Celebration Societies or Charter Cities?

There has been much discussion of Paul Romer’s charter cities, and an experiment of this sort may be taking shape in the Honduras– though not one to Romer’s liking. I expect that people will want to compare celebration society city states to charter cities. I wish to facilitate this comparison, highlighting important differences and showing why these differences matter. First, there are certain important similarities.

Charter cities work on the basis of capitalism, essentially seeking to transport successful first-world models of investment and development to less developed regions of the world. Romer argues that this is how the British lease of Hong Kong brought prosperity to that city state. Capitalism will also enable the creation of early celebration societies.

In both cases, an outside party will be given control of a small portion of a nation’s territory in exchange for the promise of significant economic improvement. In both cases, establishing consistent and transparent rule of law is considered paramount. In both cases, the outside party will establish its own system of government.

Here are the differences that I see:

1) Long-time residents of the host country do not need to be worried about being “kicked out” by the foreigners. Celebration Society cities will offer displaced residents the choice of either becoming residents of the new society (with the ability to become Citizens just like any other resident) or an above-fair-market-value settlement for their land to help them relocate elsewhere within the host country.

2) Rather than generating profit only for outside investors, the Celebration Society will continue to contribute a direct share of its revenues to the host country.  (If the first celebration societies not only showcase a superior quality of life but also significantly benefit their host countries, that combination will facilitate the creation of additional societies.)

3) A Celebration Society will be owned by its residents and governed by its Citizens. Outside investors may be offered long-term concessions on infrastructure projects, but never ownership of the society itself.

4) The population of a charter city will basically come from the host country. The vast majority of the populace of a Celebration Society would likely be immigrants from other countries; at least in the initial cases. (While it is possible that a single host country could itself populate a new Celebration Society, making that a restriction would increase the challenge of collecting the vast number of escrow funders/residents needed.))

5) Rather than companies bearing the cost of initial construction and improvement, then reaping the benefits of the city’s productivity, the cost of initial construction and improvement for Celebration Society cities will be borne by a combination of resident investment and tip-it-forward funds from existing Celebration Society cities; potentially supplemented by impact investors who are as concerned about the success of the experiment as their own ROI. As a result, the city’s profits flow back to the residents less what is shared with the host country. (Note: Profits from individual companies owned by residents will still flow to the owners of those companies, less taxes.)

6) The investors in a charter city would be in a favored position. The nature of the Celebration Society government prevents power blocs and entrenched interests from gaining control. It would still be possible for a company to bribe individual members of Parliament to vote favorable laws. However since those laws would be transparent, and have a waiting period before they become permanent, it becomes significantly more difficult to maintain unfair laws that favor a company over other companies or the general populace.

7) Further, once bribes were recognized, the company and its executives and owners would probably be expelled for violating the Charter. Therefore, it would be a last-ditch emergency tactic rather than standard operating procedure. Likewise, with a monetary system that is envisioned as being all-electronic, blockchain-based and traceable, bribes would probably have to be paid in money that is never repatriated to the celebration society. This would create considerable problems both for the payor and the recipient(s) of such a bribe.

8) Some critics have expressed concern that organized crime might flourish in charter cities. Organized crime in general (AKA racketeering) requires minions to be effective. Such minions must perceive that their expected reward from the criminal activity exceeds the risk. As an early Celebration Society gradually shifts from capitalism to celebrationism, the incentives of criminal activity will become less appealing and the perceived risks greater. With their basic needs met by the celebrationist production system, few residents will risk their opportunity to live in one of the most pleasant places on Earth merely for the chance at illicit gains that they do not need.

Eventually, I expect that celebration societies will be created not only as new city states in largely uninhabited land, but also as “retrofits” to existing societies. At that point, the comparison to charter cities will break down. However, this welcome development is years and probably decades in the future.

Caveat: I have read only a limited amount about charter cities, and it is possible that some proposed charter city designs will address some of the differences I have highlighted.