India’s Voluntary City

by on June 10, 2011 at 7:47 am in Economics | Permalink

Fascinating piece in the NYTimes about a new city in India, a new city of 1.5 million people and more or less no city government.

Gurgaon was widely regarded as an economic wasteland. In 1979, the state of Haryana created Gurgaon by dividing a longstanding political district on the outskirts of New Delhi. One half would revolve around the city of Faridabad, which had an active municipal government, direct rail access to the capital, fertile farmland and a strong industrial base. The other half, Gurgaon, had rocky soil, no local government, no railway link and almost no industrial base.

As an economic competition, it seemed an unfair fight. And it has been: Gurgaon has won, easily. Faridabad has struggled to catch India’s modernization wave, while Gurgaon’s disadvantages turned out to be advantages, none more important, initially, than the absence of a districtwide government, which meant less red tape capable of choking development.

Gurgaon  has no publicly provided “functioning citywide sewer or drainage system; reliable electricity or water; public sidewalks, adequate parking, decent roads or any citywide system of public transportation.” Yet Gurgaon is a magnet for “India’s best-educated, English-speaking young professionals,” it has 26 shopping malls, seven golf courses, apartment towers, a sports stadium, five-star hotels and “a futuristic commercial hub called Cyber City [that] houses many of the world’s most respected corporations.” According to one survey, Gurgaon is India’s best city to work and live. So how does Gurgaon thrive? It thrives because in the absence of government the private sector has stepped in to provide transportation, utilities, security and more:

From computerized control rooms, Genpact [a major corporation, AT] employees manage 350 private drivers, who travel roughly 60,000 miles every day transporting 10,000 employees. Employees book daily online reservations and receive e-mail or text message “tickets” for their assigned car. In the parking lot, a large L.E.D. screen is posted with rolling lists of cars and their assigned passengers.

And the cars are only the beginning. Faced with regular power failures, Genpact has backup diesel generators capable of producing enough electricity to run the complex for five days (or enough electricity for about 2,000 Indian homes). It has a sewage treatment plant and a post office, which uses only private couriers, since the local postal service is understaffed and unreliable. It has a medical clinic, with a private ambulance, and more than 200 private security guards and five vehicles patrolling the region. It has A.T.M.’s, a cellphone kiosk, a cafeteria and a gym.

“It is a fully finished small city,” said Naveen Puri, a Genpact administrator.

…Meanwhile, with Gurgaon’s understaffed police force outmatched by such a rapidly growing population, some law-and-order responsibilities have been delegated to the private sector. Nearly 12,000 private security guards work in Gurgaon, and many are pressed into directing traffic on major streets.

Not everything works well, of course. Gurgaon is describe as a city of “private islands.” Private oases would be a better term. Within the private oases life is good but in between lies a desolate government desert. Not only are services such as roads and utilities poor, the private oases don’t internalize all the externalities so there are problems with common resources such as the water table. It would also be more efficient to have centralized sewage and electricity.

Much of the article is written as a “cautionary tale,” the private sector can’t do everything and the absence of government has made the city dysfunctional.  I see the situation somewhat differently. The problem is that the original developer didn’t go far enough. The original developer, DLF, made a deal to build commercial buildings and apartments but:

… a state agency, the Haryana Urban Development Authority, or HUDA, was supposed to build the infrastructure binding together the city.

And that is where the problems arose. HUDA and other state agencies could not keep up with the pace of construction. The absence of a local government had helped Gurgaon become a leader of India’s growth boom. But that absence had also created a dysfunctional city.

Had the original developer been responsible for both the oases and the desert it could have built the power plants, the roads and other infrastructure and made locating in Gurgaon even more desirable than it is now. It is true that a city requires public goods which local governments often do not provide. Charter cities try to get around this problem by importing wholesale a new, higher-quality government. An alternative is to avoid government all together and privatize enough to make the entire city what is in effect a hotel on a grand scale.

But what to do now?  The governments involved are inefficient and often corrupt. We can hope that they will get better in response to the well-educated populace and the incoming corporations but even today, the solution is not simply to hope for better government but to expand on what is working well. The firms that operate the private oases are “small cities,” the solution is to make these cities larger.

Connect enough office parks, factories, and apartments, for example, and it will make sense for a private firm to build an efficient electric plant rather than have smaller firms use inefficient and polluting diesel as is the case now. Similarly, Will Rogers once said the solution to congestion was to have business build the roads and government build the cars. In fact, only the former is necessary. Privatize the roads and they will be quickly built and well maintained (yes, they will probably be more expensive than necessary due to some monopoly power but at this point in time that is a second-order problem).

As the private oases reach out and connect with one another most of the kinks will be ironed out. The city is only thirty years old and undergoing a growth spurt, so some problems are to be expected. The big picture, however, is that a modern city has been built from the ground up based almost entirely on private development, it is attracting residents and jobs and leading the country in economic growth. A remarkable achievement.

Addendum: For more historical and contemporary examples on the private provision of public goods see The Voluntary City.

Addendum 2: Matt Yglesias gets it and then makes some interesting comments and critiques.

Sunil June 10, 2011 at 8:18 am

“Success” of Gurgaon is akin to the “Free Markets” that flourish in slums of Mumbai and favelas of Sao Paolo. It is a testament to human ingenuity and utter failure of markets to self regulate. Gurgaon is a living example of what happens when Governments fail to service the needs of a population.

I ran companies similar to the one you describe. Cars and all. (Though not in Gurgaon but in Hyderabad in southern India). And every single day I wished that I did not have to run a power generation and taxi company. I would have loved to let people find their way to the office by means most convenient that they would determine for themselves. I would have loved not to deal with accidental deaths caused by the reckless drivers of the taxis transporting my staff. In the best tradition of free markets, the drivers were ‘incentivized’ to drive badly on the roads of Delhi.

A signature example – in August 2009, I tried to find my way to the offices of CII in Gurgaon in the morning after a rainy night. I could not make it to a 1000 am appointment because the road to the office was under 18″ of water for the last 1 km, there were (are) no side walks and all the low lying areas in Gurgaon that drained storm water have been ‘occupied’ to construct high rise office towers.

With deep personal experience on the field, I submit that Gurgaon is failure rather than a success. Gurgaon is a result of the dealings between a weak, corrupt government and a super aggressive free market whose dealings are based on immediate incentives. It is a living example that good strong effective government is a requisite for a good private sector.

FYI June 10, 2011 at 10:54 am

Well, I don’t know much about India but since you mentioned Sao Paulo, the story there is not the same. First of all, much of the poverty in Brazil is perpetuated by the government. First of all, not everyone in the favelas is super poor. The large majority is low middle class and the main reason they live there is because the government regulates the real estate market in a very stupid/draconian way. To buy a house in SP (and pretty much anywhere in a big city) you have be wealthy. Renting is also ridiculously expensive and again the problem is government regulation. Within the favelas, again the government is a problem and not a solution. Because the people living in favelas never get the title for the land, they cannot get official government services – not even mail. So you can’t really say that favelas are a ‘private’ enterprise… they are a government failure. The private market works around some of that but at the end, the problem is not lack of government but bad government.

