The Case for Nationalized Charter Cities

It is easy to understand why to some Westerners, the African continent appears to be an unsalvageable land of misery, unlikely to resemble the more developed regions of the world anytime soon. While Africa certainly isn’t all made up of famine-struck impoverished villages as some television advertisements would have one think, the continent is still the poorest on average out of the 7 and sub-Saharan Africa is home to the largest concentration of nations with low human development in the world. It’s very easy to blame a historical process or ideological current like colonialism, nationalism, capitalism, socialism, Afrocentrism, and so on for this disturbingly high level of poverty, but these approaches tend to be themselves victims of ideology and lack the nuance necessary to properly address the situation. It might be a tad bit more helpful to look more deeply at all institutions in Africa, and more broadly across the globe in all nations which have large percentages of their population living in extreme poverty.

There are two questions one ought to consider when asking why some countries are better off than others: what do economically successful and developed countries have in common with one another, and what do unsuccessful and much less developed countries have in common with each other? At first, it may be difficult to find any characteristics which fits either question, let alone one that both developed countries have and developing ones don’t (or vice versa), but a few do come to mind. All of the most developed countries are stable, have reliable cultural, political and economic institutions and use these institutions to create a strong rule of law. In contrast, the nations occupying the bottom quarter of economic development lack all or most of these things. While many have rich cultures and corresponding institutions, these are often non conducive to reliable political and economic institutions, and not a single one of these nations are able to uphold any kind of rule of law. 

The classic response to why these nations have these issues is due to colonialism. Because the European powers exploited Africa and other parts of the global south, the argument goes, those regions have no access to resources for their own industrialization, and without colonization these areas would be far wealthier. It is also common to hear defenders of this perspective cite examples of the abuse of local communities by multinational corporations, which is generally described as some form of neocolonialism. There is some truth to this, particularly in the latter argument, as private interests and some Western governments like that of France have historically made a habit of abusing African nations (though perhaps less so in the modern day) which are unable to adequately protect themselves on the international stage. However, the conclusion drawn from this is simply invalid. The truth of the matter is, most of the political systems which have existed for centuries or millennia cannot sustain consistent economic development, the rule of law as understood in the West and industrial society in general without substantial reforms. If Europeans decided not to venture into the African heartland and instead simply sold the people of these regions advanced weaponry and other technology, we would almost certainly still have had the same tribal and sectarian bloodbaths that we have seen in Africa post-decolonization. This is not to mention that the material wealth taken by colonial powers in these parts was only a fraction of the total wealth we now know of in these nations, so there is still great material wealth to be exploited.

Even if colonialism is not to blame (or even if it was), the question of how these institutions ought to be built and what the international community’s role in building them still remains unclear. The most popular approach since the decolonization has been foreign aid, sent by either Western governments themselves or by private NGOs funded by (relative to the people receiving the aid) wealthy Westerners. The premise behind aid is simple: if we inject cash, food and other resources into these struggling societies, we can alleviate problems like extreme hunger and stimulate economic growth necessary for improving the human condition. Unfortunately, even the most well-meant foreign aid can have unintended consequences such as putting farmers and producers integral to the local economy out of business and large swaths of aid being blocked or stolen by corrupt or hostile elements operating in the area, the most notable recent example of which being the Houthi rebels in the Yemeni Civil War who have been recorded as blocking or intercepting more than half of the billions of dollars worth of UN aid sent to regions experiencing famine. The solutions presented in this piece on how to fix institutions are meant to be a better alternative to conventional forms of foreign aid currently employed by the West.

It’s vital to remember why developed nations feel the moral and practical obligation to send aid at all before diving into potential alternatives. First and foremost, ignoring these issues is not only inhumane from a perspective of conventional liberal Western morality, but also harms our own communities. Swarms of refugees fleeing awful economic conditions and war often are expensive to hold and integrate, and they threaten the cultural and legal order of the communities that they flee to if they do not, while also triggering a rise in populism and other extremist ideologies. Many in-demand goods and commodities originate in these underdeveloped countries, and so endangering them can raise prices here in the west. Since Western governments have often ignored or outright supported neo colonial exploitation of these lands by private and foreign powers, we also have a moral obligation to try to do better. Lastly, developing a country successfully will benefit both its own economy, as well as even out the field of competition in regards to wages and globalisation (which in turn could help with outsourcing concerns in the West).

Economist Paul Romer once proposed “charter cities”, which are cities or regions in a third world nation that are owned, controlled and developed by a third party, generally another government. This has many advantages to it, but it may be worthwhile to go over some of its glaring disadvantages first, using Honduras as an example. The government of Honduras, after the global recession of the early 2000s, decided to open up a sort of “charter city”. It’s surprisingly reminiscent of the days of the United Fruit Company, and banana republics. Businesses are offering to make investments and start up new projects, but over the past decade few have actually being implemented, and the only notable event which transpired as a result of this policy was the displacement of natives so as to allow for these potential developments. Private corporations have been offered huge swaths of territory, but so far in this Latin American state, it has not paid off. 

We can learn several things from Honduras, but the primary one is that while the business community has an important role in developing poorer countries, they must be balanced out by state actors. As it stands, most businesses that have the interest and capital to invest in these countries to begin with have little motive to build schools or hospitals, to create strong and prosperous institutions. Businesses such as these presently need cheap labor and access to resources, not healthy and educated locals (these are obviously pluses, but they’re costly). And so instead of simply sending foreign aid, or leaving it up to global corporations, developed nations like the US should consider looking into a more nationalized variant of the “charter city” that focuses on institutions.

The African continent is filled with capital, both in the human and material sense: oil, rubber, valuable minerals, beautiful wildlife, and an ever expanding population. Yet we, and more importantly, the people who live there, have great difficulty in utilizing them. Institutions are key to ensuring that we see real gain from economic activity in Africa, as well as societal growth and stability, and charter cities (or general plots of land) may be a more effective way to go about trying to establish and cement them. Take the Southern African nation of Botswana, for example. This nation ought to be, by all standards, a hellish place. Much of it is covered by the Kalahari desert, and it’s landlocked, limiting international commerce. Yet, due to its stable political & social institutions, infrastructure, and lack of corruption, it has maintained an excellent growth rate, as well as a much higher average income than its neighbors. It flourishes in tourism, mining, and other sectors, but unlike similar countries, the people are able to profit from this due to a lack of corruption (middle income country with the fourth highest GNP in Africa). It’s literacy rate has, according to UNESCO, has increased from 69% to 83% from 1991 to 2008, and is currently at almost 90%. A few other accomplishments by this nation include one of the highest researcher densities in Sub-Saharan Africa, a budget where 21% goes to education, stable financial institutions headed by a central bank, an impressive record of economic freedom, and a far higher HDI than any of its neighbors. Now, this nation is by no means perfect; it’s been devastated by AIDS (which isn’t really something they can control), and still has substantial issues with export diversification. Nonetheless, it’s certainly a model for most Sub-Saharan African nations. 

It’s almost certain that Botswana’s excellent institutions play a role in all this, but there’s another determinant involved too. The country’s steady economic gains are in part because of its strategic utilization of its mineral deposits. The reason why they were able to achieve these kinds of results, but the Congolese, for example, could not, doesn’t lie so much in the ideological fabrics of “imperialism” or colonialism, (these obviously play some role though) as much as it does in clever decisions made by the central government. If only corporations involve themselves in these projects, many (myself included) fear it is more likely that this balance will be disrupted, especially in the case of poorer countries desperate for foreign investment.

The other major reason why states are an important factor in this whole process is security. At the end of the day, one thing that states can provide which most corporations can’t is proper security. It’s expensive to maintain a police force or combat terrorism, which is why businesses that invest in poorer countries don’t generally do these things. In fact, they usually solve this problem by not heavily investing in risky states to begin with. A state, however, can easily do this, particularly wealthy first world states, so it may be in the interest of “dangerous” poorer countries to voluntarily permit such bargains. Regardless of what some doves in the West may claim, this is already happening. Under the Chinese One Belt One Road Initiative, the PRC has been able to invest in nations like Pakistan that otherwise shunned by much of the international and business communities. (and perhaps for good reason, though this is a matter for a separate discussion). What’s more, when the Chinese were able to take control of some of the ports that they built, they were immediately able to provide increased services for both locals and themselves, notably increased security. Imagine how much further the West could go if they not only offered investment or specialists, but also security when going to foreign countries.

 If implemented properly and not as they are currently, charter cities have the potential to do great good for both the developing world, and the developed. They are a fascinating alternative to the current system of foreign aid that we send to poorer countries, and also are a great way for nations like the US to compete against growing Chinese influence while helping others instead of harming them. One way to make such investment deals more appealing to the leaders of struggling nations is to emphasize a shared doctrine of nationalism as opposed to the PRC’s system of “in exchange for some of your sovereignty, we will protect your regime from Western accusations of human rights abuses and will make your government richer”. The United States should give up trying to be a hegemon in Africa and should instead sell itself as an anti-hegemon in a similar fashion as China albeit with a bit of a greater Wilsonian focus on nationalism, liberal democracy and self-determination. For example, the United States and NATO at large should pledge to only have their security forces comprise a limited percentage of the total security in charter cities, and we should also agree to never seize control of the region, as ideally the city would re-finance itself without the need for the providing or the receiving nation to take on any substantial debt. Negotiations should be performed as publicly as possible for more autocratic countries in order to create political pressure for leaders who are otherwise more inclined to work with China to accept Western aid. In this vein, the US can also use charter cities and similar strategies to help the global South diversify their economies and become less reliant on mineral extraction, which currently is a major liability for such states and makes them vulnerable to malevolent Chinese influence. 

Whatever the West decides to do, it must move fast. The world’s sacred freedoms are at stake.