This post may seem off-topic, but from my point of view it’s relevant because I think of charter cities as part of the “master plan” for open borders. My master plan has four parts:

1. Advocacy and moral suasion
2. International migration deals, which would what the WTO has done for trade
3. Undocumented immigration and civil disobedience
4. Passport-free, or at least much less restrictionist, charter cities

See here, here, and here for more.

Anyway. The falling out between Paul Romer and Michael Strong/MGK Group seems to have been over a constitutional issue. What should the constitution of the new charter cities be like? Just what the two sides of the constitutional disagreement were is hard to discern and describe. It’s partly the lack of transparency by all parties, but more than that I think we’re hobbled by a lack of good theory. Theory gives us the vocabulary, the mental categories and the words to express them, with which to perceive what’s going on.

Let me start from the Concept page at the Charter Cities website:

The concept is very flexible, but all charter cities should share these four elements:

1. A vacant piece of land, large enough for an entire city.
2. A charter that specifies in advance the broad rules that will apply there.
3. A commitment to choice, backed by voluntary entry and free exit for all residents.
4. A commitment to the equal application of all rules to all residents.

The broad commitment to choice means that no person, employer, investor, or country can be coerced into participating. Only a country that wants to create a new charter city will contribute the land to build one. Only people who make an affirmative decision to move to the new city will live under its rules. They will stay only if its rules are as good as those offered by competing cities.

A charter should describe the process whereby the detailed rules and regulations will be established and enforced in a city. It should provide a foundation for a legal system that will let the city grow and prosper. This legal system, possibly backed by the credibility of a partner country, will be particularly important in the early years of the cityʼs development, when private investors finance most of the required urban infrastructure.

There are three distinct roles for participating nations: host, source, and guarantor. The host country provides the land. A source country supplies the people who move to the new city. A guarantor country ensures that the charter will be respected and enforced for decades into the future.

Because these roles can be played by a single nation or by several countries working together as partners, there are many potential arrangements.

This is admirably lucid as far as it goes, but I am struck by (1) the way it leaves the constitution of the charter city as fill-in-the-blank, and (2) the assumption that the crucial guarantor role must be played by a country.

Why would a country want to play the guarantor role? Presumably not for territorial aggrandizement. Possibly out of altruism, the presumptive (not always the real) motive for foreign aid. Wise constitutions don’t rely too much on altruism, however. Could a country profit by serving as the guarantor of a charter city? In one sense, that could make sense, because if better rules raise productivity, the guarantor could cream off some of the surplus value created while leaving everyone involved better off. But a crucial feature of the rules in developed countries is the distinction between private sector actors such as businessmen, who can sell their services to the highest bidder but cannot use force, and public sector actors such as judges, who cannot sell their services to the highest bidder but can use force.

The problem with relying on altruism is not just that altruism is rare, but that it doesn’t give specific instructions. Live for others? How? A stylized characterization of the constitutions of the wealthy West is that the #1 rule is that the rulers don’t make the rules, the ruled do. Suppose you tell Western bureaucrats to set up shop in a vacant plot of land in a developing country. They ask, “What are we supposed to do there?” We answer, the same thing you do at home. You guys run things well in the West, do the same thing here. But in the West, they are accustomed to serving the people. So the first thing the bureaucrats might want to do is hold an election, so they’ll have political bosses to obey and mandates from the people to carry out. But if the city’s just been founded, there’s no one to vote. So you have a chicken-and-egg problem. Later, when people move in, they’ll likely vote for different rules than the West has. And that seems to be the end of your experiment with exporting good rules to poor places.

Alternatively, the Western bureaucrats could obey their home governments. But those governments are democracies and obey their home electors, who will not have the interests of the charter city at heart. That the policies of a charter city should depend on the domestic politics, as distinct from the technocratic expertise, of another country, seems to be an unwelcome feature of a charter city whose staff are the servants of a foreign country. Is it possible to give Western bureaucrats, likely to have knowledge and integrity but not accustomed to taking initiative or setting policy, specific instructions to carry out, without letting good rules be overridden by local democratic politics or tied to irrelevant democratic politics abroad?

The following constitution is my attempt to resolve the question.

1. Define the following entities: (a) Administrator, (b) Host Nation, (c) Charter City. The Administrator is tasked to run the charter city, and might be a private foundation like the Gates Foundation, an autonomous/independent agency of a foreign government, or a multilateral global policymaking agency like the World Bank, but probably not a private for-profit firm or a political appointee of a foreign government. The Host Nation would be a country which agrees to yield a small part of its territory, initially vacant or nearly vacant, on a temporary basis– say, for   to be ruled by the Administrator, in hopes of promoting development, and perhaps in exchange for other benefits such as monetary aid, military alliances, trade privileges, visa privileges for its citizens abroad, influence on global policymaking, e.g., at the UN, etc. The piece of territory thus yielded is the Charter City.

