In part I am writing this post because Google yields so little on that combination of words.
It would be a mistake to equate charter cities with extraterritoriality. For one thing, a charter city has its own laws and governance, possibly enforced by overseas courts, rather than imposing foreign courts upon domestic governance, a’la Shanghai through the early 20th century. Still, the history of extraterritoriality gives us some sense of what it looks like to have foreign courts operating outside their usual domestic environment.
The problem with extraterritoriality, as I read the literature, is not the Chinese courts had a superior system of commercial or criminal law which was tragically pushed out by inferior Western ideas. The problem was that the foreign courts were not supported by comparably strong domestic interest groups and there was a clash between the foreign courts, national symbols, fairness perceptions, domestic rents and the like, all in a manner which led to eventual talk of foreign devils and violent overreaction against the influence of outsiders.
The history of extraterritoriality focuses one’s attention on the question of who has an incentive to support the external system of law, when such a system is transplanted abroad. This question does seem relevant to charter cities and related concepts.
Hong Kong worked because the UK and USA were able to exert enough control at a distance, at least for a long while, and because China was weak.
One vision is that a charter city works because a dominant hegemon — perhaps at a distance — supports the external system of law.
A second vision is that a charter city works because the external system of law serves up some new and especially tasty rents to domestic interest groups. In the meantime, avoid Tongans.
A related question is what it means for the external legal system to be “invited” in, and how much such an invitation constitutes prima facie evidence of real domestic support.
I would like to see these topics receive more discussion.
Two interesting books are:
1. Wesley R. Fishel, The End of Extraterritoriality in China, and
2. Par Kristoffer Cassel, Grounds of Judgment: Extraterritoriality and Imperial Power in Nineteenth-Century China and Japan.
Addendum: Here is an update about Romer’s group and Honduras. There is lots going on, and probably even more than is captured in this story. Here is the account from Romer’s group.
“In the meantime, avoid Tongans.”
Re: Republic of Minerva
Libertarians are simply not violent enough as of yet, to have their own state.
It’s not their violence that’s lacking it’s their natural personalities: they can’t possibly cooperate in great enough numbers to maintain a sufficient armed force.
Are EU member states charter cities writ large? If they are, might one study them to make some predictions on actual cities would be accepted in practice?
For example, Italy is a very patriotic country but its people are keen on some amount of government from Brussels because they feel their domestic politicians are corrupt and incompetent.
By contrast, a proportion of Britons are unenthusiastic about government from Brussels. Where they see their rulers as inadequate, they wish to deal with the problem domestically.
I make these points not to turn the thread into a debate on the EU, though I see some risk of that happening, but to suggest that populations may respond in differing ways to the introduction of foreign rules depending on their cultures and on their perceptions of the foreign and domestic rulers.
The analogy with the EU has its limits (eg the law is applied equally everywhere and does not create separate extraterritorial jurisdictions). But I still think it’s useful.
These aren’t points. They’re stereotypes, provided without evidence. Protestant Northmen strong good. Brown Catholics corrupt bad. They run deep in English language discourse, for obvious reasons.
You tell him! There’s no evidence whatsoever that we Italians are any more corrupt than the northerners. It’s a complete myth.
The terminology may be a bit different but I would recommend also looking at may cites as they were formed in the new world colonies. A lot of people forget that most of the colonies started off as outpost cities that grew into larger political entities.
How about the franchises from Neal Stephenson’s “Snow Crash?” Get a passport for Mr. Lee’s Greater Hong Kong, and have a place to hide out in every city you visit.
That book has a lot about this idea (the premise is that the US sold off a lot of land to pay off its debts). Mostly humorous, but also thought provoking.
Too much need to defuse nationalism. People often underestimate the degree of work done by the governments of Hong Kong and Singapore to ideologically realign the population: national education in Hong Kong to emphasize a non-Chinese non-British national identity, demolition of anti-Japanese war memorials in Singapore… it is the success of the realignment that makes it easy to forget, I suppose.
People who want to make a Hong Kong or a Singapore ought to remember that both only adopted their modern laissez-faire reputations later. In their initial governing periods in their postwar, modern forms, there was a lot of statism going on, in policy (mass public housing, public healthcare, state investment in infrastructure) to ideological messaging (manipulating prickly labour relations – Singapore had a majority communist government at one point – nascent nationalism, ethnic disputes…).
I daresay that Romer knows this. But I rather doubt that executives at NKG – a construction conglomerate? – have made appropriate plans.
Hong Kong still has mass public housing (http://en.wikipedia.org/wiki/Public_housing_in_Hong_Kong) and health care (http://en.wikipedia.org/wiki/Health_in_Hong_Kong). I don’t instantly know about public investment in infrastructure but I would not assume that that has gone away either.
