Bryan Caplan  

Charter Cities vs. Anti-Foreign Bias

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The Atlantic's got an incredible profile of Paul Romer.  The highlight is yet another example of how anti-foreign bias blocks paths to progress.  Romer seemed close to getting two charter cities in Madagascar, then things went pear-shaped:
Barely a year after launching his venture, Romer was on the brink of a rare coup: a nation of 20 million people was about to embrace a neo-medieval, neo-colonial scheme untested in the modern history of development. But then a different sort of coup occurred--the kind of coup, unfortunately, that underscores the obstacles to Romer's project.

Even as Romer was meeting with Ravalomanana, the president's main political opponent was sniping at the proposed lease of farmland to Daewoo, and the idea of giving up vast swaths of territory to foreigners was growing increasingly unpopular. The arrangement was denounced as treason, and public protests gathered momentum, eventually turning violent... Soon, Ravalomanana was forced out of office.

I think Romer underestimates the danger that corrupt governments will "lease" land that other people already own.  But all things considered, I'm on his side.  The greater danger is that populist governments will exclude foreigners from turning empty land into the next Hong Kong.


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COMMENTS (6 to date)
John Fast writes:

1. So the citizens of Madagascar will continue to wallow in their own poverty. This wouldn't be so bad except that in a democracy *everyone* has to take what the majority wants, so everyone gets what the majority deserves.

2. I despise anti-foreign bias the way those with anti-foreign bias despise foreigners. Nevertheless, it is helpful (on a practical level) to understand exactly why people have it. If we understand what they are afraid of, and what they want, we can figure out how to negotiate an agreement that they will accept. (Bryan, this is most of what I meant by "compassion" during our conversation at lunch. I assume you can see how one can simultaneously be compassionate *and* firm.)

My guess is that the locals are afraid that foreigners who don't care about them will be allowed to mistreat them and violate their rights, and they will end up no better off, and probably worse off.

There are some pretty straightforward ways to deal with such issues in order to (truthfully) reassure people.

3. I enjoyed the link under the word "another" and I don't see its relevance to this article. What am I overlooking? (Or are you claiming that the fact that businesses in poorer countries don't use best management practices is caused by anti-foreign bias?)

Robert writes:

I imagine some of the anti-foreign bias also consists of a fear of environmental degradation. Economist don't like to go into too much detail about negative externalities. But that fear is a reality they (economists) need to confront head on.

Rebecca Burlingame writes:

Paul Romer is one of the better examples of what the dialogue for change is finally becoming. Sure, problems galore...but five years ago, not many were really seriously considering starting new economic scenarios from scratch

Steve Sailer writes:

We have a good example of an economic powerhouse city founded as recently as 1909 by enlightened Westerners in a backwater part of the world: Tel Aviv.

For some reason, though, the locals who were living in the area at the time have never been all that pleased by the existence of Tel Aviv. Fortunately, Tel Aviv is guarded by a huge air force armed with about 100 or more nuclear weapons.

How many nukes is Dr. Romer budgeting for to defend his charter cities from being sacked by resentful locals?

R. Pointer writes:

I was unimpressed with Romer's Econtalk interview. He really seems not to understand politics very well.

He would do well to sit and think about Douglas North's most recent book: Violence and Social Orders (With Wallis & Weingast).

Steve Sailer

There is no reason to go fishing for other analogies when plenty have been provided. What about Hong Kong? Singapore? Yes Yes I understand the IQ argument etc. But remember the wage gap between African Americans and Africans? There's no reason for it to stay that large.

Choosing Tel Aviv is an awesomely disingenuous feat as an example. Its whole raison d'etre was ethnic self-determination in an ANCIENT homeland...not an exterior plant.

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