Categories
Podcast episode

How to Defeat the Dictators w/ Charles Dunst, Asia Group – EP180

Have democracies failed and is authoritarianism winning? How can democracies reinvigorate themselves? Does the West need to decouple from China? These and other questions are considered in Economics Explored episode 180. Foreign affairs expert Charles Dunst talks about his new book Defeating the Dictators with show host Gene Tunny. Among other things, Charles and Gene talk about the potential benefits of Public Private Partnerships (PPPs), such as Operation Warp Speed, the Trump administration’s COVID-19 vaccine plan. 

Please get in touch with any questions, comments and suggestions by emailing us at contact@economicsexplored.com or sending a voice message via https://www.speakpipe.com/economicsexplored

You can listen to the episode via the embedded player below or via podcasting apps including Google PodcastsApple PodcastsSpotify, and Stitcher.

About Charles Dunst

Charles Dunst is deputy director of research & analytics at The Asia Group, an adjunct fellow at the Center for Strategic and International Studies, and a contributing editor of American Purpose. He is the author of Defeating the Dictators: How Democracy Can Prevail in the Age of the Strongman (Hodder & Stoughton, February 2023). 

For further information about Charles, check out https://www.charlesdunst.com/

What’s covered in EP180

  • What is the Asia Group and what does it do? [1:35]
  • Is democracy no longer seen as the path to prosperity in developing economies? [5:28]
  • What are the most important organizing principles for a democratic system? [11:38]
  • Accountability and the lack of trust in government [16:34]
  • Best practices for running a democratic country in the 21st century [21:36]
  • Too much money in politics in the US [25:41]
  • Does the West need to decouple from China? [27:37]
  • The role of public private partnerships (PPPs) such as Operation Warp Speed [32:27]
  • How will dictators be defeated if we govern ourselves better? [34:59]
  • The importance of engaging in the conversation through social media and local governance [38:32]
  • Inequality and the Dream Hoarders [39:00]

Links relevant to the conversation

Defeating the Dictators (Please buy the book via this link to support the show):

https://amzn.to/3liQrjx

Matthew Engel’s FT article “The foreign states that own Britain’s railways”:

https://www.ft.com/content/e57c5fd0-bf54-11e9-9381-78bab8a70848

Dream Hoarders: How the American Upper Middle Class Is Leaving Everyone Else in the Dust, Why That Is a Problem, and What to Do About It

https://amzn.to/3LvCOrL

Track Nancy Pelosi’s stock portfolio:

https://www.capitoltrades.com/politicians/P000197

https://twitter.com/PelosiTracker_

Transcript: How to Defeat the Dictators w/ Charles Dunst, Asia Group – EP180

N.B. This is a lightly edited version of a transcript originally created using the AI application otter.ai. It may not be 100 percent accurate, but should be pretty close. If you’d like to quote from it, please check the quoted segment in the recording.

Gene Tunny  00:06

Welcome to the Economics Explored podcast, a frank and fearless exploration of important economic issues. I’m your host Gene Tunny. I’m a professional economist and former Australian Treasury official. The aim of this show is to help you better understand the big economic issues affecting all our lives. We do this by considering the theory evidence and by hearing a wide range of views. I’m delighted that you can join me for this episode, please check out the show notes for relevant information. Now on to the show. Thanks for tuning into the show. This is episode 190 on defeating the dictators that’s the name of the new book by up and coming Foreign Affairs expert Charles danced, who joins me this episode. Charles is deputy director of research and analytics at the Asia group based in Washington, DC. I thought Charles’s book would be good to cover on the show, because the revival of authoritarianism around the world is not just a political and human rights issue. It’s an economic one, too. It has profound implications for our trading relationships with other countries. And as we’ve seen with the invasion of Ukraine, the actions of authoritarians can massively disrupt global markets. Please stick around to the end for some additional thoughts from me. Okay, let’s get into the episode. Charles danced, welcome to the programme.

Charles Dunst  01:35

Thanks for having me on.

Gene Tunny  01:36

It’s a pleasure Charles. Nicholas grew and passed on your details to me, regarding your new book, defeating the dictators and yes, very keen to chat about that. I understand you’re the deputy director of research and analytics at the Asia group. Could you just tell us a bit about the Asia group and your work there first, please.

