?ds=wb-wdi&ctype=l&strail=false&nselm=h&met_y=ny_gdp_pcap_cd&scale_y=lin&ind_y=false&rdim=country&idim=country:MEX:CHN&tstart=-315619200000&tunit=Y&tlen=49&hl=en&dl=en http://www.google.com/publicdata?ds=wb-wdi&ctype=l&s...

by noilly 16y ago

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.
- shaddi 16y ago
  Excellent point -- no simple solutions. It's why this is a hard problem.

notahacker 16y ago

If nothing else, well-run quasi-independent liberal cities with a reputation for lower corruption are very good at attracting foreign investors, and multinational businesses that do more than just extract raw materials. Setting up artificial boundaries that allow the poverty of the rest of the country to be overlooked by visitors also adds to the business-friendly appeal, and despite the cynicism of such an approach could conceivably benefit the poorer parts of the country in the long run. On the other hand Hong Kong is the exception to the rule that developed countries haven't exactly turned the few pieces of overseas territory they still control into beacons of prosperity. And the example of Singapore shows that effective organisation from within can build a viable modern city state from nothing at least as effectively as British-run Hong Kong. There are many factors the two had in common during their period of rapid economic growth; being in the thrall of a paternally-inclined colonialist wasn't one of them.

anigbrowl 16y ago
Singapore was run from London until 1959, when it was granted independence (it declared complete independence from the commonwealth in 1963). At that time it already had the highest GDP per capita in Asia; the first Prime Minister, Lee Kuan Yew essentially ruled the country until 1990. Known as Harry to his friends, he attended an elite prep school in Singapore and later studied at the London School of Economics. He developed the institutions that were already present in Singapore rather than having to build them from scratch, and I think most people would agree that his governance was pretty paternalistic. I personally think the British are pretty good at this sort of thing, and I say that as a native of a former British colonial possession myself.
- notahacker 16y ago
  His governance was very paternalistic; far more so than the pluralist democracy the British would have preferred to leave behind. As much as I'd love our fine educational institutions to take the credit for Lee Kuan Yew, I figure that we'd also then have to take the blame for Saif al-Islam Gadaffi, amongst many post-colonial Prime Ministers, Presidents, Ministers and faction leaders who had the privilege but not the vision. Singapore might have had one of the higher GDPs in Asia at the time of independence, but most of the population lived in absolute poverty - the government-financed apartment blocks, vast industrial estates on reclaimed land and most of the financial centre came afterwards, as did the country's appearance in top ten GDP per capita lists. I don't find it particularly easy to believe that the same >7% average annual growth rate would have been achieved if we were in charge. I think Hong Kong and Singapore are pretty exceptional as former colonial powers go (with a shared characteristic more obvious than British rule being the high proportion of culturally Chinese people) and I am British.

joe_the_user 16y ago

It seems fairly clear to me that China succeeded by inviting foreign investors in, offering them a good deal and keeping them on a tight leash. The last is a big "and". You can contrast China's relative success to the failure of Mexican Maquiladoras. By allowing US companies to set-up shop in fashion that involved no commitment, no building of infrastructure and no requirements to keep capital in the country, Mexico opened itself up for the situation of today, where US companies in Mexico are closing shop and moving to ... China. Edit: China also had the luxury of being so big a market that many investors have the "I can't afford not to be there" mentality. I'm not sure if any other country could duplicate that now.

protomyth 16y ago
Mexico has other problems that obscure any direct comparison. Government corruption in Mexico is a big factor as well as having the US on it border providing better opportunity plus the war on drugs.
yummyfajitas 16y ago
Failure of Maquiladoras? Could you explain this statement? As far as I know, Mexico has more or less continually grown since NAFTA, and Maquiladoras play an important role in their economy. They certainly are facing competition from much less wealthy countries (like China), but so is everyone else in the industrialized world. http://www.google.com/publicdata?ds=wb-wdi&ctype=l&strail=false&nselm=h&met_y=ny_gdp_pcap_cd&scale_y=lin&ind_y=false&rdim=country&idim=country:MEX:CHN&tstart=-315619200000&tunit=Y&tlen=49&hl=en&dl=en http://www.google.com/publicdata?ds=wb-wdi&ctype=l&s...