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Making the World Safe From Democracy, One Charter City at a Time

If you’re a Libertarian billionaire that was looking forward [1] to creating your own privately managed [2] “Free City” [3] from a seriously distressed [4] country – a city free from things [5] like democracy [6]things may be looking up for you [7]:

Honduras Once Again Passes ‘Model Cities’ Law

TEGUCIGALPA, Honduras January 24, 2013 (AP)

The Honduran congress approved once again a “model cities” project that the country’s Supreme Court had previously declared unconstitutional because it would create special development zones outside the jurisdiction of ordinary Honduran law.

Congressman Rodolfo Irias of the ruling National Party says the law “includes the necessary modifications” to answer concerns about unconstitutionality.

The vote was 110 to 13, with 5 abstentions.

The court’s rejection of the plan led Congress to fire four of the court’s five justices in December.

The plan would create “special development regions” with their own independent tax and justice systems, to spur economic growth in this Central American country struggling with corruption and crime.

The project was opposed by civic groups as well as the indigenous people.

Ooooo…these charter cities sound so nice the Honduran legislature had to pass the plan twice. Although it sounds there are some Hondurans that aren’t entirely on board with the idea. Perhaps they just weren’t sold on the idea behind the charter cities: that the key to reversing decades of poverty and deep, entrenched corruption is to hand over governance to Libertarian billionaires? Why can’t they see the light? [8]

The New York Timne
Who Wants to Buy Honduras?

Published: May 8, 2012

Shortly after the 2009 coup that overthrew Manuel Zelaya, Honduras’s newly elected president, Porfirio Lobo, asked his aides to think big, really big. How could Honduras, the original banana republic, reform a political and economic system that kept nearly two-thirds of its people in grim poverty?

One young aide, Octavio Rubén Sánchez Barrientos, had no idea how to undo the entrenched power networks. Honduras’s economy is dominated by a handful of wealthy families; two American conglomerates, Dole and Chiquita, have controlled its agricultural exports; and desperately poor farmers barely eke out subsistence wages. Then a friend showed him a video lecture of the economist Paul Romer, which got Sánchez thinking of a ridiculously big idea: What if Honduras just started all over again?

Romer, in a series of papers in the 1980s, fundamentally changed the way economists think about the role of technology in economic growth. Since then, he has studied why some countries stay poor even when they have access to the same technology as wealthier ones. He eventually realized something that seems obvious to any nonacademic, that poor countries are saddled with laws and, crucially, customs that prevent new ideas from taking shape. He concluded that if they want to be rich, poor countries need to somehow undo their invidious systems (corruption, oppression of minorities, bureaucracy) and create an environment more conducive to business. Or they could just start from scratch.

Then he decided to put the theory into practice. In 2009, Romer developed the idea of charter cities — economic zones founded on the land of poor countries but governed with the legal and political system of, often, rich ones. There were a couple of interested parties. (The president of Madagascar was intrigued by a preliminary version of the idea, Romer told me, but he was soon ousted in a coup.) Then, in late 2010, Sánchez met with Romer, and the two hurriedly persuaded President Lobo to make Honduras the site of an economic experiment. The country quickly passed a constitutional amendment that allowed for the creation of a separately ruled Special Development Region.

Romer’s charter city is trying to avoid this dark side of urbanization by adapting older, more successful models. The United Arab Emirates, Hong Kong and Singapore were able to build well-designed cities that housed and employed millions, in part by persuading foreigners to invest heavily. Dubai created a number of micro­cities — one of which, for instance, is governed by a system resembling English common law with judges from Britain, Singapore and New Zealand.

Each has had well-known flaws, but Romer said the core idea can be replicated without them. The new Honduran charter city can work, he said, if its foreign leadership can similarly assure investors that they’ve created a secure place to do business — somewhere that money is safe from corrupt political cronyism or the occasional coup. If a multinational company commits to building new factories, real estate developers will follow and build apartments, which then provide the capital for electricity, sewers, telecom and a police force.

Note that President Lobo – the president that was “elected” in 2009 following the coup – is a big example [9] of the kind of deep corruption that he’s apparently trying to fix with charter cities.

Also note that each of the “older, more successful models” – The United Arab Emirates, Hong Kong and Singapore – are all undemocratc. And keep in mind that Patri Friedman, Milton Friedman’s grandson, stepped down as the head of Peter “I no longer believe democracy is compatible with freedom [10]” Thiel’s Seasteader Institute to lead Future Cities Development, Inc. [11] which is going to have its first project in Honduras [12].


Romer hasn’t yet been able to persuade any nations to take on the role of custodian (Sweden and Britain both passed), so Honduras has named a board of overseers until there are enough people to form a democracy. Romer, who is expected to be chairman, is hoping to build a city that can accommodate 10 million people, which is 2 million more than the current population of Honduras. His charter city will have extremely open immigration policies to attract foreign workers from all over. It will also tactically dissuade some from coming. Singapore, Romer said, provides a good (if sometimes overzealous) model. Its strict penalties for things like not flushing a public toilet may make for late-night jokes, but they signal to potential immigrants that it is a great place if you want to work hard and play by the rules.

There will be many rules in Romer’s charter city too. Even though he expects most initial opportunities will be fairly low-paying basic industrial jobs, the local government will mandate policies that ensure retirement savings, health care and education. According to Romer’s plan, the immigrants who arrive will not get rich, but their children will eventually be ready to climb the economic-development ladder.