Charles Dunst  02:00

Sure, the Azure group is a strategic risk advisor, essentially, for companies looking to do business in Asia, and we’re headquartered in Washington. But with offices in Tokyo, we have an office in Vietnam, we have an office in in New Delhi, I think we had one or one or two advisors at one point in Australia. But basically, it’s mostly companies looking to do business in Asia on things like how do I start selling cell phones in Vietnam? Or how do I start manufacturing something in India and kind of understanding those marketplaces given just challenges of doing business in those markets. And basically, people come to us looking at former US diplomats, people with longtime business experience in the region, who just need a new knee to help and we can kind of provide that expertise. And at the research team, I kind of said to denied point of the firm where I’m not super client facing in terms of on a day to day basis, I’m not necessarily engaging with, you know, X, X company or y company. It’s more so we look at pan indo-pacific issues. So we Lee, I write a daily news wire that goes to clients, that’s basically four stories from overnight, overnight us time, that happened throughout the region that matter for either business, economics or politics. So we do that we lead coverage on things like the Indo Pacific economic framework on the quad issues that don’t directly fall in one country team baskets, there’s something that’s not China’s specific or something that’s not Australia specific, we kind of handle the pan regional issues. And I handle a lot of the public facing media stuff, just given my given my own background as a journalist. So it’s a really interesting, firm really dynamic. And we just, I think our New Delhi office is now under a year old. So really, lots of lots of movement.

Gene Tunny  03:42

Raw. Yeah, absolutely. Okay. That’s very good. And depending on I mean, it’s hard to know what the right stats are. But India could well be the largest country in the world at the moment. I mean, given China’s declining population, so yes, makes sense to be boosting that Indian presence. Absolutely. Okay. Well, we better talk about your book. It’s getting some it’s got some good testimonials, is really impressive. You’ve got a testimonial from the current UK Chancellor of the Exchequer, Jeremy Hunt, you’ve also got one from? Is it McMaster, a former national security adviser? Yep. And then yes, yes, very good. So defeating the dictators. What motivated you to write this? Charles, why did you think this was an important book to write?

Charles Dunst  04:31

Sure. I mean, I’ve spent a lot of time living in non democracies or kind of countries on the on the cusp, as one might say. So I lived in Hungary when I was still in university. And I remember I was kind of a quasi young journalist at the time, and it was writing articles and pitching around articles about Hungary and writing academic work about Hungary. And it wasn’t getting so much attention because it was this was 2017. So kind of right before Orban became an internationally known figure, precisely because of his his illiberal ism. Ah cracy his notion of kind of setting the stage for folks who win elections legitimately come into government, and then do away with the liberal institutions within. And I basically lived in Hungary I then lived in Southeast Asia and I lived in London and I kind of travelled all throughout Eastern Europe, all throughout Southeast Asia spent a lot of time in the Middle East. And something that kept coming up, when you talk to the intelligence is of say, Hanoi, or the intelligencia. In Kabul, maybe less so Cairo, but the intelligence is certainly in the Gulf. There is this notion that democracy is no longer the path to prosperity, there is a sense that you can follow the models of the Singapore’s of the world that you can follow the model of China that you can follow the model of Saudi Arabia. And I think more and more when I travel around the developing world, that was something I heard, and particularly in our little Western bubbles, sometimes, particularly in the US and the UK, I think we don’t do such a great job of communicating the virtues of democracy, and basically answering the question why democracy for people in the developing world, because if you are Vietnamese, and you’ve seen your country’s GDP, and you’ve seen it grow so much, and you’ve seen your, your life expectancy increased so rapidly over the last 3040 50 years, it’s not entirely clear to me why you might look around and say, well, this system’s not working, we need a democracy, when you see January 6, there when you see three prime ministers in three months in the UK, so I wanted to write a book to make a very affirmative case for democracy. Because there are many books, I think, in recent years, kind of lamenting the decline, the decline of democracy and the rise of the Viktor Orban types. But I wanted to say, write something a bit more affirmative. And saying, well, here is what can be done to actually make sure democracy works once again. And when democracy works, once again, most importantly, you can keep democracy where it already exists. democracy works better in the United States. So if democracy works better in the United Kingdom, you’re going to get fewer elections of people like Trump, who may not necessarily be the biggest believers in the democratic system. And once you can kind of tamp that discontent at home, it’s my belief that democracies can serve as a better model for countries in the developing world, well, maybe this, they might not look at the United States and look at Australia, and look at the United Kingdom in five to 10 to 10 years and say, well, those systems are more innovative than the one in China that they’re more solid. I mean, that right now, I think, if you’re sitting in Vietnam, that might not appear to be the case. So I wanted to write a very affirmative case for democracy and looking how do we can advance our values and really practical ways?

Gene Tunny  07:32

Sounds? And we’ll use that affirmative case for democracy. What do you think are the key points in favour of democracy?