“People who want to make a Hong Kong or a Singapore ought to remember that both only adopted their modern laissez-faire reputations later. In their initial governing periods in their postwar, modern forms, there was a lot of statism going on, in policy (mass public housing, public healthcare, state investment in infrastructure) to ideological messaging (manipulating prickly labour relations – Singapore had a majority communist government at one point – nascent nationalism, ethnic disputes…).”
*was*? Singapore still has state-provided housing and healthcare today. Also, the communist government in Singapore was extremely short-lived, especially compared to the PAP, which has governed uninterruptedly for well over 5 decades. One part of the “Singapore Story” as Lee Kuan Yew tells it is the PAP’s co-opting of the communists in order to gain power and implement more pragmatic policies.
If you ask Singapore, their ideology is fundamentally pragmatism, not libertarianism. The PAP was/is nominally socialist/social democrat. It’s just that to them, pragmatism trumps all else.
‘There is lots going on, and probably even more than is captured in this story.’
Probably because words like fraud and bribery tend to have legal implications when printed, especially in a UK context.
One vision is that a charter city works because a dominant hegemon
Important to remember that this is just a vision for now. We don’t know if this will turn out to be just another failure after all. The concept seems overhyped.
Good post.
Acceptance of judicial orders and concepts of fairness guide conformity with judicial orders, more than a threat of sending the sherriff to enforce a court order. That’s why we put judges high up on a bench, why lawyers defer to judges, why we go through some rather silly pageantry rather than meet a judge in an office and sit at a conference room table in our shirt sleeves working out our differences with a judge. (Although mediation with a magistrate might work this way.) That’s why when we vote on laws, or elect others to vote on laws, we share acceptance with a rule.
Exit, Voice and Loyalty, as an economist might say.
There is a difference between commercial and personal transactions. Businesses are willing to accept arbitration to resolve business to business disputes, accept solutions done abroad or using arbitration, etc., however. But, those results are achievable without adopting another country’s law. In some industries, for example, the grain trade, in order to participate you sign an agreement to abide by basically a trade associations substantive rules and arbitration procedures. In some industries, companies agree to resolve disputes by arbitration and mediation, rather than the court system; it is not much of a big step for them to agree to resolve disputes in accordance with another jurisdictions law.
But, for the guy on the street hit by a motorcycle, he may wonder why he should be governed by the law of another jurisdiction for his tort claim.
This post and the concept of charter cities suffer from the neoliberal assumption that Hondurans are sufficiently interchangeable with mainland and overseas Chinese that as long as the right institutions are put into place, capitalism will unleash its beneficence. Like charter schools, charter cities will not succeed unless they take into account human diversity.
Also, when the original extraterritorial domains were established in East Asia, Britain and the European powers were ascendant and rapidly advancing the technological frontier. You’re asking third-party organizations and businesses from an increasingly stagnant West to help shepherd an economic renaissance in Latin America’s backwater. Honduras has higher GDP growth rates right now (though not by much) than EU nations and the U.S. The same was not true concerning imperial China when Hong Kong was created – late Qing China was not just poorer, but more stagnant than Europe.
None of that shows that institutional reforms on the margin can have positive effects. Honduras is much poorer than the west so from its POV the technological frontier is below the horizon. Of course diversity matters and affects the range of outcomes, but ceteris paribus, institutional reforms will ‘work’
“when the original extraterritorial domains were established in East Asia”
They were primarily military bases and the European powers murdered any pirates or brigands they got their hands on. With pirates and brigands cleared out the locals rushed to live and trade in the protective shadows of Western navies.
Impose the rule of law, introduce an effective land title system, impose law and order and suppress corruption and arbitrary takings and any region in the world will do better than without those things. Modern China and India would both be doing better than they are if they could suppress corruption.
“They were primarily military bases and the European powers murdered any pirates or brigands they got their hands on. With pirates and brigands cleared out the locals rushed to live and trade in the protective shadows of Western navies.
Impose the rule of law, introduce an effective land title system, impose law and order and suppress corruption and arbitrary takings and any region in the world will do better than without those things.”
Are you sure it wasn’t just (a) opium (what the British concessions in China were originally set up to enable, after all) and (b) lots of money? Drugs and cash are, if anything, more powerful incentives than the rule of law and an effective land title system.
“Are you sure it wasn’t just (a) opium”
I think the opium came later for Hong Kong and would not explain Singapore at all. There are quite a number of cities in Asia that grew up around European colonial military outposts.
Hong Kong is quite different from these extraterritorial concessions, in that it was actually formally ruled by Britain. I am less certain with Singapore, but I think Singapore was also a full-on colony founded by the East India Company (Raffles?).
I think some of the medieval towns might be a reasonable model for charter cities. As I recall Copenhagen (and I suspect Hanseatic League cities ) had special privileges and exemptions from the laws of the countries they were located in.
Who is going to live there? Hondurans? Or are they going to invite in a lot of foreigners? I’m all in favor of giving the poor Hondurans better institutions, but just setting up another tax haven for global elites, like the Cayman Islands, isn’t going to impress me.
