“Free cities” can save Africa from poverty

The search for a recipe to solve poverty is as old as humanity itself. Poverty is destructive. It shortens people’s lives and makes it a living hell; it erodes quality of life; it suffocates hope; it leaves children and old people hungry and cold. When politics create expectations that the economy cannot provide for, it leads to protests and civil wars.

A poor majority with political power who governs a minority with relative economic power creates a recipe for tension. Therefore, solving poverty is in everyone’s interest – rich and poor alike. The short-cuts of government-powered socialism brought us to dead ends, poverty and oppression. But there is hope. 

Over the past decades, economic growth in countries such as China and India has helped hundreds of millions of people to escape poverty. The question remains, however, whether or not Africa as a whole will discover the correct recipe for prosperity, especially since many African countries like Mauritius have been showing rapid economic growth for a while now.   The challenge is that the standard recipe for success, which entails free markets, property rights, the rule of law, entrepreneurship and the downscaling of the State’s role remain too high a hurdle for historically leftist governments such as the ANC.

Therefore, smaller pilot projects that can be expanded are more economically viable. The Head Economist and Vice President of the World Bank Dr Paul Romer’s imaginative idea of free cities could be such pilot projects, especially since these played a significant role in the economic emergence of communist China.

Free cities

Free cities are cities which are governed under a special “charters” and are not subject to all the normal state laws as in the case of other normal cities. Free cities are governed according to self-chosen political, economic, judicial, labour and even cultural systems. These cities enjoy delegated self-management, making it possible for custom-made systems and better decision-making as decision-makers are more in touch with local circumstances.

Hong Kong is possibly the best example of a free city and, together with the city-state Singapore, served as model for China’s rapid economic development. The Chinese leader and reformer Deng Xiaoping established four free cities in the vicinity of Hong Kong in the eighties as a pilot project to see how the free market system could work in China.

After the success of these cities, he established another 14 such major cities as “special economic zones”, after which the model was cloned across China’s whole eastern coast. Eventually, China grew into a developed “state” city by city. The governments of these areas attracted investors, companies and skilled workers as a result of their innovative economic and political systems.

In this way, the free city model of Hong Kong became the launching platform from which China emerged according to the principal of “one country, two systems”. The idea also caught on in the West. 112 of California’s cities were already free cities in 2008, of which Los Angeles and San Francisco are the best known.

Third world countries

Romer came to prominence as Economist at the Stanford University for his proposal that rich countries establish free cities in open areas in poor countries and govern these for an agreed period and under a special charter. This may ensure that better government leads to efficient political, economic and judicial rules, which in turn will ensure the rapid development of these cities. The purpose is that this successful model is extended to larger areas until the country as a whole is eventually better governed. 

Although countries like Madagascar and Honduras showed interest in the model, most Third World countries are hesitant to accept these, because new innovative ideas may easily lead to resistance to change. Romer’s ideas still enjoy major popularity, however. Already in 1997 he was named one of Times’s 25 most influential people, while he made it to the magazine Foreign Policy’s list of 100 top thinkers in the world for 2012. His lecture “Chartered Cities” on TED’s World Conference in 2009 made him world famous and many countries experiment with his ideas to export the Hong Kong example all over the world.  

Two systems

Romer’s point of departure is that poor government is the greatest cause of poverty, unemployment and environmental crises. He compares the gigantic differences between countries that started simultaneously but were governed by two different governing systems, for example West and East Germany, North and South Korea and, of course, China and Taiwan. The only difference between the prosperity of the one part and the misery in the other is grounded in the different systems of government.  

Just like Romer, Chinese leaders thought it difficult to change a whole country immediately, and realised that it would be easier to start with the city as a living experiment. This offers people the freedom to either use the new system or preserve the old. It is also small enough to perform many experiments on before it is exported and cloned on a larger scale. Romer is especially convinced that it would be difficult to change current cities with established systems and lifestyles, as this may lead to greater resistance and even revolt. His suggestion is that it is better to establish new cities that are grounded in the new rules right from the start.

South Africa

The South African Government tried replicating the Chinese experiment here in a very watered-down version. The Special Economic Zones Act, 2014 (Act No 16 of 2014) was passed in 2014, which allocated areas such as Coega, Richards Bay, East London and Saldanha Bay. The poor successes obtained are the result of these being nothing more than industrial parks. There is no meaningful incentive or the right to establish special governing measures to attract businesses, investors or innovative new projects.   

Free towns

In practice, private towns that govern themselves are on the increase, however. The increasing popularity of these “free towns” – which are becoming more and larger – is the result of better safety, water, electricity, environmental, recreational, educational and lifestyle services that Government cannot provide to the same extent to citizens. In these private towns, resident and developers in practice make their own “laws” and are not subject to the same extent to the same rules that other towns are subject to. The fast expansion of these towns is the result of a state that is quickly deteriorating and that cannot provide the more basic service to the satisfaction of those who cannot afford it. It is also the manifestation of people who do not wish to be treated like political minor children by Government and who want to make their own decisions. As the centralised political system fails, the citizenry themselves put federal (in other words decentralised) or local government solutions in place.   

China’s emergence through experimental pilot projects helped to overcome resistance to renewal and resulted in positive “radical economic transformation”. Let us hope that the competitors in the ANC’s leadership battle will look towards what China did in a bid to save our country from crippling poverty, rather than at obsolete socialism that caused it in the first place.   

Flip Buys is chairman of the Solidarity Movement.