This is a joint post with Milan Vaishnav.
One of the biggest experiments in development economics is about to begin on Honduras's Northern Coast. Honduras has altered its constitution to open the way to ceding a large tract of land to build a new "Special Economic Zone", modeled on NYU economist Paul Romer's idea of charter cities -- new cities, built up from scratch, where first-world institutions and third-world immigrants can meet and do business.
CGD has close ties to this idea. Romer is a CGD non-resident fellow, and CGD president Nancy Birdsall and senior fellow Michael Clemens are both associated with the Transparency Commission that will oversee the Honduran experiment. CGD does not take institutional positions though, and as anyone who's visited an internal seminar or staff lunch knows, there's room for vigorous debate.
Back in April, the members of the Transparency Commission met here in DC, and over lunch CGD staff had a chance to hear them explain their ideas for the city and ask questions. Since then, there's been an active debate in the hallways here about the charter city model. We want to take that debate into the public domain. To kick things off, here are three questions that we think proponents of the Honduran initiative need to grapple with.
- Democracy: Is the charter city model at odds with principles of accountability and democracy?
- Time inconsistency: Can Honduras credibly commit to investors that the rules of the zone won't change?
- History and context: Is it realistic to talk about creating an institutional blank slate in the Honduran jungle?
Our musings on these questions got a bit long for the blog, so we've posted them as a CGD essay where we explain some of our concerns in more detail and offer a couple of ideas to address them. Read on...