Romer’s Charter Cities in Honduras

Paul Romer is an economist at Stanford University known for his contributions to the economic theory of growth. After writing several articles in the late 80’s, Paul Romer left academic research to pursue his own business, and now he focuses his energies on promoting his Charter Cities project.

After a trip to the United States, President Lobo and Congress President, Juan Hernandez, went back to Honduras, very excited, supporting the Romer’s ideas. And no wonder. This is a golden opportunity for Honduras development.

The essential idea of Romer’s charter city model is simple. Development is not based on technology itself, nor knowledge, but on good rules expressed in laws and customs that allow to channel the creative energy of people. The cause of the underdevelopment of countries like Honduras is bad laws that do not encourage the necessary investment to boost the country.

So the obvious solution is to change laws, to change the rules of the game, and everything else will follow.

However, it’s not so simple. Profound changes generate enormous resistance from vested interests and popular demands.

Romer’s solution is to create a city from scratch in an uninhabited area, and to provide it of good standards from the beginning, good laws that encourage investment and creativity. This way authoritarian temptations are avoided, the government need not impose anything by force, and no one will be forced to go to a charter city.

Romer likes to put the example of the electricity problem of Guinea, where young people have to study under the street lights at night, because they don’t have electricity in their homes. This is because poor government policies, a rule that sets such a low price for electricity that makes the company loose money for each additional unit sold, so there is no incentive to connect more users. When the president of Guinea tried to change this situation, he had to retreat under the pressure from businesses and consumers accustomed to payinv low fees. In contrast, mobile phone companies do not have this restriction, so there are young people without electricity in their homes who do have cell phones.

The solution to this dilemma is to give more options to people and leaders, and the Charter City is the model that allows us to give more options to both. Instead of attacking head-on the resistance to change, we simply evade it.

A lot of people worry that the charter cities will be handing territory to foreign powers or private investors, however, such is not necessary in the model proposed by Romer. Following the example of the city of Shenzhen in China, Honduras itself could put the new rules for the Charter City, even when others put the money. However, having a strong country or a company sponsoring us can bring more credibility to the project, a credibility that the country may not have by itself.

The issue of national sovereignty is very sensitive, and must be handled with care, remembering that the ultimate goal of the State is the human person as stated by the doctrine of Christian Humanism touted by president Lobo. We must not close our minds against a project that could benefit thousands of compatriots in the name of a misunderstood patriotism. The true patriots seek to benefit their country, and this is certainly a unique opportunity to raise the quality of life of many Hondurans.

Some people want the Charter City to apply the same laws as the rest of the territory, to preserve legality and not sully the national sovereignty. But this makes no sense. The purpose of the charter cities is to provide better rules, regulations or laws than those already being applied in the rest of the country. If the rules of the game are not changed there will be no way to attract massive foreign investment and boost national development. If Honduran laws and government system were the best there would be no need to create charter cities.

The conception of the Honduran government of Charter Cities is explained here.

2 thoughts on “Romer’s Charter Cities in Honduras

  1. We could really do with one of these in the United Kingdom/England I reckon.

  2. Free market principles always works, because central planning is always an interference in what people want. Central planning has to criminalize actions outside its' rulers' dictates. The U.S. experiment with alcohol bans, and today's criminalization of stupidity (drug laws), as we can see, are failures.

    Examples: the post-WWII "German miracle", Chile jumping from Allende's state of poverty, into the developed nations.

    More examples: cell phones, PC's, the light bulb, steam engine, traffic lights, the printing press, open source. Government monopolies like education are a disaster.