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The lure of starting from scratch

It is an acknowledged national characteristic that Americans believe in self-reinvention. One of our founding myths—inspired by the once unexplored and sparsely populated expanse of the North American continent—is the idea that you can head out of town, leave the encumbrances of the past behind, and start over in a new, unspoiled place.

What would happen if we brought this sensibility to development plans for poorer, more crowded nations? What if we already do?

The ingredients for Paul Romer’s solution to global poverty include an unoccupied tract of land, a charter to lay out a new set of just and commerce-promoting rules, and two or more sovereign governments. Just as Hong Kong was created as an island of prosperity by the British in China (only voluntarily this time), poor countries would lease a piece of their land to a richer, benevolent government or group of governments that would agree to administer the new city according to the rules of the agreed-upon charter.

From a new article in Atlantic Monthly by Sebastian Mallaby, we learn that Madagascar might have become the first testing ground for Romer’s charter cities idea—if not for a coup that ousted the Malagasy President in March 2009.

Madagascar’s government was anxious to attract foreign investment, and it understood that a credibility deficit held it back…Faced with this obstacle, the Malagasy authorities were open to unconventional arrangements. To boost investment in agriculture, they were ready to lease a Connecticut-size tract of land to Daewoo, a South Korean corporation, for 99 years…Romer’s proposal fit in with these adventurous ideas.…

Romer made his pitch for a charter city, and Ravalomanana responded that he wasn’t sure one was enough; if Romer could identify two rich countries willing to play the role of government trustee, it might be better to launch two parallel experiments. The president and the professor agreed that the new hubs should be open to migrants from nearby countries as well as to locals. They rose to examine a map of Madagascar on the study wall. Ravalomanana suggested building the first city on the island’s southwestern coast, which was largely uninhabited because of its dry heat. To Romer, the site sounded very much like the coastal locations that appeal most to the world’s affluent as vacation spots.

Ravalomanana’s government was toppled before any of these plans could go forward, in part as a result of violent protests over the perceived threat to national sovereignty represented by the Daewoo deal. As Mallaby points out, this failures suggests at least one flaw of the charter cities idea—that land ownership and sovereignty are explosive issues that may not be easily or peacefully negotiated away by leaders on behalf of their people. But Romer remains optimistic, and is talking to other African leaders, possibly ones with more staying power.

The charter cities idea appeals because it is bold. It promises a fresh start for people mired in the muck of old conflicts, inequality, and bad government. When Mallaby concludes “When African teenagers do their homework under streetlights, isn’t Romer right to think the unthinkable?,”  he is arguing that while there may be legitimate concerns about the ethics or feasibility of the charter cities, those concerns are made irrelevant by the overwhelming gravity and scale of global poverty and inequality.

In other words, big, desperate problems call out for big, radical solutions. Solutions that sweep away the detritus of past failure, promise to replace it wholesale with something new and better, and perhaps even alter the boundaries of the world as we know it.

The discussion about rebuilding Haiti has been full of ideas about the earthquake as an opportunity to ”start over,” “reboot,” “wipe the slate clean” and finally “get things right” (some stellar examples here). Two recent proposals brought the call for slate-cleaning back to Africa: We already blogged Professor Pierre Englebert’s suggestion in the NYT for the international community to “move swiftly to derecognize the worst-performing African states” like Chad, the DRC, Equatorial Guinea and Sudan, and in Foreign Policy, G. Pascal Zachary submitted that “no initiative would do more for happiness, stability, and economic growth in Africa today than an energetic and enlightened redrawing” of Africa’s colonial borders.

Call it the “let’s just scrap this mess and start over” approach to development.

Unfortunately, in earthquake-devastated Haiti as in troubled central Africa, the promise of starting from scratch is an illusion. It has always been true that no matter where you go, you take yourself with you—culture, history, habits, attachments and animosities come along like a skin you can’t shed. But these days there are fewer and fewer territories on our taxed and shrinking planet beyond the reach of someone’s determined claim.

