Guantanamo: the new Canadian Hong Kong

That is Paul Romer’s advice to Obama and Castro: turn the Bay over to the Canadian government for a fixed term, allow free entry of international migrants, and collect tax revenues in return for building a metropolis. A Charter City.

Australia gets a chance too. Paul’s proposal: turn an unpopulated coastal strip into a free economic zone open to the world, a manufacturing haven with public housing for millions. It will be generations before the bottom billion get rich at home. So why not let them move to prosperity?

That’s the staggering proposal Paul offers at Growth Week. No podcast or video, sadly, although a short version is available in a TED talk:

See also the blog and full concept.

I’d caught glimpses of Paul’s proposal in the past, but hadn’t paid close attention. My first reaction: another economist gone off the deep end.

I think he’s accustomed to that.

After sitting down to listen and talk about the idea, I feel differently. I’m not sure he’s right, but what a wonderful thing to think big.

Paul doesn’t mention the words apartheid or colonialism. You can tell he’s heard them back. He stresses Charter Cities are unique in an important way: entry is voluntary, and all the rules are clear in advance.

My first question: what makes the Australia strip different than an American Indian reservation? Paul’s answer: the rules. Indian reservations set up with private property rights are actually doing quite well, and points me to work by someone named Terry Anderson on the subject.

My second question: how is this different than Chicago’s notorious housing authority, and the failure that was Cabrini-Green? The wrong rules, he responds, and leaders with the wrong incentives.

From another audience member (I think it was Adrian Wood): think about the Utopian experiments of the late 19th century. Their fundamental problem: the early adopters were complete kooks, spoiling the venture. Paul’s response: the kooks will be outnumbered by the construction workers. And unlike Dubai (which proves a city can be built anywhere) we’ll let the workers bring their families, have equal rights, and stay. He points out Pennsylvania as an example–William Penn established religious freedom, attracting not kooks but great women and men.

I remain intrigued, but unconvinced. It is very, very hard to get the rules and incentives right. Singapore stumbled upon a successful model, Chicago did not. Ex-ante, I think it may have been hard to predict which would succeed.

A trial-and-error process would, without doubt, produce dozens of successful charter cities around the world. But the error and trial could have a very heavy human cost. A half century after its birth, Cabrini-Green and the Robert Taylor homes have been razed.

It is a risky thing to model oneself after accidents of history. But I am glad Paul Romer has the imagination to try.

Interestingly, he wasn’t aware how close he is to reality. A union between Canada and the Turks and Caicos islands has been in the works for years. Maybe Paul will see a Charter City sooner than he thinks.