Now all the people in favelas end up paying taxes. There is no way you can call the brazilian government ‘weak’. It has plenty of strength; it is just slow, stupid and inefficient. I suspect the case described by Tyler is more similar to that. So even though I agree with you that a ‘strong effective government’ is good, the problem is that strong and effective don’t usually go together.

FYI June 10, 2011 at 11:14 am

Too many ‘first of all” and it is not Tyler, it’s Alex. Also, it is interesting to note that the origin of favelas is tied to the way the brazilian government dealt with ‘relocation’ of former slaves in the late 19th century. So another government failure for you right there.

Mike Kimel June 10, 2011 at 3:41 pm

FYI,

Having lived in Sao Paulo for 14 years, I can accept the argument that favelas exist because of policies of the Brazilian government. But, as you point out, the Brazilian government for the most part leaves the favelas to their own devices, except in those situations (well publicized but affecting only a relatively small number of favelados) where violence spills out of favelas. By definition, the fact that the government leaves favelas alone means what happens in a favela is the result of something other than the government, which means, private enterprise.

Not quite Mike June 10, 2011 at 7:42 pm

Not quite.

What it means is that you took a bunch of poor people, stuffed them into a region, essentially prevented them from getting out, and that is the result.

That’s not free at all. They are not free to choose.

Mike Kimel June 11, 2011 at 4:54 pm

Not quite Mike,

Ummm… there are no walls keeping people in at a favela. It isn’t the Warsaw Ghetto for crying out loud. And I remember, as a kid, a kid I knew who lived in one favela, and whose family moved to another. The level of poverty in the favela was awful (things are a bit better now in that regard, but I still wouldn’t recommend living in one) but there was freedom to choose, as Friedman would put it. One could move from favela to another.

Which explains why many people who have very are willing to give up some freedom for a bit more comfort. Its easy to be a libertarian if you’re comfortable.

Anon June 10, 2011 at 9:51 pm

To call a favela a free enterprise environment is absurd simply because, by definition, a favela is a place where private property isn’t clearly defined. The vast majority there cannot even own the place they live in. Just read some de Soto.

Mike Kimel June 11, 2011 at 5:08 pm

Anon,

I’m not sure definition is correct. It may apply to many favelas. But consider the City of God (in Rio) of the movie fame. That was built by the government. I can’t say with certainty, but I believe a process was put in place whereby residents were either granted title or given a process where they could get title.

Additionally, around 2001 a federal law was passed making it easier for municipalities to grant title to favela residents. One of the states that has pushed the envelope there has been Rio.

So, in some cases, that private property is not just defined by convention, but also by federal, state, and municipal law.

That said, I do think granting title is a good idea and would really help the country develop. But it should be noted, the granting title has a name, and that name – land reform – is the reason the US gov’t supported (or perhaps instigated is the better term) the military overthrow in ’64. Its odd to see the same folks who opposed land reform in the rural areas are in favor of it now provided its in urban areas.

But that said, it seems that Brazil’s recent success owes a lot more to the anti-poverty programs that involve providing cash and other assistance to the destitute than it does to ensuring that some of the favela residents have title.

FYI June 10, 2011 at 11:27 pm

Not quite Mike and Anon already mentioned some of my response to you Mike. To argue that favelas are ‘left alone’ is a good thing is the same as arguing that prisons are better for you because you get to exercise, rest and eat 3 times a day. It is a silly fallacy to say that people there are the result of private enterprise because in many cases you can’t even participate in the market. For instance, the fact that you officially don’t have an address prevents you from obtaining most types of credit. Companies are usually away from the favelas because of the violence created by the lack of police. On top of all that, as I mentioned in my original response, you have favelados actually paying taxes for the services they don’t get! (Brazil has a variety of sale taxes that they can’t run away from, and you also have property taxes on things like cars and motorcycles). Favelas are a disaster created and maintained by the brazilian government in any way you look at it.

Mike Kimel June 11, 2011 at 5:28 am

FYI,

In my experience, and I had friends who lived in favelas, most favelas do not look like the City of God or Complexo do Alemao or whatever you see on the news or the movies. Even most favelas in Rio do not resemble that. Heck, my guess is that on the average day, Complexo do Alemao doesn’t look like it does on the news.

From what I can tell, (and my first hand observations, admittedly, are a couple decades old, but I still pay a bit of attention to Brazilian news) just about every favelas ends up organizing its own government or leadership structure – someone has to decide what to do when there are disagreements among residents, after all, and people being people, there will be disagreements. In some (many? most?) favelas, crime is virtually nonexistent because whoever runs the favela (in some cases drug lords or other gangs or depending on where you are in the country, bicheiros, and in some cases civilian rule) is very strict and doesn’t tolerate crime. Property rights are very well defined in each favela – who would own as much as a TV set, much less the modern amenities of life? As to businesses in the favela, I can tell you that businesses do operate in favelas. Off the top of my head, I have seen (own eyes, mind you, not some news report or what have you) bars and restaurants, dress-makers (my mom used to go to a dress-maker in a favela near the house), tailors, barbers, contractors of various types, a bike shop, moto-taxis and of course, the escola de samba. Sure, you don’t have a GM plant operating in a favela, but you don’t have one in Jardins either. The businesses in a bairro nobre in Morumbi, and the businesses in a favela nearby, are businesses that cater to the local residents. No, you won’t find an H. Stern operating in a favela anywhere in Brazil, but I imagine every favela has at least one botequim.

(Incidentally – since each favela has its own governance structure, residents can vote with their feet and move to another favela if they aren’t happy. Residents of the Complexo do Alemao aren’t required to live there as opposed to another favela, and it may be no more convenient to where they work than another favela.)

FYI June 11, 2011 at 10:57 am

Mike

i was born and raised in Brazil. When I was a kid I lived in a middle class neighborhood which had several favelas around it. i’ve been to many, so I know what i am talkign about.

The ‘government’ in the favela is simply your ‘HOA’ trying to keep the chaos controlled. This idea that there is no violence in a favela is one of those romanticized ideas people love to believe. The violence is all around you, all the time. It is the drug lords forcing kids to work as ‘airplanes’ (transporting drugs), drunken unemployed man, older kids who start their life in crime by raping young women. It is everywhere. Yes, there are bars and maybe a few run down schools near the favelas but those are not big employers. You can ask any favelado and he/she will tell you that one of the main problems is transport to the downtown or other places where the jobs are. Land ownership in the favelas doesn’t mean official ownership – it means people don’t invade your house as they wish. The economic problem of not having an official address still remains and that is what makes the vicious economic cycle continue there.

In any case, I am not sure how your response is advancing the idea that favelas are somehow private market failures. I mean, favelas are a creation of the government and they continue to exist because the government wants to. The moment the brazilian government decides to do something about it (like many asian nations did – singapore is one example) the favelas would go away. The government controls land ownership, and that is the main problem there.

Mike Kimel June 11, 2011 at 12:43 pm

FYI,

Not sure why but I don’t seem to respond directly to your June 11, 2011 at 10:57 am comment so I’ll post that here.

” When I was a kid I lived in a middle class neighborhood which had several favelas around it. i’ve been to many, so I know what i am talkign about.” I wasn’t born there, but I also grew up in Brazil in a middle class neighborhood and I’ve been to many favelas too and I had friends who lived in them.

