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THIRD WORLD RESURGENCE

The Book of Paul

At a time when economists at the IMF appear to be experiencing some heartburns about neoliberalism, the World Bank has appointed Paul Romer as its chief economist, thus dispelling any notion that the Bank has in recent years been moving away from neoliberalism. In this piece, written two years ago, Sam Wetherell explains the ideas that animate the man.


PAUL Romer, the inventor of the charter city, is the closest this century has to a real-life character from a Joseph Conrad novel. Since quitting his job as a Stanford economist and tech CEO, Romer has dedicated himself to realising a vision: the creation of vast neocolonial cities within the territory of developing countries, paid for, built and governed by wealthy liberal democracies.

Romer, who describes his office as the local Peet's cafe down the road, fills his calendar with meetings with corrupt local leaders and trips to survey remote coastal hinterlands where he fantasises about the creation of cities of millions. You can imagine arriving at a tavern in some distant tropical port only to find him, wearing khakis and a Panama hat, with a cellphone, a map and a giant red marker pen, talking about 'win-win solutions' to global poverty.

Romer's charter cities are pitched as a solution to the 'bad governance' - often referring to pesky things like taxes - preventing countries like Uganda from becoming, say, Switzerland. These future metropolises will boast free movement of labour in and out of their borders. Trading their citizenship for jobs, residents would not be allowed to vote in any traditional sense other than with their feet.

Romer imagines a world in which the United States, tiring of its now-toxic ownership of Cuba's Guantanamo Bay, cedes the territory to Canada. With Castro's permission, the Canadians use private contractors to erect a vast, ten-million-strong city there. While the land would be in Canadian hands, residents of the city would still be Cubans. They would have almost no say in the administration of the city, which would be managed by technocrats and business leaders. According to Romer, such a city-state would have a profound effect on Cuba's economy, enabling the transfer of ideas, jobs, capital and people.

While this sounds fantastical, Romer rightly notes that this is an idea with a historical precedent. In 1842, representatives of the ruling Qing dynasty were marched aboard a British gunboat anchored off the coast of China and forced to sign the Treaty of Nanking, the outcome of a messy imperial war from which Britain had just emerged as the victor. Among other things, the treaty ceded Hong Kong, a small but strategically located peninsula, to British control. Hong Kong stayed in British hands until 1997, becoming a dynamic port fuelled by free trade, low taxation and sweatshop industrial production.

When Deng Xiaoping began transforming the Chinese economy in the late 1970s, the special economic zones created along China's Pacific coast were apparently inspired by Hong Kong's example. Romer's imaginary city in Guantanamo would be to Cuba as Hong Kong was to China in the 1980s.

The sociologist Aihwa Ong has argued that in the late 20th century citizenship is becoming increasingly decoupled from geographic space. Romer's cities are a perfect fit for this new state of affairs. Residents of charter cities will be consumers rather than stakeholders, able to come and go but unable to vote on how their city is run. Indeed, the idea that people have the knowledge, material resources and inclination to uproot and leave their charter city as soon as things start going downhill - and that these decisions can be substituted for traditional forms of political action - is perhaps the most fantastical and terrifying part of Romer's vision.

His idea recalls Italo Calvino's fictional city of Eutropia, whose residents, tiring of their mundane existence, move en masse to a different city, which is waiting 'empty and good as new', a city where they will receive new jobs, friends and pastimes.

Romer first pitched his idea to the government of Madagascar in 2008. After repeated attempts to secure a meeting with then-president Marc Ravalomanana, Romer turned up uninvited in Antananarivo and staked out the presidential palace. When he was eventually granted an audience, Romer convinced Ravalomanana to agree to the creation of two charter cities, each run by a different Western power. Ravalomanana, a wealthy self-made man, was himself an evangelist for neoliberal development and had spent the better part of the last decade privatising much of his country's infrastructure.

Malagasy charter cities were shipwrecked, however, by events in 2009. When Ravalomanana's presidential guard opened fire on demonstrators protesting high food prices in Antananarivo, a chain of events was initiated that ended in Ravalomanana's deposition by military coup and the termination of his partnership with Romer.

Romer's next stop was Honduras. He hoped that a charter city there would reduce the influence of the country's powerful criminal networks. However, while described as 'unpopulated', the two zones selected for the cities were home to large numbers of the Garifuna community, who would be displaced were the plan to go forward.

