The Idea of New Economic Cities

Paul Romer has an interesting idea (see the Ted video below).   His plan is to create new cities from scratch in 3rd world places that will be a start over and get it right this time, thus attracting successful people and making the new experimental cities a success.  An interesting twist is to incorporate a neo-colonial element to the projects, where 1st world nations would partner with the project and oversee much of it to make it work right..

There is a lot to talk about here both good and bad.  On one hand I have to commemorate him for thinking outside the box, when few people are.  In addition the inclusion of a 1st world senior partner in the project gives these new cities a better chance of succeeding.

On the downside there are a lot of wishful assumptions in the plan that may very well not work out.  Let´s look at some of the problems.  Romer talks about making better rules to improve society.  While this may make sense to an extent, the reality is that in the 3rd world the law is simply ignored most of the time by both the population and the government.  Believe me.  I know.  I have lived in many of these countries, and the mentality/culture is different than in the first world.  The law is only imposed when there is a acute public outcry, someone wants a bribe, or politicians want to go after their enemies.  Even in the US, the government simply ignores the constitution and other laws whenever it sees fit.  In the third world it is infinitely worse.  So simply putting in better laws will not significantly improve the situation, because the laws are ignored.

Furthermore, what rules do we want to put in place in these new cities?  The experts cannot even agree on what are the right rules, and even when the experts were in consensus, they have so often been utterly wrong, and their expert ideas failed miserably.  For instance it was all the vogue in the 1960´s that what poor black neighborhoods needed was a fresh restart.  They decided to tear down entire neighborhoods of dilapidated, but often charming buildings, and build brand new apartment blocks, all in the elitist architect´s approved box style surrounded by grass.  It did not take long before the new building complexes where worse than the old neighborhoods.  What needed to change were the people, not the surroundings.  The experts got is all spectacularly wrong.  And it is hardly the first, nor the last time.  How can we be sure that the people who make the rules for new city states won´t be driven by the human vices of stupidity, conformity, greed, corruption, interests, trendy theories, etc?  We always believe that this time we will get it right…and so often we are wrong.

To bolster his argument Romer presents examples of how changing the rules (laws) leads to much greater prosperity.  His implication is that if better rules can be established in his new city states, they will escape the problems of their poor host country.  For instance the ideas is that Honduras and Africa can start to develop if only better rules (laws) are put in plane.  To support his argument he mentions several communist governments (China and North Korea).  When China changed their rules (became more free market), their economies vastly improved.  He even mentioned the successful Chinese Free Trade Zones (such as Shenzhen) as a model to follow in creating new prosperous cities within poor countries.  He also says that North Korea is starving, while South Korea is prospering, because the south has better rules.  It has a free market economy.

While this is true, the comparisons between Central America and Africa on one hand, and China on the other, is really an apple to oranges comparison.  Central America and Africa are already predominantly capitalist countries.  China was Communist.  So simply removing Communism in Kenya is not the solution, because Kenya is not Communist to begin with.  That low hanging fruit is not there.  Unlike the 1st world, most of the 3rd world has never had a record of success when ingeniously governed.  The Chinese have a long history all over the world for entrepreneurial achievements.  Eliminating Communism simply allowed the Chinese to return to their naturally successful ways. The Nicaraguans have never shown an ability to run a successful economy.

In sum, if the folks of the 3rd world hope to get out of poverty, the only sure way is to change the people.  Anything else is wishful thinking.  If we keep the same people we are going to get the same results.  That is why Romer´s plan has a very slim chance of actually succeeding if it can be populated and governed mostly by more competent people from outside the poor country in question.  A kind of neocolonialism.  Certainly Africa flourished under European colonialism, and collapsed under self rule.  It has only recently done a bit better due to a commodities spike, and because, for the first time in decades, an outside power (the Chinese) is investing in Africa, building up the infrastructure and economy to extract commodities.  It is a kind of soft neo-Colonialism.  And it is not done out of charity.  It is done because China needs what Africa has.  The Africans laso need the Chinese because they cannot do it by themselves.  Africa certainly has ENORMOUS potential, but someone other than the Africans needs to unlock it.  First it was the Europeans.  Now it is the Chinese.

So Romer´s new city states might just work, but only if they were supervised by an outside power, and a critical mass of outsiders populated it.  The border would have to be strictly enforced, or at least they would have to have a very least a very very strict police force to prevent squatters from taking over.  Because if these new city states actually work, it will be an island of prosperity amid a sea of misery, and it will not take long before such cities become overwhelmed with immigrant squatters desperate for a better life.  Just look at downtown Johannesburg, where trying to maintain a normal city has become impossible due to the masses of squatter who have camped out in the city, destroying its quality of life and attractiveness.  If new city states becomes overwhelmed with migrant poor, then the successful will flee, and prosperity and success will also flee.

Even if these new cities were a success, how politically feasible would it be to have an island of prosperity, governed and populated largely by foreigners?  Simple resentment and envy by the poor majority would put the city in a very potentially precarious position the next time a populist demagogue comes to power.  History is full of examples of societies that killed the golden goose out of sheer jealousy.  Just look at Zimbabwe.  Mugabe and friends looked with envy at the prosperous white farms, and stole them for themselves.  The country quickly went from one of the most successful in Africa to a basket case.  Everyone has suffered and will continue suffer.  Zimbabwe is not coming back any time soon.  The whites have fled and the natives cannot do it by themselves.

In sum, Romer´s idea is thought provoking and interesting.  It might work, but has plenty of hurdles to overcome, and will need a lot of luck to work out.  I am not a great believer in depending on luck, but I could be wrong.

As a final comment, I hope that if they build these new cities they don´t hire Award Winning Architects who love to design ugly strange and off putting buildings.  That will definitely hurt the effort to make the city a success.  Just look at Defense in Paris or the Balneau as an example of what not to do.

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