June 17, 2010

JACK KEMP CALLED THEM EMPOWERMENT ZONES:

The Politically Incorrect Guide to Ending Poverty: In the 1990s, Paul Romer revolutionized economics. In the aughts, he became rich as a software entrepreneur. Now he’s trying to help the poorest countries grow rich—by convincing them to establish foreign-run “charter cities” within their borders. Romer’s idea is unconventional, even neo-colonial—the best analogy is Britain’s historic lease of Hong Kong. And against all odds, he just might make it happen. (Sebastian Mallaby, The Atlantic)

Halfway through the 12th century, and a long time before economists began pondering how to turn poor places into rich ones, the Germanic prince Henry the Lion set out to create a merchant’s mecca on the lawless Baltic coast. It was an ambitious project, a bit like trying to build a new Chicago in modern Congo or Iraq. Northern Germany was plagued by what today’s development gurus might delicately call a “bad-governance equilibrium,” its townships frequently sacked by Slavic marauders such as the formidable pirate Niclot the Obotrite. But Henry was not a mouse. He seized control of a fledgling town called Lübeck, had Niclot beheaded on the battlefield, and arranged for Lübeck to become the seat of a diocese. A grand rectangular market was laid out at the center of the town; all that was missing was the merchants.

To attract that missing ingredient to his city, Henry hit on an idea that has enjoyed a sort of comeback lately. He devised a charter for Lübeck, a set of “most honorable civic rights,” calculating that a city with light regulation and fair laws would attract investment easily. The stultifying feudal hierarchy was cast aside; an autonomous council of local burgesses would govern Lübeck. Onerous taxes and trade restrictions were ruled out; merchants who settled in Lübeck would be exempt from duties and customs throughout Henry the Lion’s lands, which stretched south as far as Bavaria. The residents of Lübeck were promised fair treatment before the law and an independent mint that would shelter them from confiscatory inflation. With this bill of rights in place, Henry dispatched messengers to Russia, Denmark, Norway, and Sweden. Merchants who liked the sound of his charter were invited to migrate to Lübeck.

The plan worked. Immigrants soon began arriving in force, and Lübeck became the leading entrepôt for the budding Baltic Sea trade route, which eventually extended as far west as London and Bruges and as far east as Novgorod, in Russia. Hundreds of oaken cogs—ships powered by a single square sail—entered Lübeck’s harbor every year, their hulls bursting with Flemish cloth, Russian fur, and German salt. In less than a century, Lübeck went from a backwater to the most populous and prosperous town in northern Europe. “In medieval urban history there is hardly another example of a success so sudden and so brilliant,” writes the historian Philippe Dollinger.

Perhaps the only thing more remarkable than Lübeck’s wealth was the influence of its charter. As trade routes lengthened, new cities mushroomed all along the Baltic shore, and rather than develop a legal code from scratch, the next wave of city fathers copied Lübeck’s charter, importing its political and economic liberties. The early imitators included the nearby cities of Rostock and Danzig, but the charter was eventually adopted as far afield as Riga and Tallinn, the capitals of modern Latvia and Estonia. The medieval world had stumbled upon a formula for creating order out of chaos and prosperity amid backwardness. Lübeck ultimately became the seat of the Hanseatic League, an economic alliance of 200 cities that lasted nearly half a millennium.

Fast-forward several centuries, and Henry the Lion’s would-be heir is Paul Romer, a gentle economist at Stanford University. Elegant, bespectacled, geekishly curious in a boyish way, Romer is not the kind of person you might picture armed with a two-handed flanged mace, cutting down Slavic marauders. But he is bent on cutting down an adversary almost as resistant: the conventional approach to development in poor countries. Rather than betting that aid dollars can beat poverty, Romer is peddling a radical vision: that dysfunctional nations can kick-start their own development by creating new cities with new rules—Lübeck-style centers of progress that Romer calls “charter cities.” By building urban oases of technocratic sanity, struggling nations could attract investment and jobs; private capital would flood in and foreign aid would not be needed. And since Henry the Lion is not on hand to establish these new cities, Romer looks to the chief source of legitimate coercion that exists today—the governments that preside over the world’s more successful countries. To launch new charter cities, he says, poor countries should lease chunks of territory to enlightened foreign powers, which would take charge as though presiding over some imperial protectorate. Romer’s prescription is not merely neo-medieval, in other words. It is also neo-colonial.


That is the sense in which globalization is a form of Anglo-American imperialism. But it's dang benign, no?

Posted by Orrin Judd at June 17, 2010 6:09 AM
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