These ideas share an overly-optimistic belief in a neutral, benevolent international community and its power to peacefully oversee imposed changes. All are tone-deaf to the very real degree of nationalism that does exist in basically all countries by now, regardless of whether they were misbegotten colonial creations or not. They also violate sovereignty as conventionally defined, which may be good or bad but is sure to provoke a nationalist reaction.

Early development economists working at the hopeful dawn of colonial independence believed that they really were starting from scratch. The last fifty years have shown us that they weren’t, and this has been—and remains—one of development’s biggest blind spots.

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26 Comments

  1. Dave A wrote:

    Great post. I appreciate how you linked Romer’s proposal to the discourse on Haiti and other countries. It reminds me of how post-conflict situations (esp. Iraq, Afghanistan) are often discussed. The sad thing is, if confronted about it, I’m pretty sure all the proponents of this thinking would admit the nuances of the world. I’m starting to wonder if this is a psychological phenomenon, some kind of decision-making heuristic that leads us to wish the world were simpler than it is.

    There’s another great dissection of Romer’s terrible idea at Aid Thoughts, and I’ve made some commentary of my own.

    Posted June 17, 2010 at 1:33 am | Permalink
  2. But isn’t it strange how much support this hyper-engineering idea (of charter cities) receives from some libertarians?!

    Additional critical commentary, including a riposte by Paul Romer himself as well as me ranting-on-capitalism appeared at Marginal Revolution a few days back —

    http://www.marginalrevolution.com/marginalrevolution/2010/06/sebastian-mallaby-on-paul-romer.html#comments

    Posted June 17, 2010 at 2:19 am | Permalink
  3. This is one of the best Aid Watch posts in ages. I think the problem is more than just that you can’t simply start over – it’s that even if you did, it would take 50-100 years to get a set of rules that fit the mix of people, geography etc. that exists, even if you import all the technology, capital etc. you need.

    I’ve written a couple of pieces on Aid Thoughts about this, the latter about the same article: http://aidthoughts.org/?p=1319

    Posted June 17, 2010 at 3:11 am | Permalink
  4. Oh, I see Dave already linked to it! thanks. I read your piece, too.

    Posted June 17, 2010 at 3:16 am | Permalink
  5. Justin Kraus wrote:

    I think this discussion needs some nuance.
    First I share with most people who have commented here a skepticism that Romer’s idea would work, though I am not sure if its any more immoral than many aid projects that we currently do.
    And the vehement negative reaction that many have had to Romer’s proposal seems mostly to stem from this perceived immorality (i.e. it is neo-colonial).
    My reaction is more mixed. I think in the short term, if a willing country and willing governor could be found (big ifs) then economic growth would likely proceed quite smoothly in a charter city. We only need to look at China to see that the availability of low-wage workers and reliable institutions/rules (even if autocratically imposed) is a sure fire recipe for economic growth.
    The (huge) problems with charter cities are more of a political and long-term nature. And they would only arise IF the charter city is successful economically.
    In this case the biggest problem would be keeping the local poor and the politically powerful out of the charter cities. For no matter what the Charter may say, locals will not give up sovereignty over their land, especially if there is money to be made by pressing their claim. And here is where the parallels to colonialism will really be apparent. Ultimately the governors of these Charter cities will find it impossible to maintain their grip and a process of reintegrating the charter cities into the country within which they are situated will follow. But probably not before a lot of bloodshed occurs.
    If Romer has a solution to this future political problem, I think his idea has merit, but otherwise it might be wise to hold off for awhile.

    Posted June 17, 2010 at 7:40 am | Permalink
  6. Rebecca Burlingame wrote:

    All I wish to do is to express why some have hope for Romer’s idea, and my experience is limited to living in the U.S. Mobility – even in the U.S., is not what it once was. There are plenty of places even here where locals would close the doors to outsiders (native-born) if they could. True, we are out of land to start anew. The
    place for expansion and fresh starts now only exists in our minds, and I believe this is what allows people to have hope in charters – or sets of ideas not laden with layers of laws written for times when people related in very different ways.