When an initial attempt to create a charter city was struck down by the Honduran Supreme Court in 2012, the government promptly fired the four judges who had voted against the plan and invited Romer to sit on a transparency committee advising the creation of two charter cities. But in the wake of news that those in charge of the cities had signed a memorandum of understanding with a mysterious business consortium called Grupo MGK that had alleged links to libertarian Whole Foods founder John Mackey, Romer resigned from the transparency committee, claiming he wasn't being included in major decisions regarding the project.

Events in Madagascar and Honduras saw a return of the realpolitik that Romer's breezy Freakonomics-style rhetoric tries so hard to repress. While his ideas seemed convincing in the air-conditioned hum of a TED Talks lecture theatre, in practice the trading of democracy for untrammelled free-market capitalism turned out, to Romer's surprise, not to be conducive to human rights, political stability and the flourishing of a million bright-eyed tech entrepreneurs.

Thatcher's Paris Commune

Although charter cities are presented by Romer as a technocratic conjuring trick, the geopolitical equivalent of a lifehack, similar ideas have been at the forefront of New Right thinking for more than a generation. The privatisation and deregulation of small pieces of urban land to showcase the success of free-market capitalism in its purest form has been the strategy behind enterprise zones, special economic zones and free ports. These policies have arguably been neoliberalism's most successful legislative pushes.

The story of these ideas begins with a group of maverick urban planners writing in Britain in the late 1960s. Led by the urban planning guru and later government adviser Peter Hall, the group set out their vision in what became known as the 'Non-Plan' manifesto. The non-planners called for large county-sized regions of the UK to be freed from all state planning restrictions. Critiquing what they saw as a frustrating and ossified government bureaucracy, the authors imagined that a new world of social and aesthetic freedom would emerge in these regions.

They envisioned thatched British villages connected by vast Los Angeles-style freeways and houseboats sailing to 'row-in movie theatres', and outlined a radical vision of democratic urban planning. 'Why not let people shape their own environment?' the non-planners asked. At times playful, at times fiercely passionate, the Non-Plan did not quite amount to an ideology, but it was a sentiment, a primordial soup from which a new ideology would soon evolve.

Despite these libertarian fantasies, Peter Hall remained at first a reliable, though at times reluctant, member of Britain's left-wing intelligentsia, advising a key Labour Party planning committee and participating enthusiastically in campus upheavals in Berkeley during a 1960s stint at the university. In 1973, Hall chaired the Fabian Society, Britain's most influential left-wing think-tank.

His allegiances were overturned, however, during the economic crises of the 1970s. During that decade, Hall made repeated visits to Hong Kong, where, like Romer, he fell in love with the British colony's sweatshop dynamism and grew convinced that deregulation was the only solution to Britain's growing urban crisis. In a high-profile speech in 1977, Hall first suggested the enterprise zone as a solution to Britain's urban decay (though he didn't use the term). The idea was seized on by Margaret Thatcher's government-in-waiting.

Enterprise zones were to be small inner-city areas exempt from certain elements of state regulation (and, crucially, from taxation). Gone were the anti-authoritarian impulses and aesthetic hedonism of the Non-Plan; the freedom that remained was to be the freedom of the market. The enterprise zones were designed to pave the way for top-down, financial-services-led gentrification.

The original vision called for passport checks along the borders of the zones, which would be designated as 'Crown Colonies' (the formal name for many British colonial territories, including Hong Kong). The zones would be totally exempt from all fire and building code regulations and laws forbidding workplace discrimination. While the final implementation of the zones was somewhat diluted, it was the enterprise zone, rather than the Non-Plan region, that became British policy in 1981.

Twenty years later, Hall would acknowledge the irony of this story, writing that the transition from Non-Plan area to enterprise zone marked a moment where 'right and left met around the back of the stage'.

The idea took off. The same year that enterprise zone legislation was being drawn up by Thatcher's new government, it crossed the Atlantic, supported and further honed by libertarian think-tanks like the Cato Institute. Today, there are thousands of enterprise zones in the United States, 79 in the UK, 85 in France and 22 in Italy. There are plans to set up zones in South Africa, Australia and even Sweden.

The first 11 zones created in the United Kingdom by Thatcher were presented to local residents as means of bringing back jobs and prosperity. Secret government memos from the time, however, told a different story: Keith Joseph, a senior adviser to Thatcher, noted that the zones would be 'demonstration areas … where conditions more encouraging to enterprise might be established - to show what would then result'.