Hmmm…a planned charter city of fairly low-paying basic industrial jobs. On the one hand, that means many of those planned jobs will be filled by robots in a decade or two, but on the other hand at least Paul Romer is envision a guaranteed healthcare and education mandate. It would be interesting to see if that healthcare mandate includes guaranteed healthcare even if the low-paid workers can’t afford it or if it’s one of those other kinds of “mandates” [13]. You also have to wonder if there’s going to be the kind of labor law mandates that ensure workers can still afford to live without having to work so many hours that they don’t have enough free time to spend reading the history of thier countriy. This might include the history of how their oligarch overlords first took over and looted the country and then eventually implemented an “anti-corruption” scheme that involves selling off cities to international Libertarian consortiums that want to build privately run international-oligarch-founded city states with a distinct uber-Libertarian business-first constitutional philosophy. There won’t be an mandates that ensure the workers have enough time to learn about all that because, you [14] know [15], that would be [16] anti-freedom [17].

Unfortunately, there isn’t much chance that we’ll find out how Mr. Romer’s envisioned mandates would have played out because while the Charter Cities plan is back on the agenda, Romer is no longer part of the project. He had been leading the “Transparency Panel” for the project to ensure that the whole endeavor would be negotiated in a public, responsible manner that would lay the foundations for long-term trust between the Honduran public and the international investors that would be financially backing the cities. But he decided to quit in protest last October after he found out that the Honduran government had already worked out a deal with the first group of investors in secret [18]:

The New York Times
Plan for Charter City to Fight Honduras Poverty Loses Its Initiator
Published: September 30, 2012

MEXICO CITY — Paul Romer is a respected economist with an unconventional plan to lift people out of poverty. And in Honduras, he thought he had found a government eager to put his ideas into practice.

What if you simply sweep aside the corruption, the self-interested elites, and the distorted economic rules that stifle growth in many poor countries and set up a brand new city with its own law and governance?

The charter city, as Mr. Romer calls it, would be administered by countries that have developed strong institutions and rule of law. If it sounds crazy, think of Hong Kong.

Once Honduras signed on and its Congress passed a law at the beginning of 2011 to start the process, the concept moved from big idea to a tentative possibility. Stories followed in The Economist, The Wall Street Journal and The New York Times Magazine.

But now, Mr. Romer, an expert on economic growth, is out of his own project, tripped up by the sort of opaque decision making that his plan was supposed to change.

The tipping point came with the announcement a few weeks ago that the Honduran agency set up to oversee the project had signed a memorandum of understanding with its first investor group.

The news came as surprise to Mr. Romer. He believed that a temporary transparency commission he had formed with a group of well-known experts should have been consulted. He withdrew from the project.

The law setting up Honduras’s experiment in a charter city, a special development region, or RED in its Spanish initials, creates flexibility that promotes innovations, but requires strict disclosure along the way, Mr. Romer said. “The one absolute principle is a commitment to transparency,” he said.

The investor group is led by Michael Strong, an activist who has worked in the past with libertarians like John Mackey, the founder of Whole Foods. He promises that his investors include Silicon Valley entrepreneurs and Central American investors, but when pressed for details, named only one Guatemalan businessman.

Opponents on the left have been filing challenges with the Honduran Supreme Court against the charter cities plan. The news of the investment deal brought more.

According to Mr. Strong and others involved in the project, including Mark Klugmann, an American consultant who is working with Mr. Sánchez, the transparency board never legally existed. Mr. Sánchez agreed, although he had never disputed the existence of the board in the past.

Mr. Romer said that President Lobo signed the decree in his presence in December. But he acknowledged that the board was on tenuous legal footing because of the challenges in the Supreme Court. The decree was never published.

Mr. Romer is now looking elsewhere.

“If it were easy to undertake social reform, it would have happened,” he said. “You just have to keep trying.”

The loss of the adademic visionary that was providing the intellectual justifications for the project was certainly a blow to the whole affair. Mr. Romer is still looking elsewhere [19] to create his vision but his leaving wasn’t a deathblow to the project. That came a few weeks later [20]:

The Atlantic Cities
Probable Deathblow of the Day: Charter Cities Struck Down in Honduras

Henry Grabar
Oct 22, 2012

Over the last year, Paul Romer’s ambitious and controversial vision for Charter Cities — foreign-run economic colonies designed to bring wealth and stability to poor countries — has been moving quickly towards reality in the Honduran jungle. But a rapid series of setbacks may have brought the project to a halt.

Last month, the project’s Transparency Commission, an oversight committee featuring Romer and several other prominent economists, was excluded from agreements between the Honduran government and international development companies, prompting fears about corruption. (One of those companies, the Future Cities Development Corporation — slogan: “Creating Humanity’s Future” — was founded by Patri Friedman, grandson of Milton, who wrote in 2009 that “democracy is not the answer.”)

Later that month, a prominent Honduras human rights lawyer who had filed one of dozens of legal challenges to the “model cities” decree, was murdered, inspiring further speculation.

Last Wednesday, the Honduran Supreme Court ruled that last October’s alterations to the Honduran constitution removing national territory from government control were unconstitutional. A branch of the court had come to that conclusion earlier this month, but because the decision (4-1) was not unanimous, the full court convened to vote. It struck down the legislative decree 13 to 2.

President Porfirio Lobo, one the project’s biggest supporters, was upset by the decision, insinuating that the court was influenced by external economic and political interests. He encouraged Hondurans to go to the Supreme Court to look for the jobs that the body’s ruling had denied them. “I’m sure they’re not thinking about the harm they’re doing to the Honduran people,” he said.

Deathblows like supreme court rulings that rule the project unconstitutional are difficut hurdles for any project that requires an aire of legitimacy. Deathblows to prominent opponents of the project are even worse [21]. But as the first article [7] indicated, where there’s a will, and lots of money, and a corrupt government, there’s a way [22]. Yes, things are looking up [23] for Libertarian oligarchs in Honduras.