    Posted June 17, 2010 at 9:04 am | Permalink
  7. dWj wrote:

    George Will commented once that “nation-building” is like “orchid-building”; nations can’t be built, but must be organically grown. And there seems to be a certain social blank-slate-ism with Romer’s idea that should invoke some skepticism. That said, as far as idealistic social experiments go, I think this falls toward the lets-give-it-a-shot end, largely because 1) participants have an exit at any time, 2) it can be done on a scale that is, at least by the standards of these countries, let alone of global poverty, small, and 3) it doesn’t ask people in any current polity to change what they’re doing. These strike me as safety valves that should at least keep it from causing much actual harm.

    I largely agree with Justin on other issues; the whole point is to be able to import a commitment not to kill the institutions through expropriation or some other means of short-term gain, and the bigger the temptation becomes to violate that commitment, the more trouble is likely to occur in maintaining it.

    –Dean

    Posted June 17, 2010 at 9:09 am | Permalink
  8. Adam Baker wrote:

    Laura, I agree that the Madagascar situation would have been very weird. But could you comment on the experience of Dubai? Albeit with substantial assistance from the other emirates, it seems that in a sense they have been able to “start from scratch” in developing a services economy based on free-trade principles.

    Posted June 17, 2010 at 10:12 am | Permalink
  9. improbable wrote:

    I’m not holding my breath for Romer to actually get a a charter city, but I think that many of the criticisms are ill-founded. To I agree that “land ownership and sovereignty are explosive issues”, but this makes it unlikely to happen, rather than making it a bad idea.

    Every aid project is an attempt to re-shape some poor country by importing some ideas which worked in some richer countries. Culture is a dynamic thing, and my ancestral culture is no poorer for having imported writing, double-entry accounting, production-line manufacturing, and unix. No matter how hard you try you aren’t going to clone the donor country, Hong Kong doesn’t look much like London you know, but that doesn’t mean it hasn’t borrowed many good ideas, and incorporated them into a living culture.

    If the country whose land you borrow for this takes it back at some point, well that may happen. In the best case this may be 100 years hence, once the thing has flourished, and some ideas diffused back. In the worst case it may happen the next time power changes hands, and it never gets off the ground… this would hardly be the first aid project to achieve no result. In between, if it becomes rich enough to be worth plundering, then it has achieved some of its goal, surely. And the people who worked there, tasted a different system, are the ones who might go on to infect the host country.

    Is it colonialist? As far as what words will get thrown at it, this is about the sovereignty point above. As far as how it treats people, well economically they won’t move there without better prospects, and as for votes they don’t get those if they move to the rich world either, immediately. Will their descendants born there have votes? If it flourished for that long then they will sort it out won’t they… maybe you get another Singapore?

    I think it’s about time people got over the colonial hang-over, and over the independence euphoria too. Is it so hard to understand some things having had both positive and negative consequences? Trying to add them up and say “on the balance…” is fun over desert, but is irrelevant to deciding which aspects you would like to apply this century.

    Posted June 17, 2010 at 10:43 am | Permalink
  10. Zac Gochenour wrote:

    I think the skepticism here is good: certainly, nationalistic sentiment is the biggest enemy of charter cities. Bryan Caplan recently blogged something similar. Bold ideas like this are going to be beset by enemies on all sides, and anyone is perfectly in the right to express doubt that it could work. But this is no argument to scrap the whole idea.

    In a recent post on Romer at Let a Thousand Nations Bloom, the author points out that Romer seems to be swinging in the direction of a free zone or free city rather than the “neo-colonialist” approach reviled here in the comments.

    I agree with commenter Justin Kraus that many of the long-term problems might arise only if the charter city is successful. But by then, the idea would be proven to work. As they say, you have to start somewhere.