The Cayman Islands rely on people placing their money there, not living there. Lots of rich people are willing to live in California or New York despite the taxes, I don’t think many will move to Honduras. Your suggestion that they’ll import east asians (of whom there are many poor people willing to move to earn a bit more) seems much more plausible.
So wasn’t a big part of why extraterritoriality unpopular among the Chinese that the European courts (and laws) were seen as biased against native Chinese, and in favor of Europeans? If Hondurans come to believe that the charter city courts will protect Americans/Europeans in conflicts with Hondurans, even when the Honduran is in the right, it will be easy to whip up nationalist sentiment against the charter city, and the experiment will fail. This applies even if native residents of the extraterritorial zone are earning significantly more than their compatriots in the rest of the country – perhaps even more so, as they’ll have greater expectations of fairness and justice.
There’s a similar problem if the locals believe that one segment of the society is being favored over another. though that may be less of a problem in a Latin American context, where there is lots of experience of that sort of bias.
“So wasn’t a big part of why extraterritoriality unpopular among the Chinese that the European courts (and laws) were seen as biased against native Chinese, and in favor of Europeans?”
Perhaps, apart from the general humiliation of having a bunch of dirty drug runners bust out the most powerful navy the world had ever known to force your government to allow imports of highly addictive narcotics. It’s like if cocaine smugglers persuaded Mexico to invade the United States in protest against the FBI destroying a shipment of cocaine, Mexico *won*, and then Mexico turned a chunk of LA into a foreign concession where Americans weren’t allowed to live anymore, where foreign courts in foreign tongues held sway. Quite apart from the merits of foreign governance, there’s really no way of avoiding the sense of gross humiliation involved when it’s introduced like that. I think it’s just as likely that the Chinese hated (and hate) the extraterritoriality because it came in as part of the unequal treaties, as that they hated the extraterritoriality on its own merits.
I do not condone colonialism, but your analogy is forgetting the part where the Mexicans bring lots of new tech to LA, create a more efficient bureaucracy, and generally improve living standards. And when invaded by a foreign nation (let’s say Canada), the Mexicans willingly protected the Americans in their concessions, even when it put the Mexicans and Canadians in direct conflict.
I’d suggest reading “The Age of Openness” by Frank Dikotter for more about this. Chinese industrialists, merchants, and artists all thrived during the semi-occupation of Shanghai, more than in nearly any other Chinese city. Colonialism as an idea is abhorrent, but it’s impossible to look at it’s historical effects as simply black and white.
I actually am not an opponent of colonialism at all — if anything, I am anti-anti-colonial, given how many national liberation movements have ended up replacing generally decent, competent, if somewhat myopic colonial administrators with mass murdering native kleptocrats.
That said, the humiliation of colonial subjugation has absolutely nothing to do with the quality of governance. Indeed, I should imagine Americans would feel even more keenly than almost any other people in the world the special humiliation of being governed well by a foreign occupying power.
One could consider multi-nationals (such as Coca-Cola, Shell, etc) with facilities located in developing countries a sort of charter city. They basically import a developed country institutional framework and often have the contracts with their local providers and customers in a developed country law (usually English, sometimes New York) with requirements to arbitrate in a developed country. The local workers working for a multi-national are in effect leaving their country and joining the developed world when they go to work. As far as I can see there is little resentment of the multi-nationals for this approach, often they are heavily courted by developing countries governments for the tax revenues and jobs they generate.
It seems to me that the multi-national approach is more likely to be accepted than charter cities, as being a less obvious abrogation of local laws.
Hong Kong had monopoly status, so its prospects were good.
Hong Kong funneled all output from more people than anyplace on earth.
Similarly, a financial sector funnels all money for savings, investments, and retirements.
Of course monopolies/oligopolies produce profit — ah, that we could all invest in monopolies.
As a mind check, put all 6 million “entrepreneurial” Hong Kong people not at the narrows of a funnel, but on some Indonesian island or in the Philippines.
From those same people, the world would hear nothing.
You mean like Australia?
ChrisA: another analogy for a charter city is employment in a consulate of a western nation. I know people who worked in American consulates in India and going to work was almost like being in America during office hours . This included things common in America: the American flag, a drinking water fountain ( unknown in India), the pencil sharpener fixed to the wall ( also not found in India) , the portrait of the U.S president displayed prominently, neat toilets, punctual staff, and American holidays. To reenforce the American life-style, Coke and Pepsi were served in parties hosted for employees at a time when they were banned in India. So being in the consulate was really like visiting America. Everything was run far more efficiently in the consulates than in the world outside. A charter city presumably replicates American efficiency for the entire city. India too should welcome this venture but any suggestion on this line will be opposed on bogus nationalist sentiments.
I wonder if it would be possible to do this in India if the administrators were Indian-born Indians who had lived abroad for long enough to understand which differences matter, and why, and administer accordingly. By keeping a brown face on the practice, the nationalist objection to the concept might be mitigated.
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