“The ‘government’ in the favela is simply your ‘HOA’ trying to keep the chaos controlled. This idea that there is no violence in a favela is one of those romanticized ideas people love to believe. The violence is all around you, all the time. It is the drug lords forcing kids to work as ‘airplanes’ (transporting drugs), drunken unemployed man, older kids who start their life in crime by raping young women. It is everywhere.”

Some favelas yes. Some no. A drug lord or a bicheiro knows he has to count on his customers coming to him, and they won’t do it if they’re going to risk their lives, or get robbed, or see someone getting raped on their way over. That’s not romanticizing the life, that’s business.

“Yes, there are bars and maybe a few run down schools near the favelas but those are not big employers.”

But how big is a favela? I can’t imagine that most people who live in Jardins work within two kilometers, much less a few blocks of where they live, and that isn’t considered a failure of the market or the government or some sign that the wealthy are being repressed.

“one of the main problems is transport to the downtown or other places where the jobs are.”

Actually, that’s a problem for most poor people in Brazil, not just the ones who live in favelas. I’ve spent more than enough time stuck in traffic in Sao Paulo and other cities to tell you its not just a problem for poor people, either. But yes, I agree that most Brazilian cities would function better if the government put a bit more effort and intelligence into developing a good transportation system. Laying major roads on riverbeds, as was done in Sao Paulo a few decades ago, was the kind of stupidity that will cause problems as long as there are any residents of the city.

“Land ownership in the favelas doesn’t mean official ownership – it means people don’t invade your house as they wish. The economic problem of not having an official address still remains and that is what makes the vicious economic cycle continue there.”

Sure. But the federal, state, and municipal government isn’t keeping track of who owns what. (Exceptions noted below.) The favela government is. I’ve never had motive to inquire when I had the chance, but I imagine there must be some process recognized in each favela for transferring ownership that is recognized by whatever organization runs the favela, and the Brazilian government has no involvement in that.

“The economic problem of not having an official address still remains and that is what makes the vicious economic cycle continue there.”

I imagine AT or TC would point out that also means its pretty hard for the government to collect taxes on revenues made in the favela too. Another argument that the Brazilian authorities really are not interfering very much with the economic life of the favela.

“The moment the brazilian government decides to do something about it (like many asian nations did – singapore is one example) the favelas would go away. The government controls land ownership, and that is the main problem there.”

What should the Brazilian government do? I don’t know the details but I understand that for the past ten years or so some cities (Rio, Belo Horizonte) have moved to grant title under some conditions to the residents of some existing favelas that grew up, er, organically. On the flip side, there are favelas like Cidade de Deus of movie fame, planned and built by the government, and I believe (I may be wrong) that residents got title to their homes or were put into a program that would result in that from the very beginning. It seems to me that how well a favela works from a financial perspective for the benefit of its residents doesn’t have much to do with the degree of government involvement because in many favelas that is virtually nil. So what is the deciding factor then?

Joe June 11, 2011 at 12:05 pm

Then why was it rated in a survey as the best Indian city to live in?

Michael Scandirito June 14, 2011 at 7:23 pm

your understanding of markets is shallow at best in that statement. the roads and traffic laws are created by the indian state, which does a very bad job in india with its roads….badrinath rd. for example. the gurgaon community has nothing to do with the conditioning of indian traffic. i’ve been to india several times for long, long stays in the northern and southern regions. the slums in any of the cities, including mumbai were incentivized by central planning through city, state and national governments and do not even compare to gurgaon or any free market economies that have ever existed in the world.

the freed markets in india are a good model for the rest of the world. there are no price problems in the health care industry, thanks to the lack of prescription and intellectual property laws. the many cooperative ashram atmospheres and the long tradition of satyagraha, which is still prevalent in indian culture have prevented india from becoming an authoritarian state. if only the waterways were freed to the people of the communities, and the national agreements with the u.s. state backed biotechnology industry were scrapped along with maybe their increasingly draconian immigration laws, no corporatist state throughout the rest of the world could come close to reaching such a rich cultural phenomena.

Satish June 10, 2011 at 8:56 am

Seriously , I wish you had written the endorsement actually after visiting Gurgaon. You would have to got to see the market failures right next to free market successes. The slums, the squatter, the rickshaws,the awful traffic (see every one has their own road but sadly they do have to come out of their private oases some times) the crime (especially against women) are a ringing testament to how spectacularly markets fail in certain basic things.

Lou June 10, 2011 at 9:14 am

Compared to the rest of India, where there are no slums, traffic or crime.

Andrew' June 10, 2011 at 9:21 am

“Compared to the rest of India, where there are no slums, traffic or crime.”

Exactly. You have to do a (difficult) apples-to-apples. And the bottom line is the even harder to measure ROI.

I live in the US. We have violence against women, you have to do a lot of your own police work if you actually want crimes solved and prosecuted, flooded streets, etc. and we also pay a load for it under the pretense that taxes and our relatively good lifestyle post hoc ergo propter hoc.

Andrew' June 10, 2011 at 9:27 am

Also: “In 1979, the state of Haryana created Gurgaon ” 1979!
Plenty of Western cities have been at the whole governance thing for considerably longer than 30 years and still haven’t gotten it right (e.g. NYC until recently). Even if more of a government would be marginally or even substantially better, that’s a remarkably young experiment that should embarrass a lot of city administrators.

Jon Potato June 10, 2011 at 9:59 am

You think violence against women is the worst problem in the United States?

Andrew' June 10, 2011 at 10:58 am

Sigh

Andrew' June 10, 2011 at 1:12 pm

“You think violence against women is the worst problem in the United States?”

To who? The victims?

Dan June 10, 2011 at 9:03 am

Obviously this is a complex story. It’s far from clear that this situation is a “win.” But the fact that companies think it is preferable to roll their own city services rather than deal with government bureaucracy highlights just how high the hidden cost of the latter is.

Akhil June 10, 2011 at 9:14 am

I’m with Sunil on this one. Actually going to Gurgaon will change your perspective on the “success” of the story. Abstracted into numbers and text, it sounds a lot cooler than it is.

pravin June 10, 2011 at 10:04 am

yeah.i live in gurgaon.it is better than chandigarh which many govt types think is a good idea of a city
chandigarh has no slums -that is because the planners made no provision for them and purposefully kept the poor out.
chandigarh is full of wide roads and houseful of bureaucrats -but is not vibrant or dynamic.most of its residents are tax parasites and wealth creation remains in the suburbs of mohali etc

Andrew' June 10, 2011 at 9:16 am

has no publicly provided “functioning citywide sewer or drainage system; reliable electricity or water; public sidewalks, adequate parking, decent roads or any citywide system of public transportation.”

i.e., just like most other cities

Chris E June 10, 2011 at 10:21 am

I think there are large numbers of people in Western Europe and other places (like Singapore) who would disagree with you. Unless you are about to add ‘.. in the third world and America’.

Nick June 10, 2011 at 10:45 am

I’m pretty sure “in the third world and America” covers “most… cities”, depending on one’s definition of “city” and “third world” (and “America”).

Andrew' June 10, 2011 at 11:01 am

It was meant to be humorous, but is pretty truthy considering the flexibility of the words “functioning,” “reliable,” “adequate,” and “city-wide.”

BB June 10, 2011 at 9:24 am

AT:

Ah, Marginal Revolution. Small steps toward a better world. Just not clear what the steps are — clean water, or taxis-by-text-message.