    Michael Heller, I agree with you that capitalism is the solution. So successful charter cities will be set up with a high degree of economic freedom. We can say economic freedom is the key to growth, but this is not something being aggressively pursued in the third world. It is something unlikely to occur through democratic means. In the above referenced post at LATNB, the author also points out that “Romer’s paper goes to the heart of the issue by explicitly advocating ‘exit’ as an important alternative to ‘voice,’ explicitly supporting freedom of choice while calling into question the coercive majoritarian processes of democratic nation-states.” The charter city would show that there is another way – and it works – and hey, you can be part of it.

    The more I think and read about charter cities, the more I think of their potential. Ms Freschi points out some reasons why charter cities might be difficult to implement, but no convincing reasons to just scrap the idea.

    Posted June 17, 2010 at 10:56 am | Permalink
  11. Michael Heller usefully asked why libertarians, who hark back to Hayek and perhaps Burke and who thus would be against social engineering, should be so supportive of Romer’s charter cities idea. There are at least two parts to an answer. Firstly Michael will recall the debates about shock therapy (another hyper-engineering program) in the post-socialist transition debates, and most, if not all, libertarians were quite supportive of shock therapy when it came to the transition from real-existing socialism to capitalism. In Ralf Dahrendorf’s wonderful 1990 book echoing Burke, “The Revolution in Europe: Letters intended to be sent to a Gentleman in Warsaw”, he pointed that there were Dr. Jekyll and Mr. Hyde sides to Hayek. One Hayek was a sophisticated critic of social engineering but there was another Hayek, the author of the “Consititution of Liberty”, who didn’t seem to mind the “right” kind of social engineering, e.g., the kind that appeals to most economists, libertarians, and Romer.
    The other part of the answer starts from the two (dual) logics of institutional design which following Hirschman could be called the logic of exit and the logic of voice (and loyalty). Economists are trained to view all questions of institutional design through the logic of exit where the market is the paradigm. Classical liberals and libertarians also see the world through the lens of the logic of exit. For instance, democracy in organizational entities (nation-states or otherwise) plays no role in the libertarian conceptual lexicon (e.g., note the total absence of it in Nozick’s notion of a free society). Exit is all, and “voice” is unheard of. Since Romer’s idea of a charter city has no role for democratic self-govt and emphasizes free entry and exit (with no provision for voice), it is naturally going to appeal to libertarians. A similar idea pushed by Patri Friedman substitutes floating cities for Romer’s charter cities (thus solving the land problem). Patri’s father is David and David’s father is Milton, in case one wondered about the parentage of these ideas. The “Let a Thousand Nations Bloom” blog is an example of this type of reasoning.

    Posted June 17, 2010 at 12:19 pm | Permalink
  12. John Coonrod wrote:

    One of the best mantras in development is to build on strength. Every society I’ve ever encountered has traditional strengths that are often bypassed, undermined or ignored in the rush to impose a modern solution – both by outsiders and insiders. Development in all forms could use a strong dose of appreciative inquiry to ferret out and revitalize cultural strengths – in some cases spruce up to strip off egregious patriarchal baggage. This has been the work of many of the greatest grassroots leaders from Gandhi onwards.

    Posted June 17, 2010 at 12:35 pm | Permalink
  13. Dan Kyba wrote:

    Interesting post; reading the Romer piece I was immediately struck by the similarity of his idea with the Madgeburg City Laws of medieval Europe; The Madgeburg Laws are generally regarded as having a positive influence on the development of trade and the breaking down of feudalism. The feudal rulers granted Madgeburg rights to various cities because they needed the income from tax revenue such cities would generate.

    Posted June 17, 2010 at 12:53 pm | Permalink
  14. Tina Z wrote:

    This post reminds me of the debate over international intervention in conflicts and human rights abuses (genocide among others). The same concerns are expressed about the issue of impartiality of the international community or other external actor(s). Can any actor intervening in sovereign states’ affairs ever be impartial? I don’t think so, for many of the reasons you cited here. It’s the reality of the system.

