Student Op-Ed: Paul Romer’s Charter Cities – A Crazy Ambitious Social Solution?

Screen Shot 2015-06-16 at 10.09.26 AMKelsey Sobczak is a recent graduate from the Mendoza College of Business in Management Entrepreneurship with a second major in Economics. During her time at Notre Dame, she was heavily involved in the Student Union Board and worked on campus as a math, business, and economics tutor for student athletes. This past year her business idea, Underground Sound, won best undergraduate written business plan in the McCloskey Business Plan Competition. She is originally from Seattle, Washington, and is looking forward to her new life in Chicago as a consultant with Deloitte.

Sometimes, the world’s problems require crazy good ideas to solve them – emphasis on the crazy.  In a TED Talk from 2009, Paul Romer discusses the potential of charter cities as a means to address access and opportunity gaps between the 1stand 3rd worlds. Romer, an economist out of NYU, argues that standard of living discrepancies arise from a structure of bad rules. Charter cities, backed by parent country partnerships and run via a specialized but standardized set of ‘good’ rules, is Romer’s answer. Charter cities could be built from scratch in high opportunity areas and populated on an opt-in basis. In this way, it is very different from colonialism. Participation in charter cities would be completely voluntary; societal choices built into the charter city model ensures the system is not one of coercion and condemnation. Ultimately, it is hoped that the same economic boom that sprung out of Hong Kong, a unique free market area of China, in the 1950s can be recreated elsewhere. Romer asserts that charter cities would lead to a global alleviation of urban overpopulation, a decrease in crime, an increased access to basic utilities, increased jobs, better education, and improved sanitation.

This is a pretty novel idea with a lofty, but positive goal. Clearly, Romer’s charter cities hope to achieve a greater societal good. The progression from solely donation-based organizations to businesses with a social goal as a vehicle for social change is a relatively recent shift. Romer’s preposition takes this to another level: instead of a sustainable social enterprise to successfully address social needs, charter cities can create an entirely sustainable community network devoted to addressing social needs. This is like taking a social venture and multiplying it. Certainly, a charter city in fruition could act as a hotbed for social startups.

The idea, however, doesn’t come without potential problems. Main concerns include how charter cities’ ‘good’ rules of governance will be established unanimously and then subsequently standardized. On a macro scale, what would happen when partner countries that are jointly invested in the project disagree? Differences between countries’ underlying social standards may present a problem. Before a charter city is ever fully conceived, simply working with an existing government throughout the startup process may prove difficult. Oftentimes, areas that offer the greatest opportunity for a charter city have not succeeded in the past because of integral issues, such as corruption, a lack of infrastructure, civil conflict, etc.

Image from New York Times article 'Who Wants to Buy Honduras'

Image from New York Times article ‘Who Wants to Buy Honduras’

A lack of transparency in the tentative execution of Romer’s charter city idea actually caused Romer to drop out of his own project in 2012. The Charter Cities Urbanization Project hoped to work with the Honduran government to set up a charter city in the country, a project locally called RED or Region Especial de Dessarrollo. When the government started to show signs of favoritism towards special interest investor groups that bypassed the temporary transparency commission assigned to the program, Romer withdrew his participation from the project. Still, the charter cities movement had traction and moved forward in tandem with the Honduran government on shaky support from stakeholders. Romer continues to pursue his idea elsewhere.

Romer’s idea certainly should not be discounted as a failed attempt. As an ongoing process, success could still be achieved. People should look at the idea and ask for more. More information, research, ideation, collaboration, and beta testing is necessary to truly validate or discredit the charter cities initiative. Most impressively, it is a big idea that has the potential to address big problems – rarely does the social space see such aptly scaled ideas given the vastness of access and opportunity gaps. At the very least, Romer’s charter city is ambitious, but valiant; crazy, but hopeful.

Are charter cities crazy enough to work? Let Irish Impact know what you think by commenting on this post!

Sources for article:

http://urbanizationproject.org/blog/charter-cities

http://www.nytimes.com/2012/10/01/world/americas/charter-city-plan-to-fight-honduras-poverty-loses-initiator.html?_r=0

http://marginalrevolution.com/marginalrevolution/2012/09/paul-romer-on-what-happened-in-honduras.html

http://www.nytimes.com/2012/05/13/magazine/who-wants-to-buy-honduras.html

One response to “Student Op-Ed: Paul Romer’s Charter Cities – A Crazy Ambitious Social Solution?

  1. An interesting and important article, Kelsey! Thanks. I was able to take a close look at charter cities during my ND MBA internship with Intellectual Ventures, and, from what I can tell, the only “successful” charter cities to date have been those sponsored by centrally planned or autocratic countries. This is for exactly the reason you pointed out: the problem of maintaining stable, long-term, and unanimous support for such ambitious, capital intensive projects. Masdar city, sponsored by the autocratic prince of the UAE, is often cited as the best modern case study. But it is having problems of its own…

    Like

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