In 2009, the American economist Paul Romer took to the prestigious forum of the TED Talks (that would be “technology, entertainment, design,” for you unfortunate creative-class have-nots) to explain how to solve world poverty. Where old-economy governments once sowed scarcity and corruption with their outmoded ideas of sovereignty and economic nationalism, today you can simply plug in new-economy investors and create administrative zones called “charter cities.” And my, how they will prosper.
As Romer lays things out in “Why the World Needs Charter Cities,” poor countries suffer from a typical case of “bad rules.” The solution, of course, is to adopt better rules that ensure private-sector success. Or, as Romer tried to put the idea across in TED-speak: “If we can keep innovating in our space of rules, and particularly innovate in the sense of coming up with rules for changing rules so we don’t get stuck with bad rules, then we can keep moving progress forward.”
Right. But how do these magical innovations work, exactly? Romer instructs his listeners to ponder the former British colony of Hong Kong, which, when viewed from space at night, looks brighter than mainland China—all because the country had operated under “rules that were copied from working market economies of the time and administered by the British.” And since nocturnal illumination is a sturdy sign of individual economic well-being, the TED-branded moral is clear: “In a sense, Britain inadvertently—through its actions in Hong Kong—did more to reduce world poverty than all the aid programs that we’ve undertaken in the last century.”
Of course, given this particular island nation’s history, Romer was smart to insert that coy “inadvertently” into his celebration of Britain’s economic legacy. Prior to a landmark series of anti-colonial youth riots in 1967, Hong Kong was known as “the sweatshop colony.” Still, Romer knows that the less inadvertent features of the charter cities plan—the bankrolling of overseas development via corporate schemes of governance, for example—can prompt negative visceral reactions to perceived colonialism, and so he warns his audience that “the kind of emotions that come up when we start to think about these things can get in the way, can make us pull back, can shut down our ability and our interest in trying to explore new ideas.”
In the cloistered social world envisioned on the TED stage, charter cities are hives of rule-based innovation around the Western record of colonial exploitation—an old idea!—while colonialism itself becomes chiefly a function of attitude:
The thing that was bad about colonialism . . . is that it involved elements of coercion and condescension. This [charter city] model is all about choices, both for leaders and for the people who will live in these new places, and choice is the antidote to coercion and condescension.
In practical terms, as Romer goes on to explain, the fundamental choice available to non-leaders in this novel scheme is whether or not to immigrate to a charter city; they do not have a say in whether their leaders partition and auction off national territory to corporate sponsors to govern by remote control. Nor will the inhabitants who choose to immigrate be burdened with the cumbersome choices that come with regularly scheduled elections; the idea is to phase in such luxuries gradually, as they are earned via other metrics of investor performance. It’s meanwhile safe to assume that, were the Chinese to build a charter city in half of Paul Romer’s house and give him the option of living in the other half of it, he might well be hailing this incursion as something other than an “antidote to coercion and condescension.”
Recipes for Disaster
Paul Romer came to his big idea of streamlining global investment in charter cities via his faith in, well, big ideas. Throughout the eighties and nineties, Romer—who had initially been trained as a physicist—sought to revive the beleaguered discipline of development economics with something called New Growth Theory. Romer’s pet doctrine was a forerunner to the faddish pop-economic theories of our own enlightened age of Freakonomics, holding as it did that “ideas” were a principal driver of economic growth.
By 2010, Romer had landed himself a coveted perch in the global roster of big thinkers, with Foreign Policy magazine designating him a solid No. 54 among its Top 100 Global Thinkers changing, you know, the globe. The magazine enthused that the charter cities plan was nothing less than “the world’s quickest shortcut to economic development,” while its progenitor, then an economics professor at Stanford, happily assumed the role of bad-boy academic iconoclast. (“I’m quite happy to offend everyone,” Romer likes to say.) Within a year, he was installed as the new director of the Urbanization Project at New York University’s Stern School of Business.
Romer’s physics background has apparently imbued him with the conviction that the many ills of international poverty can be dispelled with a little unabashed technocratic experimentation. Defining economic growth as “whenever people take resources and rearrange them in ways that are more valuable,” he deploys scientific-sounding jargon (“Rearranging involves connecting things, or modifying them chemically or structurally”) and culinary metaphors (“Human history teaches us . . . that economic growth springs from better recipes, not just from more cooking”) to sell his recipe for recipe-making.