    Besides, individuals who try to start their lives over with a clean slate often fail to do so completely. If they are successful, I think it’s because they have internalized hard lessons learned along the way. They consciously recognize which behaviors are holding them back and identify the need to change them but also recognize positive behaviors (that have developed over time) which can be exploited to their benefit. For states, to start over would mean being able to self-identify what’s not working and having the ability to change those actions/policies, even with external help. But lots of those actions/policies have developed over time, like negative behavior in individuals, and can be tied into a state’s identity even if it lives in only a subsection of the population (sort if like a dissociative personality in an individual). Thus the problem with starting over, like you said, is that you can’t erase the past completely and backlash from segments of the population is unavoidable.

    Posted June 17, 2010 at 3:21 pm | Permalink
  15. Jess wrote:

    Sounds like a great sci-fi flick!

    Posted June 17, 2010 at 4:34 pm | Permalink
  16. Luke Lam wrote:

    Ms. Freschi seems to miss some elements of Romer’s concept. Romer is trying to create a framework to provide the right incentives to all parties, the expert outsiders, the host nations, the workers. The host nations need not to change, outside of the charter cities. Inside the charter cities, it’s expected that the expertise will be transfer to the workers to run the system. It’s not a stretch to imagine that the knowledge transfer will be ripple throughout the host nations and in the long run will transform that nation’s culture. In fact, this is what happened in Hong Kong.

    Ms. Freschi’s contentions is along the lines of ‘you can’t change people’ and ‘rebooting the system’. It’s true that it’s hard to change people, but it had been done. Romer is not advocating a ‘system reboot’, replacing the whole government system. His proposal is only carving out a place where commerce is safe and encouraged.
    Ms. Freschi touched only on a few observations of the difficulties that Romer’s facing, however, nothing she indicates that would invalidate his concept.

    Posted June 17, 2010 at 6:33 pm | Permalink
  17. Stephen Jones wrote:

    I thought the idea of starting somewhere near Ground Zero never survived its first tryout in Iraq in 2003-2004. Much of what Naomi Klein writes in the shock doctrine is ill-informed but her original article on Iraq is one of the most important journalistic articles of the decade.

    His proposal is only carving out a place where commerce is safe and encouraged.

    And who’s having commerce with who?

    Posted June 17, 2010 at 9:12 pm | Permalink
  18. Stephen Jones wrote:

    Romer honestly appears mentally unstable. Let’s look at this ridiculous statement from the Atlantic article:
    Why do these kids have access to a cutting-edge technology like the cell phone, but not to a 100-year-old technology for generating electric light in the home? The answer, in a word, is rules. Because of misguided price controls in the teenagers’ country, the local electricity utility has no incentive to connect their houses to the power grid.
    The only rules involved are those of the market, which Romer wants them to adapt. It costs money to wire up their houses and they haven’t got it, and even if they did, they’d still need the money to make it safe to wire their houses. On the other hand cell phones and top-up cards are cheap. And if they are wired up but there’s no electricity because of load shedding, as happens in half the world, then again the reason is cost. There isn’t enough capital to build generators to provide sufficient extra load, or the only quickly installable extra capacity is diesel which is affected by wild price volatility that can mean the company ends up paying more for the extra capacity than it sells it for.

    Posted June 17, 2010 at 9:21 pm | Permalink
  19. Stephen Jones wrote:

    In the absence of a Romer-type solution, these migrants will move into urban slums with no running water, high crime rates, few steady jobs, and sewage in the streets; charter cities seem a better option

    Except none of them are going to be allowed anywhere near these charter cities. They’re not an alternative at all.

    Posted June 17, 2010 at 9:29 pm | Permalink
  20. Stephen Jones wrote:

    Mainland China forcibly had a large number of these enclaves in the 19th and 20th century and they didn’t seem to do any good to the rest of the country.

    Posted June 17, 2010 at 9:53 pm | Permalink
  21. Bob K. wrote:

    Although not quite the same, this sort of thing has already been tested and refined in (of all places) Dubai: the Dubai Financial Services Authority is actually run on British common law, and the Emir imported British judges to set up the regulator and then run it. So its essentially a concession of Dubai sovereignty to British judicial system, and people cite it as one factor behind Dubai’s attractiveness to international corporations.