Charles Dunst  07:38

But key point for me is study after study still shows, despite the kind of discontent in our democracies that if you live in a liberal democratic society, or even just the democratic society, you are likely to live longer, you are likely to make more money. And I know there are no studies that can necessarily show this, but it is my belief that you’re likely to live a richer cultural life, and you are more likely to innovate, that is true as well, that the world’s best generally still comes from democracies. And this is not to say that Singapore and China cannot innovate. Of course, of course they can. And of course, great art and great movies and all that can come out of non democracies. But there is a reason why when you travel around the developing world, particularly in Asia, that the media is the the music people listen to his Japanese and Korean democracies, or the movies on TV are mostly American, maybe British, maybe Australian, but it’s not like Chinese, Chinese culture has become predominant in the developing world. And that is kind of a silly example. But it’s indicative to me, of the ways in which democracies embrace the kind of tumult and chaos of our systems and we are better for it in the long run. So it’s just about making sure that we are making sure that our systems are providing for our people, while also embracing this chaos that allows for a Jackson Pollock painting, or allows morikami to write when a cue for these are not works, that someone will be able to conceptualise in a non democracy and think that’s a very, very key point that the art and the innovations that are going to be really necessary for the future particularly think about things like climate change. Well, the Evie transition is going to be fixed by innovations that are primarily coming out of democracy, or democracies. And it’s the same thing on healthcare innovation. I mean, where did where did the COVID vaccines come from? Exclusively democracies, not only the United States, Germany as well, of course. So that was my affirmative case for democracy was starting at this point of saying, well, even the things look really messy. Right now, if you look around, you would rather be the citizen of a democracy than an autocracy bar, not

Gene Tunny  09:41

just on Vietnam, and that was an interesting point you made. Do they recognise that? I mean, a lot of their prosperity does come from embracing the market, doesn’t it from embracing the market and as someone who I mean, I’ve read a lot of Milton Friedman when I was younger, and I mean, Friedman used to make the case that the market and democracy were very closely entwined. Or that you can’t have one without the other. I think Friedman’s argument was. So the people in Vietnam recognise that the importance of the market, and then the importance of freedom more broadly,

Charles Dunst  10:17

I think not so much the notion of freedom more broadly. But I think there is a recognition of the need to have liberal ish economics, I mean, Vietnam, China, Singapore, these countries all got richer. I mean, certainly Vietnam is not rich, like Singapore is, but they all got richer by embracing liberal trade. And I think what’s really not troubling, but a little concerning if you’re in a democracy is that those countries and others have proved that you can have mostly liberal trade without liberal politics. And that is a very different scenario than with the Soviet Union, or the kind of Soviet bloc writ large, or China before dung XIAO PING, where essentially, these were the countries that were illiberal politically, and also illiberal economically, so they couldn’t really grow in any meaningful way. So those systems never had a tonne of legitimacy, because they never worked. Whereas now, I’d be hard pressed to say that the Vietnamese system has not worked, or that the Singaporean system has not worked. Clearly, you can get rich without democracy. And that’s a new relatively new point over the last 180 years. It really was this notion that the way to get rich in the post colonial era was to be a democracy. So the fact that you can actually decouple liberal values from liberal trade is definitely a concern. And part of the reason why why I wanted to write the book,

Gene Tunny  11:38

yeah, just on Singapore, you mentioned Singapore quite a few times in the book. And that’s an interesting example. And probably, I mean, that relied upon just that extraordinary figure of Lee Kuan Yew, didn’t it and someone who was, you know, almost just by his background, and by his education could be that benign dictator or authoritarian, that he was an exceptional individual and probably someone you can’t count on having another another kind countries. So I thought it was interesting. You did tackle that question of Singapore, head on in your book. So yeah, just an observation just while I remembered it on Singapore. Okay. In your book, you give a really good summary of your argument early on, and you’re talking about a No BS approach to the future, committing to our values and, and also to the practices but not buying into utopianism. I really like this, but you go that we must convince the world in practical terms why our organising principles remain preferable to those of autocracies both at home and abroad. We need to look our own failures in the eye while learning from the successes of others. You talked before about the affirmative case for democracy, but could you just restate or reiterate? What are those organising principles? What are the most important ones, Charles,

