Wednesday, 4 November 2009

Romer demolished in a day.

Paul Romer, champion of charter cities, explains his philosophy of history on 'the long now' website. Indians on the internet, however much they might long for a nice Corporate run City to call home, have registered their cynicism at the notion.
Indeed, Romer's focus on China rather than India vitiates his theory of history. Unlike India- where small local Kingdoms, linked by mariage or feudal ties,were valorised, China placed the highest value on preserving the Empire. Disaster was associated with a divided country. China's policies were not designed to maximize per capita income but to minimize centrifugal tendencies- including the social power of merchants and traders- especially on the coast.
The success of Taiwan and Hong Kong (post 48- it was a sleepy backwater before that day) was linked to  refugees including people fleeing from Shanghai- which was the very reverse of a Charter City, it was a Divided, Triad dominated shambles, but still an incredibly productive and entrepreneurial region.
Taiwan carried out one-off land reform in the opposite manner to India- i.e. it did it fast and such that title became clearer rather than fuzzier. Already in India, the British had limited the market for agricultural land introducing rules re. illegality of sale to non-agriculturists. In other words, though India may at one time had Rules similar to Taiwan and Hong Kong- those rules were changed starting with the British themselves. Anarchy in some states like Bihar is linked with uncertainty arising out of stalled or failed land reform.
In India, laws tending to freeze up the market or to create ambiguity about ownership and control- e.g. rent control, labor law, 'inspection raj, nationalisation, property rights in jobs, break up of Managing Agencies, etc.' etc- either already existed or had been envisaged in the British period. Shanghai type capitalism- reduplicated in Hong Kong by refugees- was not condoned by the British. Rather, they turned a blind eye to many things including the manner in which the colony served the Communists. There is more to Hong Kong than Romer sees.
 Indeed, the British police in Hong Kong were the only British force known to be corrupt- however, this helped grease the wheels and served their overall strategy.
China's decision to raise per-capita income and create a shiny new consumerist paradise does not represent a decision to cede control from the Imperial center to Commercial hubs on the Pacific Rim. On the contrary, China is acting as a great Imperial power, determined to increase its force projection across historic- as well as mythical- borders.
China simply does not serve Romer's thesis at all.
British India does or should do. They create three Charter Cities- the Presidencies of Bombay, Madras and Calcutta- and the British Empire grows from those seeds. The history of British jurisprudence in India- or let us just say 'the rules set'- is not of rational rules displacing traditions or conventions that cause productivity to stagnate and made Social Capital building more difficult- but, emphatically, the reverse.
Prior to the British, you at least knew who you were- that's my dad, that's my mum, I own this house where I live. But, as time passes- as the Court Pundits are dispensed with in the 1860s- you have a new situation. 'Your dad wasn't married to your Mum. You are illegitimate. You own nothing at all."
Oh your parents were sva-gotra or if not them than some grand-parents or other ancestor!
So now,  you have a court case on your hand.
You say- I own this land. Every one in the village knows it. But no, your caste has been classed as non-agricultural. It is a delusion that you own this land. Kindly get your head examined.

If Romer's Charter Cities can get resources like water and power and so on out of the ocean or the wind then, perhaps, such Cities might never be parasitical on the hinterland. But if such is not the case, or if the real estate in the City is an object of contention by elites in the hinterland, then conditions are ripe for the 'Rule set' to be continually deformed to create uncertainty such that local power-brokers benefit. In other words- you have rent seeking behaviour.
In the case of India- British justice, whatever its merits, operated as a vast rent-seeking machine. So did the administration. So did representative Government- when it emerged. What of Corporations? Do they have clean hands? If Jamshedpur- a Corporate City if ever there was one- is mentioned by MJAkbar as a hotspot for communal riots back in the 80's- then what hope can we have in such ventures now?
What incentive structure exists within Corporations that might encourage ambitious rising stars to spend their time fighting machine politicians or gangster controlled unions? A billionaire like Murdoch had an incentive to break the power of the Fleet Street Unions- but Mrs. Thatcher was cheering him on. Does Murdoch have an incentive to confront China about journalistic freedom? Of course not. And if not Murdoch- then how about  some corporate drone in his 30's or 40's? Why should he or she take that sort of risk?
Romer has achievements to his credit in terms of modelling increasing returns and other production and organisational externality effects.
However, what is missing is the recognition that backwardness arises from higher weightage to negative consumption externalities- i.e. treating all goods as positional and wishing to deny them to others to increase one's status or else maximise rent seeking- and, moreover, universalisation of poverty is the precondition for private affluence of any sort at all! In this context, taipan Charter Cities need mass hunger in the hinterland so as to say- what difference does my corporate jet make? Take away all my perks and distribute it to the poor- and, okay, they eat well for just one day. After that what happens?
In any case, the 5 star hotels and bars of the Charter City is absolutely necessary for the U.N and N.G.O do-goodniks who will turn up to feed the starving countryside. Of course, we may get lucky and Al Qaeeda sets up base back in the bad lands. Again, we're gonna need a sparkling Emerald City for N.A.T.O to rest up in while managing regime change.
Thus a billion below the poverty line is a sufficient excuse for the billionaire club to be bullish on recruiting. However, mass poverty will never be truly safe unless you have terrorism and genocide in the hinterland.
Thankfully, the Internet can help us here.

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