Charter Cities: Empowered Cities for the Urban Age

Speaker 1

Lockhart is a director of research at the Charter Cities Institute as well as a co-host of the Charter Cities Podcast. He is a PhD candidate in political science at Oxford University. His research examines the effects of institutional reforms on public goods provision in low-income countries. looking specifically at political decentralization and new city developments across the global south. At Oxford, he has taught both quantitative methods and African politics. In the field, he has previously worked as a research manager for the International Growth Center for Warwick Africa. And for the ELIMU Impact Evaluation Center in Kenya, where he managed the implementation of several randomized control trials across many different sectors. Including health insurance, rural electrification, and tax administration and legal aid. He holds, A Master’s of Science and Development Management from the London School of Economics and a BA in Economics and Development Studies from McGill University. Curtis Lockhart.

Kurtis Lockhart

Test, test, test, test, test, test. This one on. Test, test. There we go.

Kurtis Lockhart

Sorry, I did not know she was going to read out that long, beefy abstract of my past. I apologize. And I guess I’m making. I’m doing the most Canadian thing ever. I’m from Vancouver. Start off with an apology, and I’m going to give. Another apology to Matthew, the previous speaker. On behalf of Canada, we apologize for our very aged nuclear infrastructure. Yeah, so as was said, I’m Curtis Lockhart. I’m Director of Research and now Executive Director of the Charter Cities Institute. CCI, we’re a think tank. We are dedicated to building the ecosystem for charter cities. And so, you know. Unsurprisingly, I’m going to be talking to you about charter cities and why we think they’re an idea whose time has come.

Kurtis Lockhart

So I thought I’d start with this quote, and this is a Harvard biologist, E. O. Wilson. He actually just passed away in the last couple of months. But he had this great knack for coming up, synthesizing really complex ideas in these pithy, memorable phrases. And this was one that has always stuck with me. He said, the real problem with humanity is we have Paleolithic emotions, medieval institutions, and godlike technology. And this quote gets at one of the most important problems at our time, of our time, I think, this mismatch between the pace of change of some of the three of the most fundamental building blocks of human flourishing, right? Psychology, institutions, and technology. And so I think one of the challenges of our times is to try and solve this mismatch. finding ways, innovative ways to more quickly get human psychology and human institutions to adapt to an ever more rapidly changing world. World, especially a technologically changing world.

Kurtis Lockhart

And things are made a lot more difficult because, in addition to changing technology, There’s also a lot of other changes we have to grapple with this century, including unprecedented demographic change. I’ll point folks on the graph here. It splits the world’s population into both urban and rural. And around the year 2007 The world, for the first time in human history, became a majority urban species. Every year prior to two thousand seven, we were prominently rural, low density. species. And if you look back to eighteen hundred, prior to eighteen hundred we were pretty much entirely a completely rural species.

Kurtis Lockhart

And I find it a sort of really interesting exercise and illustrative exercise to sort of map some institutional changes onto this. demographic change. I think somebody I think was Laura may have brought up the US Constitution. So in the late 1700s, the drafting of the US Constitution sort of started off this flowering, this budding of a bunch of constitution writing, first in the US and then France, and then in the 1800s, a bunch of Western countries, nation states got together and wrote their own constitutions. Fast forward a bit to post-World War II, a lot of former colonies gained independence and they sat down and started writing their own constitutions for these newly independent countries. And so I just wanted to put them on the timeline and map them over the demographic changes, because if you look at both Both were written in periods where the blue rurals completely dominate the urban reds. And the implication to me is that The laws and the constitutions and the founding documents that govern a lot of us today are written for a totally different world.

Speaker 1

And I think this is important to keep in mind.

Kurtis Lockhart

Am I going close enough here? Can you hear me? Good. There we go.

Kurtis Lockhart

And so the question then becomes: okay, well, how do we come up with institutions that can more rapidly adapt to this rapidly changing world. And surprise, surprise, I’m going to pitch you charter cities and we’ll see how it goes. Yeah, for this new urban age, we see charter cities as an essential institutional innovation and an essential way to get institutions to adapt more quickly. The rest of my talk will go over these sort of four points here. Number one, covering just the why. Why are Charter cities important. Then going a bit over what charter cities are, definitions. What are we talking about when we talk about charter cities? Then we’ll cover a bit of examples, cases, precedents out there in the world today. And I did not know I was supposed to leave room for Q<unk>A, so I might skip over the last point depending on how much time I have left.

Kurtis Lockhart

Okay, so the why here. So the when people talk about the why with charter cities, they mainly start with some key Pieces, some key facets of urban economics. Charter cities can function as hubs of innovation, of creativity. Charter cities can be engines of growth for the national economy. Charter cities can be these generators of agglomeration economies. And all these things are true, and these things are fantastic, and part of why cities are great. But I’m going to, I think, focus on a less common reason why I think charter cities are important and more folks should be paying attention to it. And that’s just for the simple reason that these new cities are being built right now as we speak. This is largely in response to huge demand for urban spaces. We have seventy eight million people on average every year moving to cities. This is largely concentrated in the Global South. ninety five percent of the growth in urban areas over the next thirty years to twenty fifty are going to be in the global south, where these places often have A lack of governance and a lack of capacity to deal with that influx.