And then to suggest that the original developer didn’t go far enough? You, Alex, are too hilarious. (I’m sure the water supply would have been next on his to-do list).

Andrew' June 10, 2011 at 11:19 am

I live in the US and I have a water filter and buy distilled water for those still under development. Last week we lost water pressure. I have government.

Gabe June 10, 2011 at 11:47 am

I live in a expensive Boston suburb with abundant fresh water nearby, yet our government gets us dirty brown tap water(with flouride thrown in) and terrible roads.

Damien RS June 12, 2011 at 11:07 am

I live in an expensive Boston suburb and our water is great. With, yes, fluoride — you’re *complaining* about that? Boston water seems good too.

Bernard Guerrero June 10, 2011 at 11:33 am

The water-supply _wouldn’t_ have been on his list? Generally speaking, it’s difficult to sell space in malls and office blocks without running water. Just sayin’…..

BB June 10, 2011 at 9:26 am

AT: …so there are problems with common resources such as the water table…

Ah, Marginal Revolution. Small steps toward a better world. Just not clear what the steps are — clean water, or taxis-by-text-message.

And then to suggest that the original developer didn’t go far enough? You, Alex, are too hilarious. (I’m sure the water supply would have been next on his to-do list).

(Sorry for the double-post! Left out the money quote).

The Unqualified Economist June 10, 2011 at 9:30 am

Kind of extra funny/ironic/interesting/ viewed alongside all the reports of China’s empty cities…

http://www.youtube.com/watch?v=pbDeS_mXMnM

http://theunqualifiedeconomist.com/2010/03/07/u-s-bailout-money-inflating-chinese-real-estate-bubble/

Corey June 10, 2011 at 9:32 am

You see a libertarian paradise that’s just not libertarian enough, I see enormous deadweight loss in requiring companies to run surely-redundant power plants, water treatment, private transportation, etc.

YMMV

pravin June 10, 2011 at 10:01 am

dead weight? the fact that there is redundant systems make it robust .it is not too big to fail .why does optimized always have to be the best solution?

economist1 June 10, 2011 at 12:51 pm

“why does optimized always have to be the best solution?”

Think about that one for a minute…..

Andrew' June 10, 2011 at 1:15 pm

Nice gotcha, but he clearly meant ‘optimized’ minus optimum redundancy.

Bill June 10, 2011 at 5:16 pm

Andrew’–

That’s a mindbender response–’‘optimized’ minus optimum redundancy.’

Sort of like–’finalized minus partial finished.’

Or, how about “fully employed plus those actively looking for work”

J Thomas June 11, 2011 at 1:07 am

the fact that there is redundant systems make it robust .it is not too big to fail .why does optimized always have to be the best solution?

There are people who want to say that free markets always produce the best solution.

How do free markets decide how redundant a system should be in case of failures?

I can see that markets could factor in the costs of frequent failures. But how do you optimally prepare for failures that are too rare to get good statistics on?

At any rate, your answer sounds rather Panglossian to me. Of course it has to be the best of all possible worlds if it’s built by private enterprise.

Jim McClarin June 11, 2011 at 8:30 pm

I agree. Vast, centralized infrastructures place large numbers at the mercy of whoever controls them — or sabotages them in their nexus or main trunk line. Redundancy equals resiliency. On-site power, water purification, gardening, telecommuting, and redundant communication modes may consume more capital resources but they would make our society almost impossible to subdue.

So “optimized” for what needs to be asked.

wiseen June 10, 2011 at 5:16 pm

Taleb made a good joke about this – if economists designed humans you wouldn’t have two kidneys – you would time share one with ~5 other people …

Andrew Edwards June 10, 2011 at 9:40 am

I’m tempted to ask why this doesn’t happen more often if it is such a good idea. There are plenty of areas in the world without existing cities built on them and without substantial local governance.

Is it a market failure that there are not more of these cities? Or are they actually not so hot? Or do they actually require state intervention to create (here, the formation of the political boundary and, I’m guessing, some serious subsidies to the resource sector in the area, whether over or under the table)?

Andrew' June 10, 2011 at 11:07 am

I would guess that it’s the other way around. It does happen, then the governators swoop in afterward to capture credit. Ever been to a neighborhood meeting that doesn’t have a neighborhood association yet?

Gabe June 10, 2011 at 10:48 am

So people are voluntarily flocking to this fastly growing city. Why has it gown so quickly? obviously there is some revealed preference that many of the people who now go to this city have improved their lot in life by going there. Is it a perfect city? no of course not…is the rest of India perfect? I don’t believe it is. Is Faridabad completely filled with stagnant slums/bad education systems/pollution/filth and a corupt governemnt that stifles innovation and improvements? yes.

Perhaps Gurgaon could innovate and find solutions to many of its problems if there was more competition from other free cities. Why not experiment and see? Obviously socialism and leviathan has not helped eliminate the poverty and poor economic conditions.

I find it amazing that the fans of collecivism have no respect for the scientific method which relies so heavily on experimentation, observation, creating a theory repeat. Instead the collectivist seem to attack any experiments that have promising results and scream for more monopolies of violence in spite of all evidence pointing to monopolies on violence being bad for individual freedom and happiness.

gaelen June 11, 2011 at 11:28 am

we had corporate controlled cities, …..they didn’t work that well for the employees. This article says way more about the dysfunctional government of India than about the amazing ability of corporations to build and run a city. By which I mean that a large part of the reason that so many businesses moved there and set this city up is the Indian governments corruption and incompetence.

“Instead the collectivist seem to attack any experiments that have promising results and scream for more monopolies of violence in spite of all evidence pointing to monopolies on violence being bad for individual freedom and happiness”
Are you serious, what sort of anarcho-libertarian utopia do you live in. So inside the ‘oasis’ there is a monopoly of violence based on the rules and regulations thought up by those who run the corporation, not sure why that is preferable to the gov. And in between you get the joy of living in a place where there is no monopoly of violence, which from my limited experience is not somewhere that you want to live.

Damien RS June 12, 2011 at 11:11 am

Indian governments don’t define the range of governance. You’d have to look at Western Europe, Japan, the Americas (including places within the US) as well. Basic rule of science: don’t cherry-pick your data.

Nick June 10, 2011 at 10:51 am

Even taking as read that this is a condemnation of city governments (leaving aside reasonable objections raised by earlier commentors), I’d really like to see more free-market and/or libertarian types acknowledge that things like this indict city governments and not governments. I don’t think there’s any question that one can have too many layers of government; places in the US that are under the purview of federal, then state, then county/parish/regional, then township (and sometimes even more layers) certainly get overburdened by the amount of differing levels of red tape in the way of doing anything. But people very rarely use this to argue for consolidated government, as would be logical; they instead leap to the idea of shrinking government (or even eliminating it), which this sort of thing does not militate toward.

Doug June 10, 2011 at 7:55 pm

If I want to get a permit to build an extra room above my garage, who do you think is going to be more responsive, the planning department of my city government, or some bureaucrat at a National Building and Development Department of the United States in Washington D.C.?

If my builder or architect has come up with some innovative design or construction technique, who do you think would likely be more flexible in issuing a building permit?

As cumbersome as multiple layers of government can be, I don’t believe there is any serious question that our current system is far more responsive, efficient, and flexible than it would be if building/planning/development decisions were all made at the national level.