2. The Administrator creates a network of judges, police, and other officials, probably foreign and/or foreign-trained, to enforce rules and resolve disputes, with jurisdictions, chains of command, appeals systems, etc., on the model of the West.

3. A Basic Law is distilled from the English common law tradition, codified, published, and declared to be in force. This Basic Law covers property rights, enforcement of contracts, criminal procedure, etc., but avoids as much as possible dealing with the provision of public goods.

4. The following classes of persons will be defined by the Administrator: officials, citizens-stakeholders, and residents-sojourners. Officials are the judges, police, etc. mentioned above. They are chosen by the Administrator. Citizen-stakeholder status would be granted on the basis of length of residence, a record of payment of taxes, and perhaps other conditions, e.g., language fluency, or education, or a formal declaration of consent to the constitution. It would confer financial advantages, e.g., citizen-stakeholders might be issued credit cards which exempted them from a 10% sales tax, but it would involve some duties as well, such as voting in referenda and participating in juries and in the citizen assembly (see below). Access to citizen-stkaeholder status might be made easier, or even automatic, for Host Nation citizens. In turn, the Charter City would try to negotiate for its citizen-stakeholders to have the option of obtaining Host Nation citizenship. Resident-sojourners are all persons present in the territory who are not members of the other two classes. They might be admitted from anywhere in the world, or the Host Nation might place some general restrictions on who could be admitted, while still giving the Administrator much latitude. Of course, the hope is that the Administrator would opt for open borders. Resident-sojourners would enjoy protection of the laws but not full participation in governance, and might be subject to special taxes.

5. All legislation over and above the Basic Law, plus modifications to the Basic Law, would be initiated by petition. Petitions could be signed by citizen-stakeholders or resident-sojourners. They would be ranked in order of the number of signatures and sent to the citizen assembly for consideration.

6. The citizen assembly would consist of a few hundred citizen-stakeholders (maybe 0.5% of the citizen-stakeholder population) chosen by lot. Their responsibility would be to study petitions and decide whether to forward them to the Administrator with a recommendation to pass them as laws. If the petition is unclear or many citizen assembly members want to see modifications, officials called Referees would be assigned to clarify or modify petitions at the assembly’s request. Petitions forwarded to the Administrator would become bills.

7. The Administrator would have a Legislative Council (LegCo, as in Hong Kong) responsible for deciding whether to pass bills as law. It would be understood that the LegCo should try to pass any bills that are feasible to implement and not inconsistent with the basic constitutional framework of the Charter City, and should not dismiss bills that merely differ from their own personal preferences. But they could veto bills that are infeasible or profoundly harmful to the City’s interests as they perceive them. In case of rejection, LegCo would have to publish its reasons for exercising a veto. LegCo could also modify bills, in which case Referees would have to decide whether the changes were merely technical matters of implementation or substantive policy changes. If the latter, a referendum would be required with at least a 50% threshold for passage. LegCo could also call a referendum on a bill that they could pass, if they are uncertain of its merits and want the public’s input.

8. Referenda would be conducted within two weeks of the time they were called. All citizen-stakeholders would be expected to vote, and repeated non-voting would result in small fines. LegCo could set various thresholds. For example, they might set a 90% threshold for a measure they thought should only proceed if it enjoys nearly unanimous public support, or a 10% threshold for a measure they think is very necessary but will abandon if they find it faces nearly unanimous opposition.

9. The citizen assembly would be empowered to make recommendations about the hiring and firing of public officials, which the Administrator would undertake to consider, although it would not be bound by them.

What do you think? It is not entirely a democratic constitution, and it avoids popular sovereignty, which is a problematic concept when who “the people” are is as fluid and endogenous as it must be in a charter city. Yet it has many democratic elements, with strong channels for popular input into governance, and popular political participation perhaps more intense than any democracy today. The temporary nature of the constitution would leave Host Nation sovereignty intact. If many charter cities of this kind were established around the world, the Administrator might acquire extensive experience with this style of governance. Nations could negotiate for access to charter cities hosted on one another’s territory, and the poorest nations, in particular, might be eager to establish charter cities to promote development and gain diplomatic clout.

It’s one way to open the world’s borders.

Nathan Smith

Nathan Smith is an assistant professor of economics at Fresno Pacific University. He did his Ph.D. in economics from George Mason University and has also worked for the World Bank. Smith proposed Don’t Restrict Immigration, Tax It, one of the more comprehensive keyhole solution proposals to address concerns surrounding open borders.

See also:

Page about Nathan Smith on Open Borders
All blog posts by Nathan Smith