It perhaps comes as no surprise that Honduras, one of the poorest countries in the western hemisphere—situated firmly in the path of long-standing U.S. free-market interventions in Latin America—is serving as Romer’s first kitchen-laboratory, after the national legislature there passed a constitutional amendment last year authorizing the creation of Special Development Regions (REDs). Far from coincidentally, Honduras’s civic plunge into ever-increasing corporate fealty has occurred under the illegitimate administration of Porfirio Lobo, who ascended to power via fraudulent elections held in the aftermath of a U.S.-facilitated coup d’état and whose reign has been characterized by politically motivated killings and other forms of oppression.
For all the voguish globalizing chatter surrounding the charter cities movement, there is nothing new about American investors parking their money in countries that happily do their bidding. Historian Greg Grandin has spelled out the symbiotic modern union of U.S.-brewed free-market theory and anti-democratic strongman rule in Latin America in his book Empire’s Workshop—a relationship that bore ripest fruit under the bloody dictatorship of Augusto Pinochet in Chile. The “Chicago Boys”—a cohort of University of Chicago-trained Chilean economists who were disciples of the libertarian shock therapist Milton Friedman—fashioned the military regime into an obliging way station for foreign investment, and crafted in the process a new model for investor-driven governance in the developing world.
“Where Friedman made allusions to the superiority of economic freedom over political freedom in his defense of Pinochet, the Chicago group institutionalized that hierarchy in a 1980 constitution named after [Friedrich von] Hayek’s 1960 treatise The Constitution of Liberty,” Grandin writes. “The new charter enshrined economic liberty and political authoritarianism as complementary elements.”
And so, despite the new-economy apothegms of Romer, the brave new Honduran economic order is little more than the latest franchise of the Chicago liberty charter. There is, to begin with, the small matter of native dispossession. Though Romer specifies in his TED Talk that model cities are to be constructed on “uninhabited territory,” the Honduran Black Fraternal Organization has noted that the area slated for development includes local populations who may not realize that their lands are uninhabited: “Government authorities have indicated that the first RED will be located between the Bay of Trujillo and the Sico river—an area with 24 Garifuna communities that are considered to be a cultural sanctuary.”
But the Honduran project has furnished a cultural sanctuary of another sort—a last-gasp bid, in an era of dire global economic crisis, for champions of globalization to intone a few nineties-era slogans, squeeze their eyes shut, and watch the world prosper in their preferred image. In December 2011, The Economist, with nary a trace of postcolonialist irony, hailed Lobo’s pursuit of a bona-fide “Hong Kong in Honduras.” This crisp neoliberal plaudit offered a brief (if no less vague) summation of Romer’s “meta-rules” for economic success: the idea, the august weekly explained, was “to move from bad rules, which keep people in poverty, to the sort that lets them thrive.”
To believe such facile formulas is to overlook nearly all of the meta-politics in the equation. Just for starters, the 2009 military coup that produced the Lobo presidency was spurred in large part by former president Manuel Zelaya’s 60 percent increase in the minimum wage paid to workers in Honduran cities. Evidently, a baseline living is neither a choice nor a “good rule” that Honduran citizens will enjoy in their freshly chartered state.
And Lobo’s aggressive courtship of global capital has come with ample hidden costs for ordinary Hondurans—crude reminders that when financial elites chase simple economic formulas across national borders, local populations pay. A few of the better-known casualties of Lobo’s ascension include communities contaminated by international mining operations and landless farmers pitted against Honduras’s wealthiest oligarch, biofuels magnate Miguel Facussé. Most observers agree that Zelaya’s ouster came about at least in part from the president’s willingness to pay lip service to such causes.
That error won’t be repeated by a Honduran leader anytime soon. Just to drive the point home, the Honduran National Association of Industrialists, the business trade group headed up by Miguel Facussé’s nephew, Adolfo, rushed to hail Roberto Micheletti—the putschist interim president who governed between Zelaya and Lobo—as the country’s “first national hero of the twenty-first century.”
Lobo, meanwhile, came to power after a clumsily rigged election in 2009 ratified the coup’s results, and was installed in the presidency the following year. (He subsequently won praise from Barack Obama for his putative commitment to democracy.) When the real work of Lobo’s presidency began, however, the nation’s second great hero of the new century set about scouring all traces of Zelaya’s faintly populist agenda from the economic scene. The region’s elite need no longer fear the rumored expropriation of their superfluous houses, or the specter of universal, free health care. As for their counterparts abroad, whose fund managers might well be contemplating a fresh look at Honduran portfolios, well, what better way to get the message across than a 2011 gathering called “Honduras is Open for Business”?
