Charter Cities

Dave Killion — May 2, 2012

Despite having posted (twice) about Jody Paterson’s fallacious article on Honduras, I must confess that I don’t find her the most interesting thing about the place. That honour goes to what I think is a Very Big Deal


“With the near unanimous support of its Congress, Honduras recently defined a new legal entity: la Región Especial de Desarrollo. A RED is an independent reform zone intended to offer jobs and safety to families who lack a good alternative; officials in the RED will be able to partner with foreign governments in critical areas such as policing, jurisprudence and transparency. By participating, Canada can lead an innovative approach to development assistance, an approach that tackles the primary roadblock to prosperity in the developing world: weak governance.”

Honduran REDs are a type of charter city, and I think they have some very exciting possibilities, including the potential for disaster. Consider charter schools. If a charter school fails, investors lose their money and the charter company goes out of business. What would happen if a charter city failed?

And how best to construct the charter? For example, is it better to avoid criminal sanctions against drugs and prostitution in order to avoid the perils of prohibition, or would it be better to adopt draconian punishments against such practices in an effort to keep ‘undesirable’ elements out of the city?

My chief concern with charter city governance is that  it still involves coercive governments. Some would argue that given the voluntary nature of charter cities, restrictions on drug use and prostitution should be acceptable to libertarians. They would be mistaken. It is criminal for a government to encroach on the rights of human beings, and nothing about charter governance changes that. Voluntary participation in a charter city no more legitimizes state abuse than voluntary marriage to a known abuser  legitimizes spousal abuse. I think if there is to be real competition between charter cities, some of them will have to be given over entirely to the private sector. Forgive me if I don’t hold my breath.


Zach says

In fact, there are people pushing for an entrepreneurial city model there, with a new legal system and governance provided through the development firm rather than another nation-state.

— May 3, 2012

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