Charles Dunst  13:03

when I was talking about liberal organising principles, I’m really thinking about the things that are necessary to be a democratic system. So things like freedom of speech, things like free and fair elections, broadly open societies space for civil discourse, space for civil rights organisations, for civil society organisations, this notion that it is actually good to have a dynamic and open society where there can be really aggressive, loud debate and disagreement. And that’s not I don’t think that’s a bad thing. I don’t think it’s a bad thing that we can have really heated political debates. I’d rather that than the opposite of kind of no debate at all. So but I think we really do need to convince countries of well, why should I have? You know, why? If you’re Vietnamese, or your, you know, rich, Chinese rich, rich Chinese person, you turn on CNN, you’re gonna say, Well, why would I want that? Why would I want two people kind of debating angrily at each other over on TV? I mean, how is that helpful for my government? So I think we really need to say, well, here’s why. Because that loud debate tends to lead to a society that’s open enough to produce really strong innovations that’s really good, strong to produce the best kind of art. And these are all things that are vital to the future, but clearly just kind of walking around and dropping into annoyance. And well, you shouldn’t be like us, because our systems are open, and they’re so great isn’t enough, when there is a need to demonstrate very practically, well, why is the United States or why is Australia? Why do we offer a better path for prosperity broadly, than do China or Singapore? So that’s really how I how I thought about it.

Gene Tunny  14:41

Gotcha. Right. And what do you think the failure is? You talk about the failures, so we have to look at our own failures in the eye. What failures do you think are most significant?

Charles Dunst  14:53

I think honestly, one of the biggest ones that I talk about very frequently is this is more of a problem I would say in the US in the UK than Australia, but broadly kind of the mismanagement of globalisation in the sense of thinking that we could essentially export manufacturing to places like Vietnam and China without experiencing any domestic discontent at home, that people who would had who’ve had who have had these manufacturing jobs for generations are mining jobs for generations, would lose them turn around and say, I’m all good. Okay, and wouldn’t revolt in one way or another, and particularly in the US the it is this programme designed to kind of ameliorate that loss with some economic assistance, but it’s kind of a mess and doesn’t really work effectively. And that, to me is so indicative of the problem that the United States China, the UK comes through this free trade through globalisation, we all got richer, but the average person did not get as rich as their as the god the government did, or as the kind of top 1% did. So I think there’s this increased frustration, it’s saying, well, people turn against globalisation, because they turn away because they’re mad or with the way globalisation was managed. And I think really pushing back against that is really important and saying, Well, trade isn’t the problem, or liberalism isn’t the problem, the problem was the way it was managed. And that gets into the broader question of inequality, where, particularly in the United States, particularly in the United Kingdom, inequality is one of the major fuels beyond anti immigration politics beyond I would argue, kind of very strong, populist politics, that lead to things like Brexit or elections of people like Trump. So that those are kind of two big ones. And the other, I think, really, really vital. One is a relative lack of accountability and which is fueled a lack of trust. I think there was a notion if you talk to enough people in the UK or the US and even even Australia times, that there are two sets of rules that there’s a set of rules for normal people and a set of rules for everyone else, me everyone else who kind of that top 1% of rich people and rich people in the government. And that view in the US, I think about the example of the fact that there are so many Congress, people who trade stocks, I’m sure some of them are I’m sure many of them are not doing it illegally, technically. But clearly, you’re privy to some kind of information as a lawmaker with a certain type of security clearance that you probably should not be allowed to turn around and trade stocks. And even when a lawmaker is caught either not filing their stock disclosures on time, nothing seems to happen. They pay a little slap on the wrist fine, and then they’re done. And that’s fuel this notion that if that’s a normal person, that person is getting punished very severely. And I think making sure that we’re restoring accountability is key. So it’s about economics, but it is also about things like accountability, which leads to distrust in government. And when when your government lacks trust, it’s really hard to do just about anything.

Gene Tunny  17:50

Wrong. Yeah. Yeah. Good point. I’ll put a link. I think there’s a Twitter account that tracks Nancy Pelosi stock portfolio. So Pelosi has been one of the strongest performers in the Congress. And I don’t think she’s the top performer. But I’m sort of stuck fix, which is, you know, far exceeds market performance. So yes, does does raise some questions there. Charles, do you have any reflections on how democracies fared relative to autocracies during the pandemic?

