Unabridged Introduction (pdf)
A charter city is a new type of special reform zone. It extends the concept of a special economic zone by increasing its size and expanding the scope of its reforms. It must be large enough to accommodate a city with millions of workers and residents. Its reforms must extend to all the rules needed to support exchange in a modern market economy and structure interactions in a well-run city.
The concept allows for cross-national government partnerships that facilitate the transfer of working systems of rules to greenfield locations. By adhering strictly to two key principles — that the new rules apply only to people who choose to live under them and that they apply equally to all residents — rules can be copied from elsewhere and still achieve a high degree of local legitimacy.
The Role for Rules
In too many places, weak or outdated rules hold people back. Some rules limit who can sell power, so electricity is expensive. Others fail to contain crime. Others make it difficult to start a business or open a plant. Because of this, firms build new factories not in places where the need for work is highest, but in places where electricity is inexpensive, people and property are safe, and doing business is relatively easy. The few workers who manage to migrate from places with inefficient rules to places with better rules end up earning wages that are many times higher than what they can earn in the places they leave behind.
The worldʼs poor know that better rules prevail elsewhere. Gallup reports that 630 million people would like to move permanently to another country. If they could, more would surely follow, but they cannot because voters in the countries where they want to go, the countries with the best rules, will not let them in.
The world needn’t choose between forcing migration on countries that do not want it and shutting out those who want to escape inefficient rules. Charter cities offer a third option. By copying rules that work, new cities can quickly give millions of people the chance to move to places that start with better rules.
Charter City Structure
The concept is very flexible, but all charter cities should share these four elements:
- A vacant piece of land, large enough for an entire city.
- A charter that specifies in advance the broad rules that will apply there.
- A commitment to choice, backed by voluntary entry and free exit for all residents.
- A commitment to the equal application of all rules to all residents.
The broad commitment to choice means that no person, employer, investor, or country can be coerced into participating. Only a country that wants to create a new charter city will contribute the land to build one. Only people who make an affirmative decision to move to the new city will live under its rules. They will stay only if its rules are as good as those offered by competing cities.
A charter should describe the process whereby the detailed rules and regulations will be established and enforced in a city. It should provide a foundation for a legal system that will let the city grow and prosper. 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. Consider the following hypothetical cases. (They do not reflect actual conversations or projects.)
- One country could assume all three roles, much as China did in establishing the special economic zone where the new city of Shenzhen emerged. India is considering such a path, using innovative governance structures and public-private partnerships to create new cities on greenfield sites.
- One country could serve as both the host and the guarantor. Another could be the primary source. For example, Brazil might create within its borders an open city with a special legal structure, inviting Haitians to be residents of this zone but not of Brazil as a whole. If conditions in Haiti do not improve or if local hostility to the UN’s MINUSTAH becomes excessively problematic, Brazil may need an alternative to the mission. A charter city in Brazil would give Haitians who want to live under Brazilian rules and policing a chance to do so, without forcing this arrangement on those who do not.
- One country could serve as both the host and the primary source, but a coalition of partners could act as guarantors. For example, Mauritania could host a charter city in which most of the residents are Mauritanians. New Zealand and Norway could act as guarantors. By cooperating with these partners, Mauritania may be able to induce higher levels of investment and employment than it could achieve on its own.
These are just a few of many possibilities. The UN estimates that 3 billion people will move to cities in the next few decades. The question is not whether, it’s where and under what conditions. As it stands, many of the people moving to cities will end up in slums. There is a better option. The world has room for dozens, perhaps hundreds, of newly chartered cities. Whether they involve countries acting alone or in partnerships, charter cities can create opportunities for millions of people to access better rules and lead safer, healthier, and more prosperous lives.