Nick June 12, 2011 at 4:52 pm

“Done at the national level” doesn’t mean “done in Washington DC”. Your post office is physically located in your local city, and is a federal institution.

That said, I’m not suggesting that we have to consolidate to one layer of government, just that it’s obviously ridiculous to have four or five.

Doug June 14, 2011 at 9:13 pm

Again, do you find that the local branches of federal institutions to be more flexible and responsive than local agencies or less? If you believed an unfair rule was being enforced, for instance, do you think it would be easier to get that rule changed by going to a local city council meeting, or by visiting the local branch of the United States Post Office?

If you want to consolidate to more than one layer, but less than “four or five,” which layers are you proposing that we eliminate?

Tim June 10, 2011 at 11:10 am

And if the developer had built all the infrastructure what would the difference have been between a developer and a government?

Tim June 10, 2011 at 11:14 am

More to the point is libertarianism in a democratic society actually a movement to reign in democracy and move back towards totalitarian control (albeit through private corporations rather than private families)?

Gabe June 10, 2011 at 12:02 pm

Democracy is not good if there is no protection of individual rights.

Most libertarians would argue that America’s fastest growth occurred due to the protection of individual property rights. There is now a common fetish towards democracy:(the system by which any majority can vote to plunder/imprison/outlaw any other minority). Libertarians do not believe that the opposite or the exclusion of democracy neccesitates “totalitarianism” as Tim implies. Most libertarians think a strong emphasis on individual property rights is actually a boon to the little guy/underdog/hard working person who is often victimized in a system where “might makes right” or majority makes right.

Libertarianism is a movement in favor of individual property rights, with lots of debate over how those individual rights would most ideally be defined. There is plenty of room for redistributionist/socialist libertarians to argue that rights would best be defined one way while the non-redistributionist define them in another way….however it is a bit insane to argue that the system of “majority have absolute rule of all” is the ideal society without even examining a few of the other possible systems.

What do you think Tim?

Tim June 10, 2011 at 2:59 pm

I would suggest your definition of Democracy is flawed and resembles more the “Democracy” of the Soviets than that of the United States. I understand the basics of libertarianism. I understand there are many models.
I’m politically active and strongly in favor of a strong, efficiently run government. I work within our Democracy to make that happen. From my perspective not only are libertarians attempting to destroy what I’m working for, they’re attempting to create a system whereby I cannot build the sort of government I want, thus taking away my personal freedom. Which is why I find libertarianism ultimately about elimination of freedom. If I can’t build a system exactly like the system I have now, then I’m not particularly free. And if you don’t keep me from building the system I have today, then I will do so eliminating your libertarian utopia.
My original comment was not so much about libertarianism itself as the people who seem drawn to it. They seem to have become disillusioned with the democratic process and enthralled with the idea of business leaders (whom they idolize) running the joint.

Michael June 10, 2011 at 3:34 pm

You’re free to build your system so long as you don’t force other people into it.

Tim June 10, 2011 at 4:25 pm

Michael – perhaps we can. I would be for a system whereby libertarians could opt out of all taxes (well except for defense obviously since there’s no way to do that (although I would be willing to give you an even slice of the bill rather than a subsidized rate); there are some issues with libertarianism related to the fact that we don’t choose where we’re born), and you would be free to use any of my resources as long as you paid full market rate for them. My guess is that majority of US citizens would still go along with the subsidized system.

Shorter Tim June 10, 2011 at 9:51 pm

I can do whatever you can’t stop me from doing.

Shorter Tim June 10, 2011 at 9:52 pm

I am not free if I can’t have everything I want. Why are you being so mean to meeeeeeeeee?

Shorter Tim June 10, 2011 at 9:55 pm

If you’re upset that big Group A voted itself a bunch of resources at the expense of small Group B, Group B should just participate more! It’s not barbarism if we talk about it first (never mind that Group B doesn’t have any bargaining power).

Damien RS June 12, 2011 at 11:26 am

Fastest growth? If you mean the 19th century, that was due in large part to “free land” stolen from the Indians and partially worked by slave labor. In the 20th century, the period of fastest long-term growth saw 70% tax rates in the top bracket… and those were instituted before the growth, not parasitic on it later.

Individual private title is useful for growth but it’s not the whole story, and it’s hard to find cases where it isn’t somewhat tainted to boot.

The Anti-Gnostic June 10, 2011 at 12:13 pm

There is a distinction between ‘totalitarian’ and ‘authoritarian.’

Paraphrasing Voegelin, a totalitarian society is run by an elite who follow a gnostic vision that is at odds with reality. The totalitarian society must therefore deny, falsify, propagandize, distort and deconstruct reality, taking total control of all aspects of peoples’ lives to do so. Stalinist Russia and North Korea would be examples of this: economies run by central committees with ideologically-driven models unhinged from reality.

Authoritarian society is another thing entirely. Think Pinochet’s Chile or Franco’s Spain. Or the Arab Emirates. So long as the rulers aren’t sucking up all the productive capital through graft, etc., most people get along fine in authoritarian society.

Gabe June 10, 2011 at 12:27 pm

Central committees of money printers with (keynsian-statist) ideologically-driven models unhinged from reality: check.

Media filled with propaganda: check

Authoritarian swat teams attacking the population for doing things like dancing or having a family memeber who doesn’t keep up with their student loans or for buying vegetation that has been declared illegal.

Militaristic government that starts wars without the consent of the population due to out-of-control facism(crony corporations overly involved in government decision making).

Wide use of torture, wire-tapping….check check check

Tim June 10, 2011 at 2:43 pm

Democratic society that lets you find out about (and do something about) these things… check.

wiseen June 10, 2011 at 5:23 pm

@Tim – Cops trying to destroy the evidence and attacking bystanders – check … the fact that goverment hasn’t came up with a way to censor the internet efficiently yet is only a technical issue.

Tim June 10, 2011 at 2:59 pm

You’re correct. Wrong word.

Stranger June 10, 2011 at 6:13 pm

A government is a producer of justice in conflicts, and a monopoly government can use its monopoly to produce injustice in favor of itself, thus expropriating its subjects with new taxes and regulations.

A state is a producer of improved land, featuring roads, sewers and parks. Tenants pay rent on land to benefit from these improvements.

The reason we confuse the two is that the modern state was created in the 17th century when the landlords made a pact to monopolize government for themselves, the Treaty of Westphalia.

Doug June 10, 2011 at 8:03 pm

The difference is that a government has the ability to force all citizens to pay for a project, regardless of whether or not they want to use the project. The developer, on the other hand, can only extract payment from those who find value in the project, and voluntarily decide to use it.

Do you really not understand the difference between a government and a corporation, or are you consciously trying to ignore it?

efp June 10, 2011 at 11:31 am

Welcome to the world of franchulates and burbclaves.

xyz June 10, 2011 at 1:24 pm

Tabarrok’s summary of “thriving” Gurgaon emphasizes the shopping malls, office parks and golf courses. He manages to omit mention of the slum communities described in the article, where half the children don’t go to school and there are open sewers and uncontrolled garbage dumping. By the definition of most ordinary people, having little oases of privilege amidst grinding poverty hardly constitutes a “thriving” city.