Held in the city of San Pedro Sula, the conference brought together investors from fifty-five countries. Distinguished guests included Carlos Slim (aka the world’s richest person), Colombia’s former president-cum-war criminal Álvaro Uribe, a clutch of U.S. officials (including Under Secretary of Commerce Francisco J. Sánchez and the U.S. ambassador in Tegucigalpa), and panelist Paul Romer. According to the Honduran daily El Heraldo, Romer cheerfully announced that the charter cities initiative now means that “the eyes of the world” are on Honduras, and that the nation as a whole can’t help but benefit from the new influx of foreign capital and technology into a Honduran Hong Kong.
One draws a blank, however, trying to determine possible benefits for the average Honduran. For one thing, the country’s institutionalized crime, its designation by the United Nations as the homicide capital of the world, and the corruption of its political class and military are presumably what makes “Hong Kong in Honduras” scenarios attractive to foreign investors looking to secure a hermetic social setting for their wealth to multiply in. The Economist delicately notes that, according to Romer, Honduran charter cities “are supposed to be open to anybody, but the inflow of people may have to be controlled. What is more, success or failure will depend not just on good rules, as in laws, but on the social norms that are established by its first inhabitants.”
Needless to say, the Hondurans who belong to what American University anthropologist Adrienne Pine has labeled the country’s “excess demographic”—“[y]oung men, especially poor young men who are undisciplined by the factory workplace or by institutions like Alcoholics Anonymous or Evangelical Christianity”—aren’t going to win residence in the controlled environment of the REDs. The plan to assign charter city policing duties to private security firms, which have been implicated in political murders and routine street-level crackdowns on civil liberties, certainly doesn’t bode well for the security of individual persons, especially if the industry continues to build on the country’s well-established precedent of violently suppressing unsightly evidence of youthful despair for the sake of foreign revenue. As the UN Special Rapporteur informed the Commission on Human Rights in 2002 with regard to the extrajudicial killing of Honduran youths, “every child with a tattoo and [every] street child is stigmatized as a criminal who is creating an unfriendly climate for investment and tourism in the country.”
Nor do things look so bright for citizens who’ve been detained and processed in the charter cities’ customized justice system, reconfigured on overtly colonial lines in an ostensible effort to crack down on drug trafficking. As The Economist reported, the Honduran legislature has recently approved “a ‘constitutional statute’ that creates [the charter cities’] autonomous legal framework”—a novel provision that enables the outsourcing of justice to a former British colony existing to the east of the African continent: “Mauritius has just announced that it will allow its supreme court to hear cases from the new entities (beyond that, in a relic of colonialism, is Britain’s Privy Council, to which the decisions of the island state’s supreme court can be appealed).”
But charter-city boosters insist, as always, that they’re not reviving colonialism—they’re promoting futurism! Here’s how Mark Klugmann, an adviser to the Honduran government on the charter city program (and a veteran policy hand from the Reagan White House’s uniquely brutal, narco-dependent machinations in Latin America) explained the wonderment of it all to the BBC: “The reality is that if you want credible institutions you can wait five hundred years or you can bring them in now.” Democracy, on the other hand, must by all means be put on hold, to be introduced only when—The Economist notes—“the time is ripe.”
As rendered in the free-market patois of the Wall Street Journal’s exultantly misanthropic editorialist Mary O’Grady, the civic innovations in Lobo’s investors’ paradise are actually breakthroughs in the struggle for “freedom”: “Now the little country that stood up to the world to defend its democracy”—by staging a military coup, formalized with fraudulent election returns—“seems to be affirming a belief that it needs to change if it wants to ward off future assaults on freedom.” In other words: War is peace. Ignorance is Strength. We have always been at war with Oceania.
Such logic-chopping is all-too-common fare in the U.S.-choreographed economic takeover of the colonial south. “It’s interesting how the charter cities concept unmasks the libertarian dream as deeply undemocratic,” critic Doug Henwood told me. “The compatibility of Pinochet and Milton Friedman offered plenty of hints, but this Honduran experiment looks like conclusive proof. First you need a coup. And then you need to set up a zone of freedom—but a special kind of freedom. Not the freedom of association, or of individual expression and development, but the freedom of maneuver for an economic elite to do as it pleases under a special kind of state protection.”