Kurtis Lockhart

And so this slide is all to say that today we have Over 200 new city developments being constructed across at least forty countries. And it’s my strong belief that if policymakers approach this wave of new city building with the same business as usual mentality, the same sort of conventional wisdom around institutions and urban governance that they’ve approached status quo cities, these new city developments are just going to have a lot of the same dysfunctions that the status quo cities have that they’re trying to fix. And so this is a call for out of the box thinking, and we think charter cities are part of this solution.

Kurtis Lockhart

Okay, so definitionally, so what are charter cities? What are we talking about? Very simply, a charter city is a new city with new rules. And within this definition, there are a few different models. I don’t know if some of you in the room may have seen Paul Romer. He’s a pretty famous economist, won a Nobel Prize. So he gave a very famous TED talk in 2009, where he coined this term charter cities. And basically, he was thinking about these same problems that I was just speaking about: rapid urbanization, poor institutions, and how to deal with these problems in a way that’s feasible in the world that we live in.

Kurtis Lockhart

And he came up with this idea of charter cities, and in particular, what we can call the foreign guarantor model, where a low-income uh poorly governed country like uh Honduras would cede a large city scale chunk of land to uh a well governed high income country like a Canada, self-plug. And then Canada would come in, sort of in effect, import its good institutions and improve governance in this concentrated land that’s been seized. To Canada, this good governance would then kick-start growth, and you get these positive cycles. So, this is all fine and good. He gives the talk. I’ll say I’m not going to hash out the whole history. He got some pushback. It was seen as controversial in several circles. And he sort of was appointed to the World Bank and he sort of stepped away from it gradually thereafter. So it sort of subsided in the mid 2010s. Romer exits stage right.

Kurtis Lockhart

And then CCI, where I’m at now, exits or enters, I should say, stage left. This is the founder is in the blue suit there, Mark. So how does CCI’s model compare to Paul Romer’s model? Basically, instead of Romer’s foreign guarantor model, CCI thinks that a much more effective model would be a public-private partnership between the host country and an urban developer. And we think this solves a lot of the critiques that came with Romer’s model.

Kurtis Lockhart

And then a few, I wanted to cover a few other points that I think are important to understanding the concept. One is that these sites should be located on a greenfield site, a sparsely populated piece of land. The main reason being that when you locate it on a place with little population, you can largely Circumvent or avoid some of the pre-existing political special interests that often stymie or stifle reform that’s been brought up several times today, so it’s a common theme. The second is independent administration. So I really just mean by this a blank slate administrative entity that has wide ranging authority over most policy domains within that boundaries of the city. And then third is decentralized governance powers.

Kurtis Lockhart

And I just want to make a distinction between the second and third, because some people may be like, what’s the difference between these two? So by Independent administration basically means that the city would have authority over setting policy, particularly at the inception of the city through the charter. So setting policy. at a given moment in time. Governance is related but distinct. It’s more talking about the rules for changing those policies over time. And you need both. Both are essential. Both the static rule setting at inception and the sort of dynamic rule changing as time goes on because right, you want these cities to be growing rapidly. A rapidly growing city is also a rapidly changing environment where local officials need to be empowered to to adjust and accommodate that changing environment. So those are the model, the three pieces, definitions.

Kurtis Lockhart

Okay, so uh the next logical question is, you know, are there any examples of this? Are there any uh cases of this in the world that that we can see whether it’s a feasible thing? Short answer is yes. I think over the last 50 years, we’ve seen several cities go from basically nothing To world-class cities in the span of one or two generations. Think of Dubai, think of Hong Kong. think of Senjin or Singapore. And CCI basically thinks that we should not only be learning from these models but we should be actively attempting to replicate the huge success that some of these cities have seen over the last one or two generations.

Kurtis Lockhart

It’s a 20-minute talk, so I can’t talk about all of these. So I’m going to particularly focus on one example that I think is great. So the greatest humanitarian uh miracle, I’d say, of the post-World War Two era has been uh China lifting 850 million people out of poverty in the span of Of 40 years, right? Deng Xiaoping opens up in 1978 and poverty alleviation picks up. And basically, the way that Deng did this was a combination of urbanization with special economic zones. He basically looked across and he saw Hong Kong and Taiwan and he said, these guys are Chinese, we’re Chinese, why are they rich and we’re starting? And he wanted to try and replicate their success. And so, to do so, he started, you’ll see the white squares here, four special economic zones down south.

Kurtis Lockhart

South of China. And before getting into one of them, I’d like to point out, you see on the map, Beijing is the black square up north. how far the zones were set apart from the capital city. Again, this gets back to this notion of the importance of circumventing and avoiding sort of political elites and entrenched interests that I mentioned earlier and others have mentioned in their talks. And I think This is sort of a common story throughout history. If we look at, for example, where the Italian Renaissance kicked off It kicked off in northern city states pretty far from Rome. If we look at the Scottish Enlightenment, right, it started in Edinburgh, very far from London. You look at the innovative parts of The United States and Silicon Valley is basically as far from DC as you can get. So I think this illustrates that idea as well that New ideas tend to flourish away from central domination.