Perhaps living in privileged communities in the States makes one forget about the terrible outcomes this setup produces for the poor. What’s most sinister about the Gurgaon version of a city is the complete lack of anything resembling a functioning democracy. Not only are the poor denied basic services by their government (on the dubious assumption that corporations will provide, say, free basic education without a profit motive), but their voice in all local matters is essentially removed. Where do ordinary citizens go to complain about a poorly provided service, or a bus system that doesn’t work? Poorly performing city mayors can be voted out of office; but not so for corporations that do a poor job in providing services.

Other commenters have pointed out that basic services in many Indian cities with actual governments are pretty poor too. That is certainly true, but that doesn’t exactly prove that the answer should be to banish government altogether. There seems to be an assumption about Indian government (or any developing country’s government) that they are completely awful, that nothing ever gets done,etc. But different levels and sectors of the bureaucracy function quite differently, some better than others. At least there exists democratic mechanisms whereby citizens can exercise their vote and their voice.

Tabarrok says that we shouldn’t worry about gaps in service provision because eventually these little oases will be linked up. But why should we assume that? And again, what incentives do corporations have to spend money on marginal communities where they won’t be able to increase their profits?

As another commenter suggested, perhaps Tabarrok should go spend some time in a place like Gurgaon to get a sense of how “thriving” it is. And try to take more than a few seconds to think beyond the glitzy shopping malls and office buildings about how the vast majority of people experience such a life.

Emil June 11, 2011 at 9:25 am

“He manages to omit mention of the slum communities described in the article, where half the children don’t go to school and there are open sewers and uncontrolled garbage dumping. ”

Just about like in every other city in India, but then with smaller wealthy oases (and i.e. with a higher gini-index)

“Not only are the poor denied basic services by their government (on the dubious assumption that corporations will provide, say, free basic education without a profit motive)”

Governments also do not provide free education, it is just paid for in another way

“Where do ordinary citizens go to complain about a poorly provided service, or a bus system that doesn’t work?”

To the competitor?

“Poorly performing city mayors can be voted out of office; but not so for corporations that do a poor job in providing services.”

Say what?!?!?! Have you seriously never heard of the concept of competition? A poorly performing corporation that provides bad services goes bankrupt, a poorly performing mayor just gets another slightly less well paid government job.

“At least there exists democratic mechanisms whereby citizens can exercise their vote and their voice.”

1) Again, citizens can exercise a lot of power also in markets.
2) can we please stop discussing intentions and feelings and get on with facts and results? If you are in famine because of corrupt government it is of little help that you can vote them out.

“Tabarrok says that we shouldn’t worry about gaps in service provision because eventually these little oases will be linked up. But why should we assume that?”

Because they should have strong incentives to do so? The better services they provide to their “citizens” (including of course commuting) the more attractive will they be to their “citizens” and the more of them they will attract. Can you please tell me how this would not increase their profits?

Paul June 12, 2011 at 12:29 pm

The issue here is that in the market, your vote is proportional to your wealth. To the corporations, the poor buy nothing and thus get nothing. In a place where 10% of the people controll 99% of the wealth, the corporations will focus 99% of their effort on the 10%.

Emil June 12, 2011 at 2:30 pm

“The issue here is that in the market, your vote is proportional to your wealth.”

that’s a bit of a simplification but even if it were true: in a representative democracy, your vote only counts in the election every x years. You have very little influence on the choosing of candidates, even less in the selection of bureaucrats and as a poor you have very limited means to lobby the politicians.

k June 10, 2011 at 1:25 pm

Gurgaon is NOT a useful blueprint – it is absolutely horrendous – I lived there for 6 months and my soul nearly died.

k June 10, 2011 at 1:30 pm

there’s no reliable public transport for instance, when a vast majority of people absolutely need it.

I used to use the Delhi Transport Corporations’s buses whenever I could, it was better than the “self provision” of people.

The Anti-Gnostic June 10, 2011 at 3:09 pm

No public transportation? Oh my God. I would just die. Seriously die.

Tom June 10, 2011 at 11:32 pm

Human rights violation. I knew we’d find them.

k June 11, 2011 at 1:24 pm

ha ha

k June 11, 2011 at 1:30 pm

yes, why don’t you try it Anti-Gnostic? I have, and found it to be terrible. Apparently you find this hysterical and something to be made fun of. Please make me understand your point of view.

Cptspalding June 10, 2011 at 1:41 pm

I came to this from Kevin Drum’s link. I was fascinated by this article because I just returned from Gurgaon last Monday. I encourage you to visit (maybe you have, I don’t know) I think you would see the article over simplifies the reality of Gurgaon. Also, I have to say, the notion of private corporations building power plants and roads and solving Gurgaon’s infrastructure problem is not realistic.

As for Gurgaon, it’s not too much of a stretch to imagine the limitations of Gurgaon starting to work against it soon. Just to pick one example, traffic is a mess. Getting from one place to another can be an absolute nightmare. There are costs associated with such delays and businesses will soon seek out locations without such “costs”. There are more limitations, but I’ll leave it at that for brevity’s sake.

Regarding having private roads and power plants, I’m not sure I see how any but the largest scale business (e.g. General Electric) can cover the costs of these large infrastructure efforts. Wouldn’t most businesses be better off re-investing profits into R&D, paying dividends or expanding the business? For instance from my hotel in Gurgaon I could see Rambaxy Pharmaceuticals, a billion dollar plus company. Wouldn’t they be better off spending money on pills and not potholes?

The only lesson to be drawn is that when there’s an overly repressive bureaucracy, private enterprise can accomplish a lot if left to their own, but there’s a limit to what they can accomplish. Conversely, overly centralized control by the government is likely to be counterproductive. The solution is to find the balance between the two.

Emil June 11, 2011 at 9:26 am

Rambaxy Pharmaceuticals probably already spends a load of money on potholes, just that they don’t know about it because it is spent through the taxes they pay

Steven Kopits June 10, 2011 at 1:58 pm

This strikes me as actually a quite important article.

noiselull June 10, 2011 at 2:10 pm

Walter Block has a great book on road privatization which addresses the monopoly issue effectively.

Brett June 10, 2011 at 2:16 pm

My only concern is that effectively providing a decent Company Town for your employees requires the company in question to have deep pockets. It’s probably not a problem for a giant company like General Electric, but not so much for the countless smaller firms.

Emil June 11, 2011 at 9:27 am

If there is a sufficient return to be made, someone will do so

Rick June 10, 2011 at 3:13 pm

Shouldn’t the word “airport” appear here somewhere?

I have relatives in Gurgaon and they were living in the boonies.

And then an airport was built there. And then it was made very fancy.

And now there is a very fancy elevated highway going straight into Delhi.

India lacks infrastructure in general, and it is shocking to anyone who visits India how private enterprise has to work twice as hard to makeup for basic shortcomings, and how this favors larger companies over smaller, dynamic companies who just want to focus on making their products.

But it seems Gurgaon has a much higher share of government provided infrastructure and much newer infrastructure than the rest of India.

So I really don’t get the point of all this.

Adam June 10, 2011 at 5:03 pm

So we’d have the libertarian utopia if only there was just one company to run the world?

Or, less sarcastically, how do you internalize the externalities that flow to whatever’s left outside the oasis?