Charles Dunst  18:22

Yeah, I mean, I think certainly the US performance was was quite poor. And I don’t think that’s anything intrinsic to democracy. And that’s kind of how I would approach the UK as well as there was nothing intrinsic to democracy that made them fail on the pandemic, it was more so we were just the two of those two countries, my country and then the United Kingdom, kind of had not great leaders for pandemic management when a pandemic happened. Whereas certainly, there are other democracies that did much better, certainly South Korea did much better. Certainly, Taiwan did much better. Certainly, Japan did much better for a period. And when you think about the autocracies, Vietnam had a very strong performance for a while. And again, that’s not because Vietnam was an autocracy, it’s because Vietnam had an extremely high level of social trust, that this is trust in government and social trust between one another so in the government, the government was extremely blunt, and extremely honest with its people and said, This is going to be very painful economically. But please stay home, stay off the streets, and we’ll get through it. We’ll get through it as a country and there was really smart messaging of talking about it like it was another war like the Vietnam wars, the another foreign invader was gonna be kind of overstating, but it was another war, the long line of wars against the Vietnamese people, and they banded together. And for a long time, Vietnam, controlled the pandemic extremely well, kind of until the Omicron variant showed up which no one could contain. So Vietnam performed quite well. And I think the the example people go to all the time, and I think kind of wrongly, to talk about COVID and a COVID. Management in a positive light is China where people say, well, zero COVID policy was great. And I think the irony is that The zero COVID policy was maybe very effective and could have been more effective for like a year, in the sense of if you can manage to have these strong lock downs, where you kind of say, well, you know, please stay home, whatever, whatever. And then you get vaccines and you get good vaccines, the Western vaccines and you get your way out, maybe I would sit here and say, well, that’s not a policy I would sign up for. It’s too restrictive, keeping people at home that long. I mean, as a as a democratic citizen, I am not in favour of giving your government that much power. But I do think the irony of the Chinese approach was they kind of demonstrated the efficiency kind of quote, unquote, efficiency of autocracy of saying, well, we can because we have so much power, we can shut everything down for a year, and then we’ll open up it’ll be fine. But the irony is that autocracy was then the reason she didn’t things her personal disdain for the West, was the reason why China didn’t accept the COVID vaccines from the West, that there was no way of reopening, without what models they were probably a million people who died when China reopened. And certainly that’s a lower death fold in the United States. But most of the US deaths took place before the vaccines were if it were available. So I do think at this point, it’s very hard to sit here and say, well, the autocracies managed COVID. So much better than democracy. did. I just don’t think that’s the case. I think it is. Countries with a large amount of social trust in their governments managed COVID better than others. And that’s kind of the Taiwan case. That’s the South Korea case. Those are both democracies, and they manage COVID better than most countries because, I mean, in Taiwan more so people do trust the government raw,

Gene Tunny  21:35

okay. Are they places to learn from? Are they countries and economies to learn from? You mentioned that in your book, you look at examples of good governance from everywhere past and present to detail best practices for running a democratic country in the 21st century could? What do you think those best practices are? And what examples Could you point to Charles?

Charles Dunst  21:58

Yeah, I mean, in Vietnam, I think one example, I’d point to a lot of government’s focus on winning social trust, and the focus they spend on being communicative to their people. And even in a one party state, I think there’s a recognition of what because there are not elections are not real elections, you need to win over that social trust much earlier. And you need to kind of maintain it much earlier, because there is no way at the ballot box of kind of seeing how citizens actually feel. So you need to be a little more transparent and communications at times. And some of the other examples I think about where I would like if democracies had more put on paper and more of these long term plans. People like to make fun of China’s five year plans because they are modelled off the Soviet five year plans, which of course, set these targets Soviet Union was never going to hit. But I do think the idea of democracies happening, well, maybe let’s have a 10 year critical minerals plan, or a 10 year health care plan. Because far too often, those plans are very much focused on security and defence, which are important. It’s important to have maybe a four or five year review of the state of your country’s defence infrastructure, or of your security infrastructure, what are your cybersecurity infrastructure, but I would like that apply to other things I’d like that applied to things that actually matter to normal citizens on a day to day basis. I think the idea of saying, Well, what’s our healthcare sector looking like right now? What’s our infrastructure looking like right now? On what do we want it to look like in 10 or 15 years? And I think that’s something that there are a few autocracies, particularly China and Saudi, spend a lot of time putting out these reliefs, five years to five year plans, or in Saudi Arabia, kind of the vision 2030 plan, and of course, because they’re autocracies, I would argue that they’re probably less likely to actually fulfil many of those goals. And certainly I don’t think Saudi Arabia is on perhaps the greatest trajectory. But I do think the idea of putting things on paper can be really beneficial. And one other example I don’t, I’m not gonna run through all of them. But one good one that I thought the UAE has pulled out in recent years, is they ranked every health care centre in the country, and then publish the results, and said, you know, this one in Dubai is great, this one in Sharjah is terrible. And it I really do think that’s not the worst idea, particularly in a smaller, smaller countries, you can do it state by state or city by city, where I’m from New York City, I can only imagine if New York City, the New York City government, basically brought in an unbiased agency and have them rank the New York City hospitals, and the ones that are at the bottom, clearly, you’re going to be motivated to perform better, because nothing motivates people like a fear of being embarrassed. So I do think that is this kind of odd way of being accountable and transparent. Of course, as a democracy, you can be more transparent in those rankings and and you can be more accountable than an autocracy ever could. So that was kind of the main thesis of the book was well, there may be things that autocracies put out plans or they look to build social trust, kind of in ways that I think are, are okay are kind of they’re interesting, but because democracies are a kind of a superior system, any of those reforms that we look to put in place into a liberal democratic system, I think we can do better.

