Charter cities

The same Cities edition that my paper on Tokyo is in (December 2022) runs a short article by Matthew McCartney, a senior researcher at the Charter Cities Institute, and former SOAS professor.

Entitled “Paul Romer, charter cities and lessons from historical big infrastructure?”, the paper cites two “forgotten” case studies of charter cities, i.e., the Panama and Suez Canals. They both had charters and saw large cities grow within their chartered territory.

McCartney uses the two case studies to criticize and complement Romer’s charter cities concept. I will try and summarize some of the article’s salient points first.

According to McCartney, both Panama and Suez Canals highlight one of the more controversial aspects of Romer’s idea, i.e., that of the charter cities having a sovereign “guarantor”, or Western power with superior institutions whose legislative framework and financial muscle can expedite the charter cities’ development, practically suspending the host government’s constitution in the chartered territory.

Alas, in the two case studies, these sovereign guarantors happened to be colonial powers (U.S. and France, respectively) and the relationship between them and the two host governments was extremely unequal. Most advocates for charter cities have since dropped this feature from their “wish list” given its, well, neocolonial flavour.

Next, McCartney writes that Romer underplayed the role of the host government in underwriting these projects. The private sector’s shortcomings in providing long-term capital for hard and social infrastructure, especially given chronic cost overruns and capital market failures, are instructive and can be seen in both Panama and Suez Canals. Panama and Egypt had to assume significant financial risk to ensure the long-term viability of the infrastructure projects.

According to McCartney, Romer also did not pay due attention to distributional implications of charter cities, i.e., how elite-incumbents at a national or subnational level must be “bought in” to ensure the success of the undertaking (e.g., by regular payments to the host government or subnational stakeholders in the form of concession payments).

Critics contend that elites might also use charter cities as a way to escape the physical and legal constraints of crammed, “dysfunctional” cities and prefer life in isolated high-security enclaves, as both historical case studies showed, and several contemporary projects also suffer from.

I have a few concerns about the paper. For one, McCartney says that “much of the contemporary international development discourse around charter cities is pessimistic or dismissive”. There are unfortunately no references to support this statement and frankly, I have not got the impression that critical takes on the concept dominate the discourse.

If thought through, much of McCartney’s paper itself is in fact very critical of charter cities. However, and perhaps reflecting his employer’s positive take on the concept, he states that “[t]he outlook for charter cities is more positive than suggested by this narrative”. I do not see much evidence for that coming out of the paper, but then again, it’s a short contribution.

The second qualm I have is that McCartney takes onboard mainstream notions of institutions (and therefore the associated body of “governance” literature) with a brief reference to Acemoglu and Robinson (2012).

The debate is obviously richer than that (e.g., via the work of McCartney’s former colleague at SOAS, Mushtaq Khan, to name but one of the vocal critics of the “governance” concept who have expressed their doubts on the causality between good institutions and development).

Another source could have been SOAS’s Tobias Franz’s work on subnational governance using Medellin as an example, which is highly relevant to the charter city discourse.

You don’t even have to go all “heterodox” to find some powerful arguments against the prevailing new institutional economics academic literature, their reliance on governance indicators for measuring progress, and the impact such views have on the funding of development projects.

For example, a strong section of an Effective Altruism “Intervention Report” on the Charter Cities Institute (assessing its value-add as a recipient of charitable giving) questions this reliance on the institutions, governance, indicators chain of analysis.

There are a few other small issues I have with the paper, e.g., the reference to a study that suggests there is hardly any undeveloped land left in the world. First, the study refers to Africa, not to the world, and second, uninhabited land parcels of 55 km2 are not a precondition for a greenfield charter city given that “inhabited” land parcels might have very few people in them, while “uninhabited” plots might be outright impossible to settle in.

Moreover, most “attractive” spots for urban development might have already been taken anyway for obvious historical and geographic reasons.

The discussion on charter cities is important and it’s great that people including McCartney publish on the topic. They will subject it to the academic scrutiny it deserves, and thereby pull it ever so slightly out of the policy / think tank arena which influences how the media is portraying the discourse.

No better place to start than this very recent FT article by David Pilling. Cited in it is the Charter Cities Institute’s initiative “NXT50”, whose promotional video is problematic if we take into account some of the issues above.

I would like to expand on this thinking in a series of posts going forward. My concern with charter city initiatives is that they are political exercises hiding under a technocratic cover. They are unlikely to be a panacea as they do not fully take into account what makes cities successful in the long run. They assume that governance is at the heart of (urban) (under-)development.

Improving the lot of the urban populations of the Global South will never be solved by charter cities alone. At their worst, they are manifestations of undemocratic and unaccountable rule or natural resource-fueled spending sprees, or both, and become white elephants even before they are finished. The resources could be better allocated to other fields, which have a better track record of lifting people out of poverty.

Meanwhile, greenfield cities will matter a lot in the future. Global heating is set to displace millions of people from their homes into more temperate climates, requiring new forms of relocation and resettlement. To see how the charter cities approach is “baked in” these urban design debates is instructive, and somewhat concerning if you take onboard some of the reservations above.

By focusing on McCartney’s paper only, I have obviously not dealt with what is a wider and richer debate on charter cities. I hope I can go into more detail in the future.

I also admit that judging the merit of charter cities by the failures of greenfield cities risks making a strawman argument. That’s generally permissible for a blog post, but would have to be expanded by a proper analysis of the underlying theoretical argument if I were to take this thinking any further.

2 thoughts on “Charter cities

  1. Everything I have read about charter cities has made me deeply skeptical. I’m interested in reading the article and seeing if it makes me reconsider my opinion.

    Even though it is a bit outside my research interest(International Security, some political economy), looking forward to reading McCartney’s (and yours) articles.

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