Floccina June 10, 2011 at 5:10 pm

Privatize the roads and they will be quickly built and well maintained (yes, they will probably be more expensive than necessary due to some monopoly power but at this point in time that is a second-order problem).

Roads are so small a portion of the cost of traveling by automobile and consumer surplus of driving so high that even at high price they would be a great deal.

Bill June 10, 2011 at 5:26 pm

Well, at least the companies are paying for their services that benefit themselves. Paying for their own transportation, water, sewer, electricity, etc.

In the US, we do it differently: Exxon doesn’t pay taxes and I pay for their use of the roads, waterways, pipeline inspection, gulf coast cleanup. And, if I were to charge Exxon, say, for the use of the Coast Guard to take people off of rigs or clean up after them, we would have people claiming this was a Tax Increase opposed by Grover Norquist.

WTF June 10, 2011 at 9:19 pm

Unless you are very rich, you don’t pay for anyone. Your puny tax payments don’t even cover your own costs to the government. Meanwhile, Exxon paid about $1 million per hour in income taxes in the first quarter of 2011.

How did you manage to get your image of the world completely backwards?

Bill June 10, 2011 at 9:27 pm

WTF,. You must have read the Exxon propaganda machine and not its annual report.

Here is something from CNN on your numbers: “To get to that number, the company includes the federal and state gasoline taxes that the company collects from drivers and passes on to government coffers. It also includes payroll taxes the company pays on behalf of its employees.”….. And, further: “Jeffers noted that Exxon’s tax bill can fluctuate wildly from year to year. In 2008 the company paid over 35% of its profit to the government, while in 2009 it was near zero due to an overpayment from the year before. In 2010 it was about 18%.

Tax Justice Center’s McIntyre said his own calculations show Exxon’s tax rate over the last three years is a bit less than the company is claiming, although it’s still in the same ball park.”

My taxes are not puny, either. They pay for policing the oil lanes in the gulf, an unfunded war in Iraq (It’s not about oil, ha ha ha) and some skirmishes in Libya.

Here is my link, and you have it backwards: http://money.cnn.com/2011/05/04/news/companies/exxon_oil_taxes/index.htm

Bill June 10, 2011 at 9:30 pm

WTF, And while you’re at it, please defend GE as well, or Ingersoll-Rand, or Pfizer….

WTF June 11, 2011 at 1:33 am

Even if you and the Citizens for Tax Justice guy hold your breath, stamp your feet, and collectively ignore the difference between tax burdens and tax incidence… Exxon still “paid” (in the economic sense, i.e., the one that matters) some proportion of those taxes that you think just consumers or just employees paid. And the company is responsible for a boat load of tax receipts besides those that you’re disputing.

Now, I want to take this in stages:

1. Admit that nothing you wrote or linked to supports your statement above that Exxon pays no taxes.
2. Say “thanks”. As much as you and others cheer about the great stuff governments do, I rarely hear a word of thanks for the people who pay for most of it.

Addendum: of course, corporations don’t pay taxes – people do. But one step down the incidence/burden path at a time.

Bill June 11, 2011 at 8:55 am

WTF, Oh, please. My statement that Exxon didn’t pay taxes is supported in the article. Second, Exxon didn’t “pay” taxes when it collected gasoline taxes and remitted them to the government, nor did it pay taxes when it included employee withholding in its tax statement. Third, regarding your addendum comment, “of course, corporations don’t pay taxes, people do” leads me to conclude that if I tax a US multinational which sells to China, I am in effect taxing the Chinese. I’m all for it. You convinced me that we should be taxing corporations more, not less, because their foreign operations as in effect passing on our taxes to other countries. Thanks.

WTF June 11, 2011 at 10:36 am

My statement that Exxon didn’t pay taxes is supported in the article.

Hmm, the part that said they didn’t pay taxes in 2009 because they overpaid in 2008? Pre-payment vs no payment = same thing to you?

Or the part where the Tax Justice Center fella says that they don’t pay quite as much as they say, but they still pay in the ballpark of what they are claiming?

You’re out to lunch, dude.

And, on the economics, you’re wrong to say that Exxon didn’t “pay” taxes when it collected and remitted gasoline taxes. You’re also wrong to say that Exxon didn’t “pay” taxes when its employees were taxed. Actually, you could be right if you made one critical (and unlikely) assumption about the demand and supply curves for Exxon’s labor inputs and product outputs, but I’m pretty sure you don’t know what it is. You’re over your head on the economics here.

2nd Addendum: A US MNC selling to china and getting taxed means a tax burden for the shareholders, employees, and consumers.

Stranger June 10, 2011 at 6:10 pm

The term “voluntary city” hardly expresses what is actually taking place. There is a privately-owned city organized within the territory of a failed government, but there is still a more or less powerless government controlling ultimate justice in the territory (otherwise the private landlords could simply appropriate the water table and dead zones between themselves).

Government is nothing more than the production of justice when conflicts occur. States are land properties that produce “improved land” with roads, police and infrastructure. The corporations in this Indian city are functioning as states, but they are still under the monopoly of the Indian government.

Read this to disambiguate the problem of states, governments and the market for roads: http://strangerousthoughts.wordpress.com/2010/09/12/how-can-roads-be-provided-by-the-market-in-cities/

Poltiical Misses June 10, 2011 at 8:50 pm

This is a good video on Gurgaon : http://www.youtube.com/watch?v=oMwceo7nVLY . Sorta makes me question the nay-sayers and the people commenting negatively about living there.

J Thomas June 11, 2011 at 12:03 am

Not everything works well, of course. Gurgaon is describe as a city of “private islands.” Private oases would be a better term. Within the private oases life is good but in between lies a desolate government desert. Not only are services such as roads and utilities poor, the private oases don’t internalize all the externalities so there are problems with common resources such as the water table. It would also be more efficient to have centralized sewage and electricity.

So, giant businesses get the advantages of not having to deal much with government. And they get the disadvantage of not having government regulate externalities like sewage in the water table. But that’s no big deal, they can handle those problems for themselves by throwing money at them. Arrange their own filtration and bottled water. Their own doctors and hospital systems for employees who get sick with too much exposure to other people’s sewage. Etc.

What gets people interested is the libertarian slant, the dream that this could become a libertarian dream city where everything works wonderfully without government. It isn’t that great now, but we could predict that it can become great.

Here’s my slant — big businesses sometime look for quick results at whatever price. Being first to market can justify a great big development cost. They’ll pay a lot to avoid dealing with governments which do not share their urgency. So they patch whatever problems come up, with whatever will give adequate results quickly. And that’s what they’re doing in this case.

When the various tempory patches turn into too much continuing expense, when they have to face too many externalities from all the other businesses etc, they’ll just shrug off the sunk costs they have there, and start over somewhere else. When you’re willing to pay a whole lot for quick results, you can discard your scaffolding that’s become a bother — it’s already paid for itself, and you don’t need to pay more to fix its problems.

Gurgaon sounds a lot like a gold rush town. But the gold is quick product development. As soon as the businesses involved find the expenses mounting and a better opportunity elsewhere, they’ll turn it into a ghost town.

I don’t see that it has any big lessons about libertarian or anarchist dreams. It just superficially looks like it would.

Emil June 11, 2011 at 9:33 am

“Here’s my slant — big businesses sometime look for quick results at whatever price. Being first to market can justify a great big development cost.”

