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Methods of Development | Creating Cities to Create Growth

September 21, 2011

The City of Ambition (1910) | Source: Alfred Stieglitz, The Metropolitan Museum of Art

Once upon a time, cities grew organically, naturally. They developed in coastal areas, grew into hubs for trade and commerce, and served as departure points for exploration. Slowly they industrialized, inviting factories and businesses, blossoming from the added wealth of new resources and new venues for spending. While those characteristics are the fairy tale reality for some cities, others are hampered by rapid industrialization that leads the way to uneven development, slums, and inefficiency. In the developing world, cities have sprouted in places and ways not conducive to sustainable growth and development. In contrast, new proposals suggest harnessing a city’s potential for growth to increase development, innovation, and entrepreneurship—and even address humanitarian efforts at the same time.

According to prominent environmental author Bill McKibben in his book Deep Economy, if we expect developing nations to develop in the same ways as the developed countries did, we are setting ourselves up for an unsustainable project that will damage the environment and raise consumption and production levels to epic proportions. Furthermore, Mike Davis in Planet of Slums notes that rapid urbanization has caused slums to develop around megacities in the global South. The huge populations in these cities drain resources, leaving people with little means to survive. 

So instead of asking whether a city is the best vehicle for industrialization, perhaps we should ask if a different city model can better allow for both industrialization and prosperity. New York University economist Paul Romer suggests building charter cities—vacant pieces of land that will allow people to move from one country to another voluntarily, in order to live with rules and laws that ensure opportunity and prosperity. He outlines:

  • This legal system, possibly backed by the credibility of a partner country, will be particularly important in the early years of the cityʼs development, when private investors finance most of the required urban infrastructure.
  • There are three distinct roles for participating nations: host, source, and guarantor. The host country provides the land. A source country supplies the people who move to the new city. A guarantor country ensures that the charter will be respected and enforced for decades into the future.
  • Because these roles can be played by a single nation or by several countries working together as partners, there are many potential arrangements.

Romer’s proposal seeks to combine public and private investment in order to develop cities that will provide basic utilities (legal system, transportation structure, infrastructure) and social goods (job opportunities, education, healthcare) for inhabitants otherwise disenfranchised within their current living conditions.

Social entrepreneur Michael Strong also proposes a similar methodology based on free zones; entitled Free Cities, he maintains that cities would develop on previously vacant land. Once re-zoned, the land multiplies in value and the taxes/rent/dividends are used for supporting other humanitarian projects. Foreign businesses and entrepreneurs will rush to fill the gaps needed to create a politically autonomous city, attracting significant amounts of investment and providing thousands of people with the option of a new home.

Dubai Before and After Free Zone Economic Development | Source: Michael Strong

While the characteristics of cities could change because of the ideas of Romer and Strong, Romer has received criticism for his idea of charter cities. Romer and Strong maintain that growth lies within the development of cities, and that cities will yield funds and rules for development and humanitarian efforts. Nevertheless, creating something new from scratch is not always the most efficient mechanism, especially if it involves international land/sovereignty negotiations and developing untouched land.

A successful city should be able to provide for its inhabitants while also achieving economic growth. Also, while the shift from rural to urban sectors is usually a sign of healthy development, agriculture is essential to the city’s survival as well. The construction of a city as a development mechanism is rooted in the Industrial Revolution. While a city is viewed as efficient because of its abundance of people, businesses, and ideas, it should not be viewed as the only way to develop and provide people with economic and social opportunities. As usual, a decision must be made: to start over (thank you, Romer and Strong), or reform what currently exists? The alternative options suggested are sure to tempt some governments, but then again, they may require too much time and effort to be given much thought.

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6 Comments leave one →
  1. September 23, 2011 3:09 pm

    Thanks for the post, Laura, good to have the exposure.