    Posted June 18, 2010 at 12:59 am | Permalink
  22. Be very clear – the problem is not that it is colonialist. the problem is that it is a bad idea, bordering on stupid, because it’s incredible failure to grasp basic concepts of legal history and theory. Where does Romer think rules come from? He seems to think they can be imposed. They cannot and are not, they are the process of an implicit or explicit negotiation between state and society and other institutions. He fails to understand this and this is the basis for his whole argument.

    Posted June 18, 2010 at 3:14 am | Permalink
  23. Robert Tulip wrote:

    Charter cities are a great idea as a model for effective development, showing how rules of the game are decisive for sustainable growth. I wrote a science fiction story picking up on this idea at http://rtulip.net/to_the_sea

    Posted June 18, 2010 at 9:32 am | Permalink
  24. TGGP wrote:

    Some of the Thousand Nations folks look on the idea of a “reset” positively. Being wary of rationalism, I don’t see that as a plus. But I think the seasteading & charter city movements are some of the best ideas to come around in a while. Why? For pluralist reasons. Most new companies fail, but the ability to create them has created a huge amounts of wealth. So even if these “Thousand Nations” follow a power-law distribution in which most are (to quote Sturgeon) “crap”, the few shining successes could radically change the governance industry for the better.

    You point out the poor track record of decolonization. But how about an appraisal of the original colonialism? Some months back I suggested that William Easterly debate Mencius Moldbug on the topic.

    Posted June 19, 2010 at 12:52 am | Permalink
  25. TGGP wrote:

    I just came across an idea from Niklas Blanchard that aptly expresses a point I was trying to get across above: fail faster!

    Posted June 19, 2010 at 3:15 am | Permalink
  26. Romer wants foreign rule to solve the credibility problem. But he then creates an insult problem with his foreign rule notion. The sad thing he, he understands neither the Hong Kong example or the medieval precedents, as I discuss here. Hong Kong was created at the point of a gunboat, otherwise it would never have happened. It was creating local versions without foreign rule that created its transformative effect in China. Just as the medieval examples were about entrenching local rule, not foreign rule. The trick is not to make particularist loyalties one’s enemy, but to make them work for you.

    Posted June 29, 2010 at 9:09 am | Permalink

5 Trackbacks

  1. […] Publicerade juni 17, 2010 Uncategorized Leave a Comment Laura Freschi på Aidwatch är skeptisk till Paul Romers idéer som jag tidigare skrivit om här: Unfortunately, in earthquake-devastated […]

  2. […] This post was mentioned on Twitter by William Easterly and @mikegechter's RSS, Emma Asomba. Emma Asomba said: RT @bill_easterly: The lure of starting from scratch in development: on Charter Cities & other radical proposals http://bit.ly/9BE2KM […]

  3. By Democracy and Society » Thank you, Aid Watchers on June 18, 2010 at 10:56 pm

    […] so have been procrastinating. Laziness, fortunately, paid off for me this time as Laura Freschi at Aid Watchers has written a better version of what I was going to say: It has always been true that no matter […]

  4. […] A big, new and probably silly idea: Ranil Dissanayake at Aid Watch lambasts Paul Romer’s proposals for charter cities (here’s my take on them).  Laura Freschi at Aid Watch is more polite, but just as damning. […]

  5. […] Andrew Sullivan, Laura Freschi casts a dubious eye on the notion of charter […]

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    The Aid Watch blog is a project of New York University's Development Research Institute (DRI). This blog is principally written by William Easterly, author of "The Elusive Quest for Growth: Economists' Adventures and Misadventures in the Tropics" and "The White Man's Burden: Why the West's Efforts to Aid the Rest Have Done So Much Ill and So Little Good," and Professor of Economics at NYU. It is co-written by Laura Freschi and by occasional guest bloggers. Our work is based on the idea that more aid will reach the poor the more people are watching aid.

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