Concept of charter cities - salvation for Ukraine

Author : Oleksiy Kushch

With this concept "inefficient economies" might receive "super-cities" with more efficient judicial system, built on the principle of international arbitration courts, and a reliable system for protecting property titles
20:48, 14 January 2019

Open source

In 2018, scientists William Nordhaus and Paul Romer won the Nobel Prize in economics. William Nordhaus became famous for the fact that he made a significant contribution to identifying the interdependence between the pace of development of the world economy and the state of the environment. And Paul Romer is the author of the endogenous economic growth theory based on investment in innovation, as well as a very promising concept of “charter cities”. Such a “ranking” of scientists according to the degree of relevance takes place because in order to think about the environmental issues, it is necessary to first satisfy the basic needs of society. This is a dialectic. No one says that this is good, but this hierarchy of priorities is not a choice.

At one time, China ignored almost all initiatives to reduce greenhouse gas emissions into the atmosphere, until it created its own highly developed industry. Yes, and the United States agreed to the "Paris agreement" only in the days of the former president, when, it seemed, America would "say goodbye" to the difficult industrial past in the coming decade. But Donald Trump decided otherwise and fight the world environmental charters with the reviving power of industrial Detroit.

Ukrainians are still very far from the state of the bourgeoisie, when you go out from your own mansion and admire the beautiful lawn and dragonflies above it. Being on the first or second floor of the basic needs pyramid (food, clothing, safety), our fellow citizens prefer to act cruel in relation to the nature. This is done by the ordinary locals who are ready to cut down the forest to the last tree, just to buy, for example, a new iPhone or pay off a car loan.

But how to ensure basic needs without wood and amber, especially when the last plant in the "area" worked five years ago? The answer to this question is exactly what Paul Romer and his concept of "charter cities" can give.

Paul Romer is one of the most prominent representatives of the so-called mix economic theory, which involves not the total destruction of inefficient forms of the economy, but the sale of this "inefficiency", as well as the creation of growth models on the basis, which otherwise would not generate additional income, but on the contrary would absorb it.

One of the ideas of Romer is the creation of so-called "charter cities". With this model, in "inefficient economies" there should appear "super-cities" with extraterritoriality, that is, subordinate to the board of directors, consisting of representatives of corporations-investors. Charter cities should have their own, more efficient judicial system, built on the principle of international arbitration courts, and a reliable system for protecting property titles. The economic focus in such priority development centers should be on new technologies and the knowledge economy. The basic principle is: if, for obvious reasons, it is impossible to build a creative economy of a new type within an inefficient country, then why not create it within several "charter cities"? In Ukraine, this concept of point changes could be called the theory of "cluster development." The benefits are obvious. The population will not wait until the local "elites" will create a quality living environment within the framework of a holistic national economy. If a series of elections does not lead to the emergence of effective state management in the country, people vote not with their hands, but with their feet, that is, migrating to other countries. And with each wave of migration, the chances of building a new economy in a demographically exhausted country are rapidly declining, and sooner or later the national economy turns out to be beyond the point of no return. At the same time, the creation of "charter cities" means not just the emergence of new growth points and drivers of economic development, but also the emergence of intra-state migration magnets, when, relatively speaking, the residents of Ukraine, instead of migrating abroad, migrate to the charter cities, remaining within their countries and in their usual cultural and linguistic environment. In Ukraine, the model of creating charter cities could also be based on the creation of several regional “super-cities” and free economic zones, in which part of the administrative functions would be transferred to the board of directors consisting of the system investors’ representatives.

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The cluster city model is in fact the privatization of state inefficiency by the foreign capital in order to create enclaves of efficiency. Paul Romer tried to apply this model in Madagascar and Honduras, and in the latter country there is already certain progress in the practical implementation of the project.

In simple words, if there is economic inefficiency in the country that cannot be repaired at the domestic level, the only way out is to sell it, albeit for the conditional one dollar.

There are several striking examples in the world when the “super-city” in the course of its development became the basis for the formation of successful states. This is, so to speak, an evolutionary subtype of the theory of "charter cities". For example, the economy of Belgium is based on the so-called "Flemish rhombus": its four corners are the powerful urban agglomerations of Brussels, Ghent, Antwerp and Leuven. Almost half of the country's population (about 6 million people) lives in this territory. If we connect the vertices of this rhombus with each other, then we get the key industrial axes of the country. Now it is not only the industrial heart of Belgium, but also a center for innovation and research. As the well-known French historian Fernand Braudel and one of the authors of the theory of world-systems analysis noted: "Antwerp, one of the largest ports in Europe and the trading harbor of the Flemish rhombus, was once the center of the entire global economy."

At the moment, the above geographical and economic agglomeration is one of the richest regions of the EU, in which the level of GDP per capita at purchasing power parity is 23% higher than the average for the European Union.

Recalling the aforementioned Fernand Braudel, it can be noted that the “Flemish rhombus”, from the point of view of world-system analysis, is a unique example of development, but not only of separate isolated societies, but of trans-civilization economic entities with the advantages of each of them.

In a deeper understanding, the experience of building a "Flemish rhombus" and methods of world-system analysis could help our country in transforming the post-Soviet territorial-economic regions, which continue to form the internal structure of GDP, but have lost the necessary impetus to civilization transformation.

Paul Romer’s idea of creating "charter cities" provides pinpoint development in the face of the impossibility of achieving overall economic efficiency across the country in the foreseeable future. It could be implemented in Ukraine in the form of creating such "charter" cities like Lviv, Kyiv, and Dnipro, Kharkiv, Odesa. With this concept, Ukraine in the next five years could transform external labor migration into internal, regional, and create points of economic growth in which the level of income of the population and the basic parameters of quality of life would substantially exceed the average state level.

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