    I would add that from my perspective the most fundamental issue really is allowing developing world populations access to the world-class legal systems needed for entrepreneurship and commerce. A glance at the Doing Business rankings or economic freedom indices give some indication of just how hard it is to do business in most developing nations. Moreover, these obstacles to business most harm indigenous entrepreneurs – multinationals can afford to pay people to do the paperwork or bribe people to get around it. Ordinary people in developing nations typically cannot afford to create legal businesses. Or, put another way, as long as one remains in the gray market, one is always vulnerable to unpredictable predation from government authorities; this is the real, largely unrecognized, lesson of Mohamed Bouazizi’s immolation.

    Thus while everything else you say is true, for me the most urgent need is to create access to these world-class legal systems so that of the billions of potentially entrepreneurial people in the developing world a growing fraction of them can begin to create scaleable legal businesses that create jobs, opportunity, prosperity, role models, and peace in nations where these are most needed. For me, while urban growth will continue to happen regardless, the real issue is not the creation of cities de novo, but creating access to legal systems that allow for greater well-being.

    My wife happens to be a Senegalese entrepreneur, so these obstacles to entrepreneurship are not merely arguments in development economics but very real issues whenever we are on the ground in Senegal.

    • September 27, 2011 11:24 am

      Michael, thank you for your comment. I appreciate your clarification of the value of entrepreneurship within the Free Cities project. The focus on entrepreneurship as a result of better legal systems is an important part of Free Cities, and one that would contribute positively to development. However, if there remains this pent up entrepreneurial talent, I find it difficult to believe that those countries would willingly allow those people to leave to inhabit a new city abroad. In some senses, if this entrepreneurial ability can be recognized within the country through changes in the legal system, there would be no incentive for that country to allow its citizens to move their entrepreneurial talent to benefit the development of others. Perhaps an additional positive result would come from the remittances sent from the new cities back to the entrepreneurs’ families, which would lead to development both within the new city and the entrepreneur’s country of origin.

  2. allan henderson permalink
    September 24, 2011 1:24 pm

    “[The city] should not be viewed as the only way to develop and provide people with economic and social opportunities.”

    The expressed preference of past and present human populations has overwhelmingly been to leave the fields and migrate to cities of one sort or another. It’s not certain that this trend will continue until humanity is fully urbanized, but that’s the way to bet.

    “creating something new from scratch is not always the most efficient mechanism”

    It must be cheaper to build physical infrastructure en masse than to build it piecemeal. I don’t know if the same scale economies apply to other goods produced by a new city, such as law, policing and public services, but it’s hard to imagine that it would be at much of a disadvantage in any of these areas.

    More importantly, organically growing the world’s best cities is not possible, because they are walled in by state borders that their would-be customers aren’t allowed to cross.

    • September 27, 2011 11:25 am

      Allan, thanks for your comment. With regards to your second point about building physical infrastructure en masse versus piecemeal, I would think that the ability to fund the physical development of a city in one wave (as opposed to several waves) would require substantial capital and investment. That being said, I think investing in an existing city, in order to provide more services/infrastructure/etc. would be more appealing to the investor than to deposit large amounts of capital and investment with the promise of future inhabitants. As to your final point, I understand that if the barrier to creating cities is the legal framework of the country, then that would prevent entrepreneurship. However, that does not suggest that those entrepreneurs could not band together within their countries to either start their own cities (much like the informal infrastructure that organically develops within slum communities) or use their collective power to combat the corrupt bureaucracy and bribes of the legal system.

  3. Mike53924857 permalink
    September 29, 2011 1:13 pm

    There is no question in my mind that city-sized political, independent units are the best way to promote prosperity, just look at the list of wealthies countries (PPP GDP per capita):

    2. Liechtenstein $141,100
    3. Luxembourg $82,600
    4. Singapore $62,100
    7. United Arab Emirates (includes Dubai) $49,600
    10. Hong Kong $45,900

    I am personally moving to Singapore in January 2012 because of the second-to-none package it provides in terms of low taxation, pro-entrepreneurial policies, top-notch infrastructure, peaceful attitude, and ideal location (weather, neighboring countries).

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  1. The Hudson Institute Discovers Free Cities and asks ‘Why Not Traditional Reform?’ « Let A Thousand Nations Bloom

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