Kurtis Lockhart

And so just to dive into one of these examples, so Senjen, in addition to the very liberalized commercial regulations that come with the designation of being a special economic zone, what Senjin was also given was substantially decentralized governance powers. Beijing transferring a lot of powers down to Local officials down in Shenzhen, and those officials then taking up those powers with gusto. So, just to give some examples, those officials you know, scrambled after 1980. The zone was set up and they set up the first land markets in the entire country. These officials set up the first labor market in China. These officials set up China’s first ever stock exchange. And so this type of model where you combine liberalized commercial law with devolved governance resulted in massive, massive success.

Kurtis Lockhart

You’ll see here After the first year alone, Senjen attracted over fifty percent of total foreign direct investment in all of China. absolutely astronomical. In terms of population, it grew from a sort of collection of fishing villages of 100,000 people to over twenty million people today, forty years later. And then, of course, with all these things happening, you get sustained high rates of economic growth. Turns out people get richer very quickly. And so that’s reflected in this case as well. So Shenzhen can basically, is what I’m saying here, be thought of as a sort of proto-charter city.

Kurtis Lockhart

And then fast forward, this is a map of zones in China today. Basically, starting out with the four zones, the success of Shenzhen and these other zones were so astronomical that the regime then Expanded this model throughout all of China, so much so that by twenty ten, some ninety percent of Chinese municipalities had some sort of SEZ arrangement within them. And so I’m seeing time, so I’m going to zoom through this one, and I’m going to end with this story here, and I’m going to read because I don’t want to botch it.

Kurtis Lockhart

Yeah, I want to end with a quote that I really like and The reason I like it is I think I’ve seen today, both in society and individuals, a lot of fear around Building big things and making big plans. And so Daniel Burnham was a city planner. And he said, make no little plans. They have no magic to stir men’s blood. And I really think that Florence’s famous dome here epitomizes this sort of sentiment.

Kurtis Lockhart

Basically, the city fathers of Florence, they laid the foundation of this church in 1295. And they had the dream of building the tallest domed church in the known world at that time. The plans were massive. The church was meant to be huge and the dome even bigger than that. And the main problem is that they had no clue how to build it. They didn’t have the technology, especially for the dome piece. The dome would just essentially Collapse in on itself with technology at the time. But still, the church fathers chose to proceed anyway. They built the church, but had to leave the top here, the dome, undomed, and basically leaving that roof open up to the elements. and left the covering of that dome, the building of that dome, to future generations in faith that they would just figure it out, in faith of human ingenuity.

Kurtis Lockhart

Admittedly, that was quite a big leap. The dome remained unbuilt for over 120 years. until a really brazen genius Florentine architect who had actually never worked on a construction project before in his life said, Hey, I can build this. And he started in in fourteen eighteen. It took sixteen more years, but at long last, the dome was completed, and with it. one of Italian Renaissance’s most iconic landmarks.

Kurtis Lockhart

So this is a great story to illustrate, you know, make no small plans And I also like the the Florentine story because it kind of poetically pokes at E. O. Wilson’s quote as well, right? It turns out I think Florence shows that medieval institutions, when you combine them properly with godlike technology, can actually make some pretty magical things. So I’ll just end by saying that charter cities like Florence’s dome are unapologetically bold. But we believe they’re an idea whose time has come for this new urban age. So thank you.

Speaker 4

Talking about Shenzhen, I was remembering when I was first learning about blockchain identity. I came across Zhang Shan, which is across the river from Shenzhen, and they were using their blockchain identity to actually track people on parole through the city and track their behavioral compliance. And for me, I found that really contrary to the general narrative around blockchain identity as sort of a liberating technology. And to me, it’s really interesting to see that as a model that is the Chinese System, but even potentially in other spaces, what buffers are there that these cities don’t become like company towns run by billionaires or tech companies or DAOs that we don’t have control over and they’re tracking our us through the city. I’m just, you know. Seems like a real like they already have a model for some of that.

Speaker 3

Yeah, no, great question. And really, I think CCI is. I think cognizant of the fact that there’s going to be many, many different types of models here. I don’t know if any of you have heard about the sort of Zeti laws down in Honduras. There’s a new city called Prospera. um that’s sort of been started up on similar lines that that you’ve talked about, sort of a private city situation. But they’re experimenting with some very interesting rules. The point the point being that the whole model is about doing these things in a delimited space. Just as Utah has set up this regulatory sandbox that allows folks to experiment on a decentralized level so that If it does cause harm, it doesn’t cause harm to a ton of folks, but you still get to learn and have demonstration effects, and then you can learn what doesn’t work, you learn what works, and scales those up just as China did. That’s the model. And so we’re agnostic as to whether it’s public-private partnership is our what we lean towards, but if there are some private organizations or some Public charter cities, we could see that too, and it they would equally experiment with those things. So, yeah. Thank you. Thank you, Curtis.