So you are saying that big businesses are willing to invest when their expected return is greater than the investment? And you are portraying this as some great finding of yours?

J Thomas June 11, 2011 at 10:26 am

Emil, my great finding is that big businesses are willing to make a big temporary investment in Gurgaon, and there’s no particular reason to expect it will blossom into an anarchist utopia.

Big businesses are ready to pour a lot of money into temporary structures, and that says nothing about building a libertarian society. Libertarians who want to think of it as the first robin of spring are deluding themselves. Look for some other robin.

Emil June 11, 2011 at 11:58 am

I don’t think any of us believes in utopias (I certainly don’t). It still remains interesting that the private sector is proving itself able to do (better than the public sector) a number of things that it is often claimed would never happen without involvement of the state.

Ergo, I still don’t consider your finding to be very great

J Thomas June 11, 2011 at 12:30 pm

Emil, I certainly wouldn’t attempt to persuade you. You clearly have your mind made up from your ideology, and there’s no point trying to sway you from that.

I note that this is a case where the local Indian government appears to be doing nothing much, and big businesses have stepped in and provided the particular services that their employees need to get the job done. They have done worst at the things that were traditionally left to government — traffic control, sewage and the water table, various other externalities, urban planning, etc.

Your conclusions about this look inconclusive to me, and I don’t see anything particularly interesting here, more than other boom towns that sprang up without much government.

mulp June 11, 2011 at 4:01 am

Why do old ideas keep getting recycled as new innovative ideas no one ever thought of before?

I live south of Manchester NH, originally a company town named specifically after the company town it was modeled after, Manchester England. Manchester NH ceased to be a company town when Amoskeag Manufacturing Company went bankrupt after the WWI demobilization cut worker pay bringing labor unrest, and then in the Great Depression things got worse, and the properties liquidated. Those company residences and factories are very attractive properties today.

But Manchester was just one of multiple New England company towns organized under the Waltham-Lowell system.

Pullman IL was a later, smaller company town built by George Pullman in the late 19th century to be so great a community there would be no strikes. Workers were required to live in company houses and shop at the company stores, which was a great benefit until the Panic of 1993 when falling revenue resulted, worker wages were cut and hours increased, but not the rents and price of goods. When a committee of workers sought to meet with management, they left waiting, and several fired the next day. Things escalated from there:

Pullman, both the man and the town, is an ulcer on the body politic. He owns the houses, the schoolhouse, and the churches of God in the town he gave his once humble name.
And, thus, the merry war — the dance of skeletons bathed in human tears — goes on; and it will go on, brothers, forever unless you, the American Railway Union, stop it; end it; crush it out.

— Jennie Curtis, President of ARU Local 269, the “Girls” Local Union, Address to the 1894 Convention of American Railway Union

The strike that followed ended with Grover Cleveland sending in Federal troops. The courts forced Pullman to sell the non-production property.

The problem with company towns is surviving hard economic times, especially those from changing industries and methods which lead to bankruptcy.

Bill June 11, 2011 at 10:30 am

This is a great comment.

Thank you for tying back in to economic history. I am familiar also with another one-company town that effectively managed and owned the community. When the employees went on strike, the police force became the private army of the employer.

ChrisA June 11, 2011 at 5:45 am

I think its funny that the bits of Gurgaon that the collectivists above are saying don’t work (transport, roads, sewers, power) that are supposed to be provided by the local government. I don’t see anyone saying the privately provided infrastructure (the Malls, Hotels, Offices and Housing Compounds) don’t work. The collectivists are agreeing with Alex but they think they are disagreeing.

k June 11, 2011 at 8:39 am

yes, you’re right

but also:

the land that all this is built on is owned after all by the state government. So although they don’t want to, and try their best to not, the government has a role to play; sooner or later it will either realize this and work on it, or it won’t and when the recession hits or the water dries up or own supply of power becomes too expensive, bye bye Gurgaon.

Also, if one happens to suggest that the government should do more than it does, I don’t think that makes one a collectivist. It is recognizing that the government is failing, which would make any collectivist leanings difficult to maintain.

Gil June 11, 2011 at 11:36 am

And Libertarians complain “there’s no place to go”. There are pockets of Libertarianism in progress.

Ralph Swanson June 11, 2011 at 11:54 am

Thanks for the article. For info on people using voluntary Libertarian tools on similar and other issues, please see http://www.Libertarian-International.org the non-partisan Libertarian International Organization.

In my view these and other communities are promising Libertarian-direction entities. Purely voluntary or mostly voluntary communities do not assume any particular level of wealth, and are often created by poor, philosophically or religiously oriented, or intentional communities; nor do they presume any specific economic system. They do ease wealth creation or sharing stability for those inclined. The LIO recently registered projects to develop Libertarian-interested communities-networks as a prelude for model Libertarian eco-communities with free services for all, and incubators for other experiments; Libertarian-interest charter cities are also widely discussed.

In India there are communist libertarian communities and other local experiments deserving attention, and I look forward to and encourage more articles on the subject.

In addition, LIO activists champion the spread of Direct Democracy to all nations, and ease of adoption of town hall democracy at the local level in a Liberal, federative milieu that smiles neutrally on many social choices.

Rick June 12, 2011 at 2:48 pm

I still find it weird that the article and these comments ignore the simple fact that all those companies are in Gurgaon because that is where the govt built the new international airport.

They make do without proper infrastructure (much easier for big companies than small) but they are there so they can get in and out of India easily.

Teddee June 13, 2011 at 11:08 pm

I’ve read most of the comments and I thinks there’s a little too much faith in corporations here. Governments are a corrupt mess, but so are big businesses. Either way we’re looking at systems who benefit the wealthy. Corporations have no incentive to invest in slums. Slums house people with no purchasing power who at best qualify as a cheap unpaid labor force. Now I can admit most of my opinion is anecdotal; however, the description of the city as an English-speaking hub suggests that if you are an educated Indian already at least above lower class or a Westerner, the city offers “oases” within the domiciles of companies functioning like governments. Likely, the slums are filled with non-English speaking (or at least much less educated) locals kicked to the side by the companies like has happened to indigenous people all over the world. They have no reason to help them because there are plenty of educated people willing to relocate for higher positions, and the “unwashed masses” supply cheap labor.” If corporations were so ethical and great then sweatshops wouldn’t be an issue. To say corporations are also money-grubbing parasites is not a defense of big government. The fact is any entity with too much power is going to end up corrupt and oppressive. Huge governments are corrupt, communist states with paternalistic dictators are corrudpt, warlords and cartels with massive wealth and power compared to citizens are corrupt, and god knows huge corporate organizations are corrupt. Historically the most egalitarian societies are small and tribal; however, that’s not really a real option either. Smaller confederated entities co-oped with citizens given freedom to live/trade as they desire could combine the better qualities of small govt. (Infrastucture, education not ruled by churches, and some good agreed laws like hey, rape is always bad) and free market (free trade to prvent monopoly, innovation, work-based r&d and benefits). Sorry, but the company mentioned in the article has a creepy resemblance to Umbrella from Resident Evil, and though fiction I think we can all see corporations are no better than any fallacy of “benevolent dictators.”

Comments on this entry are closed.

Previous post:

Next post: