Assessment of Paul Romer’s Charter City Concept and its Applicability in Ending RP Poverty

       A charter city is a new type of special reform zone, which 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 that the new rules apply only to people who choose to live under them and that they apply equality to residents, rules can be copied from elsewhere and still achieve a high degree of local legitimacy. 

Paul Romer, an economist and expert on economic growth, is the man behind The Concept of Charter Cities.

            In the 1990s, Paul Romer revolutionized economics. He became rich as a software entrepreneur. Now he’s trying to help the poorest countries grow rich – by convincing them to establish charter cities within their borders. Romer’s idea is unconventional, even neo-colonial – the best analogy is Britain’s historic lease of Hong Kong. And against all odds, he might just make it happen.

Paul Romer’s charter cities share the following characteristics:

• 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 and free exit for all residents.
• A commitment to the equal application of all rules to all residents.

Each charter city requires one or more nations to play three distinct roles:

• The host country provides uninhabited land.
• The source country or countries provide residents.
• The guarantor country or countries ensure that the city’s charter is respected.

A critical lesson of today’s world is that it is not enough to have a set of rules that work now, but there must be a dynamic that lets the rule of law change overtime in response to the circumstances. An important historical example is King Charles II’s use of the charter in 17^th-century England, which has proven it successful in adapting such law. Consequently, Paul Romer have raised the idea of new start-up politics, specifically new start-up nations, that is so pressing because much of the world today lives in places with bad rules that are difficult to change.

There are primary benefits that may occur in developing charter cities. It may not just be for the people who will occupy them but for the rest of the world. Looking at the raw numbers, the enormity of what the world faces today is overwhelming. Billions of people are going to move into cities in this century and challenges arise on how to feed those people to avoid mass starvation. That may actually happen because of mutually beneficial exchange. Everybody does things mostly out of self-interest but, it turns out to good outcomes, such as feeding everybody. However, some kind of structure of rules is needed and this is where the concept of charter cities is applied. If people can create the right rules, they can help bring about the massive switch to urbanization around the world. All participants will share their benefits. First, people who move to cities will get the benefit of modern life in the city. And second, investors who finance the infrastructure in these cities will get high returns on their investments. So, this is a true opportunity for a win-win solution.

           

The charter city concept also comes at an unusual and potentially unexpected time in the global economy because the macroeconomic challenge the world faces right now is an insufficiency of investment demand. The rich countries all want to save more, and the only way for everybody to save more is if the world invests more. The world as a whole has to invest more if everybody wants to save. Moreover, if there’s just going to be less production in consumption of goods, then, there should be more production of durable things that will produce income in the future. The problem right now is that the world doesn’t know where to put this investment where there will be high returns. Accordingly, the answer could take place in building infrastructures that will create successful, livable, productive, modern cities to which billions of people are going to move.

            In contrast, if charter cities are such a good idea, why don’t they exist and applied to all poor countries already? Also, questions were raised since in the charter cities concept, it is implied that the fundamental reason for poverty was lack of progress and growth, jarred with conception of poverty as a function of inequality. Issues questioned if there’s really definitive evidence that poverty is always lessened by growth and if charter cities really promote equality. Also, it is argued that poverty would remain despite economic growth at any rate because it’s not what you can get that matters, but what others can obtain. Thus, the solution is actually not coming from the concept of charter cities, but from asset redistribution from the better-off to the worse-off.

            Different arguments and several questions took place in the charter cities concept of Paul Romer, some have affirmed and some have argued. But what’s important is the applicability of this concept especially to poor countries and developing countries, if it would be beneficial and of help or not.

Now, let us assess the applicability of such charter city in ending RP Poverty. As we all know, a lot of things were tried to alleviate and improve the conditions of the poorest of the poor in the Philippines. Activities include conditional cash transfer program, free trade, foreign investment, and charity. All of these were able to help, to some extent, in easing the poor’s living conditions. However, up to now, these activities were not able to do much as the poverty incidence in the country remains high. A lot are below the poverty line. Many Filipinos are living subsistence lives. A lot die due to hunger, thirst, lack of shelter, and lack of opportunities in life. When all else have failed to improve the poor’s conditions, the idea of Paul Romer which is the establishment of charter cities came into light. This offers considerable hope for everyone, especially the poor Filipinos that it is possible for them to see better light in the years to come.

The ideas of Paul Romer show that charter cities are made between two countries – the border, so to say. In the Philippines, this is impossible because the country is surrounded by water. So, to this respect, the formation of a charter city is impossible. Nonetheless, a charter city can still be formed inside the country (A country can be the host, source and guarantor all at the same time). A typical charter city as described by Romer should at least be 1,000 square kilometers, roughly the size of Singapore and Hong Kong. As far as we know, the territorial area of the Philippines is 300,000 square kilometers. The problem here again is that the country is an archipelago. Even though its area totals to 300,000 square kilometers, it is divided into more than 7,000 islands. Most of the islands do not even have an area of 1,000 square kilometers. Of course, the goal is not to turn the whole country into many charter cities but to make some charter cities that will be centers of improvement and well-being for many Filipinos especially the poor ones. So a few charter cities will surely do to help the poor Filipinos and other Filipinos who wish to live in a place where there is equality and equal opportunities to grow. Places in Luzon, Mindanao, Panay, Negros and other major islands of the country may be the site where charter cities will be built. A charter city with a size of 1,000 square kilometers can house a maximum of 10 million Filipinos. This would certainly be of good help to the poor Filipinos.

Of course, the three distinct roles which are the host country, source country and guarantor country may all be played by the Philippines. But for the group, we recommend that the Philippines should of course be the host country as well as the source country but that it should choose another nation to be the guarantor country. We actually want Japan to be the guarantor country because it is near the country, wields considerable power and can ensure that the charter will always be followed and upheld in the charter city. Also, much help can be given by Japan to the charter city especially on the technological aspects. Aid can also be given by Japan in the form of investments.

In a charter city, all residents would have access to utilities like safe municipal water at costs below those that they would pay in slums. They would not be subject to arbitrary relocation by predatory officials or gang leaders. They would live in a place with no tolerance for violence and crime, a place where people have to follow formal rules, rules that prevent harmful activities like dumping garbage on the streets or building unsafe structures.

All of these assessments are being done, of course, with a view of ending poverty in the Philippines. Just the same, no one is precluded from entering the charter city including the affluent and middle class Filipinos. Charter cities are not gated communities for the rich. The goal is to establish rules to maximize employment opportunities for workers, regardless of the level of experience and education. The charter must ensure that basic services like housing and transportation are affordable even for those who have just started in an entry-level job.

Even without building charter cities, the Philippines was already able to form places inside the country where a different set of rules apply. These are the special economic zones like Clark and Subic. Their charters are different from the rules that prevail in the rest of the country. So special economic zones may serve as examples on what kind of charters to implement – ones that promote health, well-being, equal protection, employment, education, equality and many other things that we all aspire for.

A charter city is a charter city by virtue of its equal application of the charter – all are equal on the eyes of the law. The charter is expected to be strict, one that does not tolerate crime, where one who is walking in the middle of the night is not afraid of robbers who might still his or her belongings. It should also promote health, especially one that is better than what the poor Filipinos will leave behind. The charter should not be exhaustive, the government should not recommend what kind of food and other articles are to be produced to ensure that the charter city will govern itself in the best way it and the charter deem fit.

These things are attainable but there are also drawbacks that go with them. First, the government may not be willing to finance the construction of such charter cities even at the expense of the poor Filipinos. There is no politicking inside the charter city. After its formation, its charter will govern almost all things. Corruption will never be tolerated inside the charter cities. That is why for political reasons, they might not push through. Second, it is hard to overcome nationalism. They say that there is no way for countries to work together to extend the reach of good rules. Many said to Paul Romer that his idea is great but it will never happen. As he said, “People always think that the unfamiliar is impossible. Many times, all that holds us back is a failure of imagination.”

Yes, charter cities are possible in the Philippines with the help of the government. Many years may pass before they can be formed but they will be surely named as centers of development and equality in the country when such time comes. The thing here is that there is not much profiteering in charter cities because everyone is equal. No one benefits from hoarding of goods because they will be kicked out of the city. No one will break the rules or they risk being thrown out of the city. Crimes are no-no. Health becomes the wealth of the citizens. Education becomes vital for their improvement. And finally, poverty is erased from the picture.