Cities as hotels

Earlier this year I posted about India’s private city, Gurgaon. Gurgaon has grown from nothing to a city of 1.5 million people in just 30 years and it has done so based almost entirely on the private provision of public goods, including transportation, utilities, and security. Gurgaon is a desirable place to live in India but it has grown haphazardly as a city of private oases, rather than as an integrated city. As a result, Gurgaon has not enjoyed all the benefits of economies of scale in infrastructure provision or the benefits that come from internalizing externalities–the types of benefits that are possible with a single owner or integrated political system. As Matt Yglesias explained at the time:

Imagine if someone owned all of San Francisco and leased the land and structures out. Well obviously he’d want to have some kind of fire department and building standards to protect his investment. And he’d want to have a security force, since crime would reduce the value of the rent. And he’d want there to be some parks, because people like parks and their presence will increase the rent he can charge. (Indeed, my building includes a small private park). And obviously he’d need schools and really all the rest. …But in order to internalize the benefits of privately provided infrastructure, parks, public safety, etc. the scale of the enterprise would have to be really big. Like the size of a whole city.

Gurgaon, however, is not unique. Private cities are growing throughout the developing world and some of them are quite large.

Renaissance Partners, the investment unit of Moscow-based Renaissance Group, plans to build a 6,400- acre city in the Democratic Republic of Congo as it seeks to benefit from Africa’s urbanization.

The Russian firm is working on a master plan for the new urban center after securing the land outside Lubumbashi, the country’s second-largest city… Renaissance is considering similar projects in GhanaNigeriaSenegal and Rwanda, he said.

“The West has peaked in terms of economic growth and the new markets are in Africa,” Meyer, 39, said. “And the main drivers of this growth in Africa are going to be cities.”

Renaissance’s Lubumbashi project will be more than double the size of Tatu City, the $5 billion center that the Russian firm is building from scratch outside the Kenyan capital of Nairobi. The Moscow firm, headed by Stephen Jennings, plans to take advantage of Africa’s economic growth and emergence of a growing urban middle class demanding better infrastructure.

6,400 acres is a small city, about the size of Apple’s home of Cupertino CA (pop: 58,000), but it is big enough that Renaissance partners will have an incentive to build public goods such as city-wide sewage, parks, roads (congestion pricing!), an electric plant and grid and so forth, exactly as Matt argued (see also The Voluntary City).

Private cities are happening now for a reason. Africa, India, and China are urbanizing more rapidly than has ever occurred in human history. In Africa, the number of urban dwellers is projected to increase by nearly 400 million, in India at least 250 million will move to cities and in China more than 400 million will move to cities in just the next 20 years. Not all of these people will move to older cities, which are not always in the right places and which rarely possess anything like the right material let alone the right political infrastructure. The rising middle-class want to live in first-world cities and in many of these countries only the private sector can deliver those cities.

The rapid urbanization of the developing world is an opportunity to remake cities anew. Private cities as hotels on a grand scale.


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