Ending poverty via urban planning
NYU economist Paul Romer is what Chrystia calls an “ideas entrepreneur.” He revolutionized the study of economic growth with his research on the power of ideas. He shook up the field of higher education with his company that offered online homework problems that were graded by computer. Now Romer has set out to alleviate world poverty. For his new project, Romer set up a nonprofit organization dedicated to convincing governments across the developing world that they should cede a portion of their territory to an external authority in order to create a “charter city” in which new rules would make it attractive for skilled immigrants, unskilled migrants and businesses to come and settle.
This radical idea is slowly catching on. Honduras is poised to be the first country in the world to host a charter city after its Congress approved a constitutional amendment enabling such a plan in January.
He talked with Chrystia at the Aspen Ideas Festival about the Charter Cities project. Here’s a transcript of some of the highlights of their conversation.
CHRYSTIA FREELAND: What kind of legislation — what does it take to build these new cities, these reform zones?
PAUL ROMER: Let me give you a “for instance.” This new zone [in Honduras] will have its own judiciary. The hope is that a partner country will agree to let its Supreme Court act as the court of final appeal for the judiciary within this zone. If the treaty can be negotiated soon enough, the enabling legislation will specify that country X is–
CHRYSTIA FREELAND: So subcontracting your legal system to a lovely place like Canada or the Netherlands or something like that? Is that the idea?
PAUL ROMER: That’s the principle, so that you can get instant independence for your judiciary from both the existing government in Honduras or the government that will be set up in this new zone.
CHRYSTIA FREELAND:And when you talk to the government of Honduras, don’t they sort of say, “But wait a minute, Paul. Are you saying that we’re just terrible at governing? And how come we shouldn’t be ruling this part of our country?”
PAUL ROMER: No. They totally get the principle which I think everybody is missing right now. Let me go back. If you think of the theory of economic development 40 or 50 years ago, people were obsessed about self-sufficiency, that every country had to develop its own technology. Even not that long ago, Brazil was trying to develop their own PCs because they didn’t want to import PCs. Everybody understands now that that’s crazy. If there’s good technology in the world, import that. If you want–
CHRYSTIA FREELAND: If there are good judges, import them? Is that the idea?
PAUL ROMER: It’s the same principle. Instead of just importing the best technology through DFI or capital equipment, there are good systems of governance around the world and why not take advantage of those instead of trying to develop your own. The saying in Britain is when you’re trying to set up an institution like the legal system, the first five centuries are always the hardest. If somebody’s already gone through that process, take advantage of it. Don’t take five centuries to try and do it again.