Heedless of such plank-in-the-eye contradictions, O’Grady proceeds to lay bare the real basis of her infatuation with the project. It is, you see, an untrammeled exercise in libertarian wish-fulfillment fantasy: “What advocate of free markets hasn’t, at one time or another, fantasized about running away to a desert island to start a country where economic liberty would be the law of the land?” This brand of First World skylarking has lately become fashionable among the Randian right; libertarian legal theorists have been peddling plans to “seastead”—i.e., to create free-market utopias on board ocean vessels that remain anchored in international waters beyond the sovereignty of the hateful regulatory nation-state. The obvious retort to such Star Trek–style reveries is to suggest that the free-market faithful simply bypass the cumbersome start-up fees and naval training entailed in such schemes, and migrate directly to a free-range failed state like, say, the pirate-friendly Somali coast. But such prospects offer few tangible perks for the privileged First World pioneer of the free-market faith. Better by far to lease out a client state like Honduras and let local populations incur the uglier transaction costs. It was not for nothing, after all, that the great leader Tom DeLay dubbed the Mariana Islands—an open-air sweatshop and human trafficking hub—a “perfect petri dish of capitalism.”
The ideological enthusiasms of O’Grady and her colleagues on the libertarian Right are drearily predictable. What’s noteworthy about the charter cities movement is the bald admiration it’s garnered in the neoliberal mainstream. Consider, for instance, the testimony of Adam Davidson—the NPR economics correspondent and New York Times Magazine columnist lately found to be feathering his own revenue model with bank-financed speaking fees and junkets. In a de facto advertisement for Romer’s scheme titled “Who Wants to Buy Honduras?” Davidson cited the precedent of the authoritarian free-market regime of Singapore in approving fashion:
Singapore, Romer said, provides a good (if sometimes overzealous) model. Its strict penalties for things like not flushing a public toilet may make for late-night jokes, but they signal to potential immigrants that it is a great place if you want to work hard and play by the rules.
Not all foreign nationals working in Singapore find the country’s rules so beguiling. British journalist Alan Shadrake, for example, was arrested in 2010 for publishing work critical of the Singapore regime’s shockingly common use of the death penalty. According to a 2004 report by Amnesty International, Singapore (which doesn’t supply reliable records on the practice) was potentially the world leader in executions per capita. What’s more, Amnesty noted, the nation’s jurists typically imposed the death penalty “on the most marginalized or vulnerable members of society including drug addicts, the poorly educated, the impoverished or unemployed, and migrant workers.”
Of course, a freedom-of-speech case involving the egregious abuse of the death penalty doesn’t serve as a winsome punch line the way that toilet flushing does—any more than there’s any incentive for a speaker-fee journalist like Davidson to regard the corporate colonial adventure afoot in Honduras with a modicum of skepticism.
Davidson, meanwhile, notes that Romer is “expected to be chairman” of the board of overseers for the adventure, despite Romer’s humble TED Talk plea: “You wouldn’t want to let us [university professors] run the cities, go out and design them. You wouldn’t let academics out in the wild.”
It turns out that, false humility or no, Romer correctly surmised the market mood on this question. This fall, he was muscled out of his leadership role in the project in a deal that was drenched in all sorts of irony. For one thing, the RED initiative was found, in a battery of Honduran court challenges, to be operating without its ballyhooed transparency board, supposedly one of its central selling points to foreign investors leery of Honduras’s traditionally corrupt and cronyist political culture. And in an equally chastening development, Romer was shunted aside by a rival American band of libertarian investors, headed up by activist Michael Strong, a frequent past collaborator with the famously libertarian CEO of Whole Foods, John Mackey. That’s right: the self-appointed baron of international capital innovation was caught up short by a stateside corps of his own ideological brethren. In other words, those who can’t do, preach transparency.
What’s more, the recent convulsions atop the RED project board have left some Hondurans suspicious that there may not, in fact, be any real money or operational momentum behind the charter-city initiative. The confident dispatchers of foreign-bred investment savvy might be all talk—the question here isn’t so much “Who is John Galt,” but where the hell did he go? In any event, the finances of the project now appear to be an academic question. In what looks to be the final death knell for Romer’s Honduran dream, the country’s supreme court ruled in a lopsided 13-to-1 decision that the whole undertaking was an unconstitutional violation of the nation’s sovereignty.
Tomorrow, the World
The Honduran project may now be a dead letter, but Romer is determined to continue puffing his big idea across new frontiers. After all, as he explains: “We can scale this model. We can go do it over and over again.”
Romer has already sought to make a post-ideological splash in this hemisphere by trying to enlist Raúl Castro to help launch a charter city on Guantánamo Bay—not far from the experiment in extralegal detention that the United States has erected for noncitizen “enemy combatants” in the war on terror. (It’s not yet been suggested to recruit Guantánamo’s inmate population as a charter city workforce, but perhaps that will be the sort of flat-world synergy calculated to transcend at last the bitter ideological clashes of the Older World Order.)