Gene Tunny  25:09

Okay, we’ll take a short break here for a word from our sponsor.

Female speaker  25:15

If you need to crunch the numbers, then get in touch with Adept Economics. We offer you Frank and fearless economic analysis and advice. We can help you with funding submissions, cost benefit analysis studies, and economic modelling of all sorts. Our head office is in Brisbane, Australia, but we work all over the world, you can get in touch via our website, http://www.adepteconomics.com.au. We’d love to hear from you.

Gene Tunny  25:44

Now back to the show. Just thinking in the States, one of the things I hear a fair bit is that there’s too much money in politics in the US. And that’s related to that was at Citizens United that decision. Do you have any thoughts on that? Is that an issue that the lobbyists have too much power to sway the the people in Congress, and they’re, you know, they’re looking for donations and all of that. So do you have any concerns over that?

Charles Dunst  26:13

Yeah, I mean, I think I definitely do have concerns about it, even if at times, it’s slightly overstated. I think maybe in the media of how much power lobbyists actually have preside over the reality is perception at one point or another. And people do think that the lobbyists do have so much power in one way around that. And something I suggested in the book is to essentially, make sure you’re being much more transparent about where the money is coming from and who it’s going to where if the Supreme Court made a ruling, clearly the money is going to keep flowing. There’s no way around that at the moment. But what a government can do, what the US government can do is create a really accessible online database that very clearly demonstrates, well, where’s the money going? Who is it going to, and there are efforts to do that. But you know, the current system is so not user friendly, it’s so difficult to go online and actually look at who’s donated to who, there’s certainly some kind of dark money that doesn’t come that doesn’t isn’t clearly registered. And I think it would be very helpful just to have this transparency, it’s a way to kind of mitigate the problem. Because if you’re a politician running for Senate or running for Congress, and you know that every donation you accept from they come from a big corporation, or every lobbyist to meet with is going to be very much public, it’s going to be a very easy to access database, you might be a little bit more hesitant to take those meetings. Whereas now you do have to register those meetings, but no one knows where to find them, and no one’s actually looking. So that’s not a wholesale solution, but I think we could mitigate the problem.

Gene Tunny  27:37

Okay, a lot ask you about how do we think about and how do we deal with authoritarian countries? So at the moment, the major ones are China and Russia? I mean, obviously, we’ve cut off a lot of ties with Russia due to their invasion of Ukraine. But what about China? I mean, in the last five years, there’s this new concern about China as a strategic threat. And they’re increasingly calls to decouple to. I mean, there are some rather extreme proposals out there, almost trying to cut ourselves off from China and not trade with China. Which, you know, in Australia, we’ve actually had some retaliation from China. And that’s affected some of our exports. But I mean, China has been a major destination for our exports. So that would be very difficult for us. How do you think about that? How should we engage with these authoritarian regimes in the future?