Indeed, Paul Ferrara, the Cato Institute apparatchik who brought the policy to the US, wrote in 1982, 'The creation of islands of economic freedom in America's major central cities will hopefully serve as useful demonstrations of the success of free markets.'

Unlike Romer, who has attempted to steam ideology out of his charter city idea, the early evangelists for enterprise zones were clear about the effects of their policy. It was designed to achieve ideological ends with administrative means. One newspaper even joked that the streets of East London's enterprise zone would be renamed after right-wing economists - Friedrich Hayek Boulevard, Milton Friedman Avenue, maybe even Ludwig von Mises Lane.

Like Romer, Hall and Thatcher's chancellor Geoffrey Howe repeatedly and favourably cited Hong Kong as a role model for their ideas. While Britain developed a Keynesian welfare state in the postwar period, Hong Kong perfected its policy of 'positive non-interventionism' and became a laissez-faire carnival of sweated migrant labour.

Praised by Milton Friedman, Hong Kong became something of an urban fantasy for the British new right - the Thatcherite equivalent of the Paris Commune. During a state visit to the city in 1980, for example, Thatcher's trade minister could not resist mentioning in his speech that the British right 'shares your profound belief in free enterprise and we shall strive to come as close to your achievements as we can'.

The proliferation of extrajudicial deregulated zones crafted to the needs of capital has occurred at the national as well as the local level. Introduced in 1980, Chinese Special Economic Zones (SEZs) are vast macroeconomic exceptions designed to link Chinese manufacturing to the developed world without fully jettisoning protectionist trade policy.

There are now more than a dozen SEZs scattered along the length of the country's Pacific coast, where exceptional laws have favoured the production of export-oriented commodities with minimal regulation or redistributive measures. There are also over 30 state-level economic development zones, more than 50 industrial development zones and 15 free-trade zones scattered throughout China.

To the extent that these zones proliferate and overlap, it is increasingly difficult to talk of a single Chinese political economy. The result is something like political economy … la carte, a system that allows neoliberalism to live alongside state-planned communes seemingly without contradiction.

The fragmentation of the global economy into competing exceptional zones continued into the late 1980s and 1990s, with new zones in Latin America, Eastern Europe and the Middle East. A 2008 World Bank report noted that there were more than 2,000 such zones scattered across the world, and that 62%˙ were entirely developed and operated by the private sector.

The Dominican Republic, for example, has created 31 privately run special economic zones around Santo Domingo in which private contractors are responsible for the provision of almost all of the zone's infrastructure. Romer's plan for charter cities is little more than the intensification of a process that has been underway for more than a generation.

One big zone

The enormous global transformations of the last few decades - away from both state socialism and Keynesianism˙- have been described as a coup by business elites, a structural shift in the economic base, or the outcome of an increasing loss of solidarity and social totality in the wake of globalisation. Looking at these geographically based policies, however, we can see neoliberalism not as a discrete set of national policies or strategies of accumulation, but instead as a network of different zones crafted to the needs of capital - zones that are increasingly becoming the rule, rather than the exception.

In 1944, Karl Polanyi argued that a series of early 19th-century upheavals ushered in, for the first time, integrated national markets which stretched taut across states like fitted sheets. Non-Plan areas, enterprise zones, special economic zones and export processing zones have pierced holes in these national economic fabrics.

Historically, from worker-cooperative towns like Robert Owen's New Lanark to the Occupy movement, the creation of utopian communities has been the preserve of the political left. The perfection of exemplary social relations within a tightly bounded geographic space has often been seen as the first step in making a new world free from the ravages of industrial capitalism. With enterprise zones and charter cities, neoliberals are discovering the powerful political possibilities of their own utopias.

A decade after the policy was proposed in Britain, Thatcher's finance minister, Geoffrey Howe, returned to the first enterprise zone in London to give a speech among the forest of skyscrapers and shopping malls that had mushroomed within its borders. The need for the zones, he claimed, was now redundant, as his government had 'turned Britain into one giant enterprise zone'.

As Paul Romer continues his mission, setting forth like Conrad's Marlow to far-flung corners of the world with a map and an imperial spark, it might not be long before we are all living in charter cities, one way or another.                              

Sam Wetherell is a visiting lecturer at Columbia University in the US. This article was first published in Jacobin (Issue 15-16, Fall 2014, www.jacobinmag.com).

*Third World Resurgence No. 310/311, Jun/July 2016, pp 26-28


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