Romer’s bid to remodel Cuba certainly coincides with U.S. schemes to pry open free-market opportunities in the Communist state by any means necessary. Caleb McCarry, onetime Cuba “transition coordinator” for the United States (and son of the right-wing spy novelist and former spook Charles McCarry) struck a perfect nonsensical balance in announcing his dual objective of permitting Cubans to both “recover their freedom” and “recover their sovereignty”—even as the U.S. installation on Guantánamo stands as a seemingly permanent rebuke to both ideals. This is all to say nothing, of course, of the none-too-subtle neocolonial aim of transition coordination.
But never mind. Paul Romer has already sussed out how Cuba can perform a deft end run around the untenable American position: Outsource it all to Canada! Here’s the scripted appeal to the Canadian prime minister he’s urging on Castro:
Look, the Yankees have a terrible PR problem. They want to get out. Why don’t you, Canada, take over? Build—run a special administrative zone. Allow a new city to be built up there. Allow many people to come in. Let us have a Hong Kong nearby. Some of my citizens will move into that city as well. Others will hold back. But this will be the gateway that will connect the modern economy and the modern world to my country.
Hong Kongs are everywhere for hire in the Romer universe; it’s just a matter of brokering the right deal uniting the right backers with the right client states. It’s altogether fitting that a restless sovereignty entrepreneur like Romer is something of a Where’s Waldo figure in the work of another hack New York Times neoliberal, the globetrotting corporate courtier-cum-columnist Thomas Friedman. In Friedman’s bestselling 2005 tract The World Is Flat, Romer has repeat walk-on appearances (duly paraphrased by Friedman) composed largely of buzz concepts and neologisms:
If you come up with the next Windows or Viagra, you can potentially sell one to everyone in the world. So idea-based workers do well in globalization, and fortunately America as a whole has more idea-driven workers than any country in the world.
There is also a cautionary addendum about the obsolescence of mere material production, in the firmly established tradition of Friedman’s globalizing gospel: “But if you are selling manual labor—or a piece of lumber or a slab of steel—the value of what you have to sell does not necessarily increase when the market expands, and it may decrease, argues Romer.”
Of course, if you lay these fearless pronouncements side by side, they work out to a vision of globalization that diametrically contradicts the arguments favored by both Friedman and Romer: “idea-based” workers, churning out Viagra in the American core, will crush the colonials condemned to making useful products out on the colonial periphery. Poverty isn’t solved; it’s just outsourced ever further off the developed industrial world’s grid.
But things get immeasurably worse when Romer turns his gaze toward continents that are—to him, anyway—undiscovered territory. Romer revealed to his TED crowd, for instance, that Africa is prime territory for the charter city movement: “I’ve talked with leaders in Africa. Many of them totally get the notion of a special zone that people can opt into as a rule. It’s a rule for changing rules.”
Nobel Prize–winning economist Joseph Stiglitz remarked in 2006 that “the one place in the world that has been least benefited by globalization—and I would say has been perhaps in some respects most hurt by it—has been Africa. The number of people in absolute poverty in Africa today is twice the number of what it was twenty years ago.”
The Paul Romers of the world are not, however, detained by the mundane historical record. After all, as Romer patiently explained to his TED listeners, the continent is a veritable creative-class frontier. There is, you see, “lots of land in Africa where new cities could be built . . . immense stretches of land . . . land where hundreds of millions of people could live.” And just to nail the point down, Romer displays a photo of the African coastline that he’d snapped from his airplane.
What the crowd is looking at, he assures them, is nothing less than a vast repository of unrealized capital. All it needs is simple—but not colonial!—harnessing via a bundle of strategic land transfers: “some arrangement that’s a little bit like an escrow account, where you [in other words, Africa] put land in the escrow account and [a] partner nation takes responsibility for it.” Africa, in other words, is expected to hand over its most precious asset to Western investment concerns in exchange for the promise of shared future prosperity. What could possibly go wrong?
That’s not all, however. Just as charter cities can pioneer a magically pain-free, stalwartly profitable brand of international development, so too will they usher in a new environmentally benign model of urbanization. Here’s how Romer glibly sums up the case: “We’d dramatically reduce the human footprint on Earth by building more cities that people can move to.”
As Max Ajl, a researcher in global development at Cornell University, notes, this aim is not achievable in any actually existing economic universe. The notion of “low-footprint population densities with which Romer is so infatuated . . . is based on the hidden premise that Africa and the rest of the global South should repeat, step-by-step, the development path of the global North. As is well known, we would need a couple extra worlds to supply the resources for the world’s population to live at consumption levels equaling those in Europe and the U.S.”
Still, there’s one crucial respect in which Paul Romer has drawn the most vital moral from the Hong Kong precedent. The charter city movement no doubt looks immeasurably better in the dark. And from outer space.