Charles Dunst  28:38

Well, I think it’s important not to, of course, lump them all together, where I think approaching China is very different. We’re approaching Russia at the moment, where certainly, I’m in favour of the broad sanctions policy against Russia saying, Well, this is a country that invaded its neighbour, I don’t know if there’s anything wrong with setting this precedent of Oh, you don’t get to evade your damper. I just kind of continued business as usual, at least with with the broader West. When it comes to China. I think the question is, how do you compete responsibly? I don’t think the idea of complete decoupling is, is really workable, if you’re the United States, if you’re the United Kingdom, if you’re Australia, because the economies are too intertwined. I mean, this is not the Soviet Union, where basically our economy didn’t really touch theirs. Whereas every basically every field is these overlap again, do I think there’s anything problematic about selling a refrigerator to China? or selling shoes to Chinese consumers? No, I that’s not a concern for me. But I do think there was a question of, well, where do you draw the line? What kind of tech is to sell what kind of goods are too sensitive to be sold to to a one party state in China, in which basically, the government does kind of oversee everything and it does seem like if you are selling some type of technology to a private firm, you could never be just how sure how private that firm actually is. And if the government could step in and kind of take that tech in one way or another. Every country is going to define a different only, but basically do I think there’s anything wrong with not selling military applicable semiconductor technology to China? No, I think that’s fine. I think basically recognising that this is a country helmed by a government that does not, frankly seem super interested in positive ties with the West. And that, of course, has been more aggressive in the broader Indo Pacific in recent years. Think about the South China Sea, you think about the drills around Taiwan, I think it makes a lot of sense to deny them certain technology. But the broad way I think about relationships with autocratic countries is just to make sure they’re in our own benefit. Where when you think about us ties with Vietnam, the current state of us Vietnam ties seemed very much in America’s interest. You know, you get a trade partner, you get, broadly a security partner, we raised human rights with them privately. I think we’ve successfully made some advancements on LGBT rights in Vietnam has been broadly kind of a success. Certainly Vietnam is not just liberal society, or is Liberal government as we would like them to be. But we don’t have the luxury of saying we’re only going to engage democracies, there are more autocracies than there are democracies today. So we do have to engage Vietnam, we do have to engage Saudi Arabia, we do have to engage Oman, and we do have to engage Rwanda. It’s just making sure that those relationships are in our benefit, and that we’re using them in our national interest, whether that’s trade, whether that’s security, and making sure that we’re not, we’re not giving the autocrats too much credit, if that makes sense. So we’re not overstating well, how important is the US, the US Saudi relationship, when I don’t think we should just sweep, sweep things under the rug, because we think that relationship is important. I think it requires a real reevaluation of well, how important is that relationship? Actually? How much how much do we actually care and it’s gonna be different for every country, it’s gonna be different. Of course, Australia has a different relationship with Vietnam, United States does, but I think that my broad sentiment is, it’s not reasonable to cut off all ties with autocracies, but it is about managing those relationships carefully.

Gene Tunny  31:59

Okay, Rod, I’ve got two more questions, if that’s okay, I’ve got a question about PPP, public private partnerships. One thing I really liked about your book is, is your openness to the potential gains from these arrangements, these cooperative arrangements between public and private sectors? Could you tell us a bit about PPS, please, Charles, and what you see is their merits?

Charles Dunst  32:27

Sure, I mean, I’m in favour of public private partnerships, only when the goals match at the beginning. And one example I talked about here very frequently, is operation warp speed in the United States, which was the development of the COVID 19 vaccines. And basically, the government gave out a pot of money to companies to develop the current vaccines as quickly as possible. And certainly, while some of these companies share, they probably had a profit motive very well. So thinking, well, this is a terrible pandemic, we need to get our vaccines out as soon as possible. And that was the government goal as well. So clearly, the goals were very meshed from the beginning. And even if the companies in the end are going to make profit, the goal was not necessarily on profit, the goal was then actually delivering. Whereas some of the examples that I’ve other people have raised, particularly when I talked to British media, as well, our our PPVs haven’t necessarily worked as well. And I would argue, well, that’s because the goals weren’t aligned from the beginning, where the government wondered one thing, and the other party was much more focused on profit than anything else. So making sure that you’re partnering with responsible private sector actors, he’s really key. I mean, he should not just be throwing money at private sector firms hoping they’re going to deliver, it needs to be a 5050 partnership goals need to be aligned. But when PPP is work at their best level, I think they serve to actually boost trust in democratic governments, because poll after poll shows that and I showed it for last three or four years, that the private sector is actually more trusted than the government. And that’s true across Europe. It’s true in the United States are basically people look at their governments think of them as sclerotic, and think of them as old and not super effective. When they look at Tim Cook and Apple, they look at the company at Tim Cook, they look at something someone like Pfizer and say this, these are great look at these great innovations they’re doing, look at the iPhone, look at the vaccines, look at the pharmaceuticals. And people do tend to trust the private sector more. And I think governments would be wise to leverage that trust in a way that also helps the government’s deliver. And I think it’s just a question of making sure you’re doing that in a responsible way. And I think there’s this irony, I raised it all the time. That’s the study from a few years ago showing that in the United States, when Americans get good public service, they actually believe that it’s coming from the private sector, because the idea of effective government service is like incomprehensible. Because our system doesn’t work. So well at times that people think, well, of course, you know, I got this, I got this great assistance, I got this homeowners assistance, or I got this vaccine, it must be from the private sector, even when it’s actually from the government. So it’s just one way of basically saying well, publicising, that cooperation, I think can actually help boost trust.

