Demystifying Charter Cities

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Sebastian Mallaby has a good piece in the Atlantic on Paul Romer and the idea of “charter cities”—places that would be administered by credible developed democracies but inhabited by migrants from poor countries—that I recommend to one and all.

One thing I will say, however, is that there’s a tension between the desire to emphasize how new and exciting and thought-provoking this idea is and the desire to actually persuade people to do it which involves trying to explain that it’s not quite as weird as it sounds. Consider, for starters, the fact that situations of ambiguous sovereignty aren’t actually all that rare. The United States governs Puerto Rico, the District of Columbia, and other territories that don’t have full voting rights under a series of ad hoc arrangements. Britain has Gibraltar, China has Hong Kong, France has New Caledonia, etc.

What’s more, it’s very common for people to be living in a democratic country that they aren’t citizens of and can’t vote in. Legal residents of the United States who moved here from Mozambique aren’t horribly oppressed or put-upon, they’re just immigrants. The real problem for would-be migrants from Mozambique is that Americans are resistant to the idea of letting an unlimited number of people move from Mozambique to the United States, and the citizens of other rich countries tend to be even more resistant. So a country might see it as serving its own interests to take a relatively uninhabited part of its territory and invite it to be administered by a rich and successful country that in the eyes of the world is a credible provider of good governance. Especially if the country in question—unlike the United States—isn’t viewed as harboring grand geopolitical ambitions.

So suddenly you have a swathe of territory being administered by some earnest Norwegians in association with an international crew of policy wonks and a couple of entrepreneurs interested in opening sweatshop-type factories. Would everyone want to move there? Of course not. Would some people want to move there? Of course they would. And if the first couple of factories were successful, then there’d be more interest in setting up more firms and that would increase the value of the land providing the Norwegians with the money they need to keep the place growing and running. The city would still be poor, of course, but there’s a lot of range within poor places—Nicaragua’s per capita GDP is over double Mozambique’s. Citizens of the original country would benefit from their ability to move, and also from remittances, and also because the presence of an island of prosperity right by their borders would have spillovers.