Monday, February 21, 2011

Romer On Charter Cities

This is a topic for late April, but it was written up in Mary Anastasia O’Grady’s column in the February 14th issue, and David Wesse'l’s column in the February 3rd issue, of The Wall Street Journal.

We’re going to talk a lot about Paul Romer in March and April – he’s the focus of Warsh’s book that we’re reading together, and of parts of newer growth theory.

Romer has moved away from academic economic theorizing, and now tries to sell his idea of “charter cities”.

Basically, he thinks you need to go into places – like Egypt – with lousy laws and political systems, and get them to hand over a location to build a new city. The new city would have new laws to separate it from the rest of the country. The archetype of this is Hong Kong.

It now appears that Honduras may be the first country to volunteer to charter a city. Naysayers nay say that Honduras can’t pull this off, because Honduras can’t pull this off (yes, that sentence sounds silly, but that’s my intention to illustrate the depth of the counterargument):

Japan and Chile were once proclaimed culturally incapable of development. He also argues that history is on Honduras's side. Separate legal systems inside cities generated untold prosperity as far back as the 14th century in Northern Europe's Hanseatic League and more recently in places like the Chinese city of Shenzhen.

Of course, you can probably envision this viewpoint:

"This is a country in which most people want to pursue the American Dream," says Octavio Sanchez Barrientos, chief of staff to Honduran President Porfirio Lobo. "And they have to leave the country and move to the U.S. This offers the possibility that, in the long run, they'll have that opportunity here."

A Honduran Ph.D. student of mine said the same thing to me – about 15 years ago. He lives in Longview now … Stetson can tell you all about where that is.

BTW: Honduras is also the country the Obama administration chose to bully about 18 months ago: their elected President made moves that people thought were dictatorial, these were ruled to be illegal, and he was chased onto a plane headed for exile. Apparently, having elections is more important than gutting your electoral system once elected.

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