Gene Tunny  34:59

Yeah. Yeah. Okay. And you mentioned that there have been failures of P PPS in Britain that have meant that people in Britain have been negative about them. And we’ve had some notable ones here in Australia too. But what I found interesting is you noted one of the great successes or most successful PPS in the book. So I’ll, I’ll put a link in the show notes to your book, Australia’s upgraded the Ballena bypass highway, completed in 1996, along with four private firms, as in conjunction with the government seven months ahead of schedule and for USD 100 million less than estimated. So that’s an impressive example. And so one I’ll probably use in the future. So yeah, good, good work finding that one. Excellent, Rado? So my final question, Charles is, I mean, how do you think this will will actually work? I mean, how, in what ways will the dictators be defeated? If if we in the democratic countries govern ourselves better? What’s the mechanism here?

Charles Dunst  35:58

I think the mechanism works twofold. Where primarily, if democracies are working better at home, you are less likely to elect people like Viktor Orban, or like Donald Trump, or like ei or Bolsonaro, who come to power through liberal democratic means, and then don’t necessarily govern in a liberal, democratic way, who have little concern, I would argue, in most cases for those liberal institutions, particularly in thinking about Orban Bolsonaro, where there’s no sense of respect for freedom of the press, there’s an effort to stack the judiciary, these are all things that can hollow out democracies from the inside. My argument is that if democracies are delivering better on economic issues on issues like the social safety net, and issues like infrastructure, if people feel optimistic about their future, which many people in democracies Do Not at the moment, they are less likely to vote for reactionary people like these that can erode democracy internally. So that is way one to defeat the dictators at home. And point to is only if you can defeat the dictators at home and prevent that autocratic impulse from taking root at home. Only then can you turn around and actually say, well look at how good we are, as a model. Look at how the United States is outperforming China or look at how Australia is outperforming Singapore, and more people in the Vietnams of the world, or people in I don’t know in a rock or in Egypt might actually look and say, well, we would like to be a democratic system. Even if we don’t agree the United States of the West, then everything. We see how well Australia is functioning, or we see how well Taiwan is functioning. Were looking at how sclerotic Saudi Arabia is their kind of messy, messy internal politics, that corruption scandals, we don’t want that. But it’s making sure that we are working well enough to fend off the autocratic impulse, and simply just that we can be the world’s model once again. Gotcha.

Gene Tunny  37:45

Okay. So showing that you’re the world’s model. Okay. Yeah. Any final thoughts? Charles, before we wrap up? Yeah,

Charles Dunst  37:55

the one thing I would just say briefly is one thing is the line, I keep using it over and over again. But I think it’s important is the lack of faith in democracy right now is really troubling to me. But something I want to say that’s positive is faith in democracy is not necessarily the problem. We all should believe in democracy and work for it. The problem is faith and democracy is automatic functioning, and the sense that everything will work without our engagement. I think the key message of the book for citizens for people who are not lawmakers, not politicians, not in government is just make sure we stay engaged. And we keep pressuring our politicians to actually make democracy work for us.

Gene Tunny  38:31

Got you. And that’s through, I suppose social media or in through, I guess, you’re engaging in the conversation? Is that what you mean?

Charles Dunst  38:40

engaging in the conversation, making sure you don’t miss elections, engaging in your local governance? I mean, it can be on a school board in the United States, you can be in your city council, you can all these local thought their town council, I think far too often we look at our messy politics or messy governments, they just write it off and stop being engaged. But I think engagement is really key to making anything work down the line.

Gene Tunny  39:01

Okay, very good. I guess one more thing, just looking back on my notes. You mentioned one of the big issues with inequality was inequality, I should ask before we go, I mean, do you have any thoughts on how that can be addressed? Or use proposing specific measures to address inequality in your book?

Charles Dunst  39:17

Yeah, one of the things I talked about was inequality in terms of education. And the notion that, basically, I think far too many democratic governments are not starting or not looking at the unequal starting points of children. And basically saying, Well, you know, once you get to university, it’s meritocratic. Its meritocratic when you get into your universities. But of course, if you are born into a lower income household, you’re less likely to have certain academic achievements that gets you into one of those schools. And if you don’t get into one of those top universities, you’re less likely to earn as much money as those who do. And I think there’s this increased need to actually look at starting points and say, Well, how do we make sure that we are doing all we can to let the talented children from lower income households actually rise? Is to top tier universities. And that’s how I think about inequality. There are certainly broader economic reforms that other folks have proposed. But I think about inequality in terms of the lack of meritocracy in the way that basically it does seem like we’re perpetuating kind of an elite with the same people and go to the same schools, their kids go to the same schools, because they have a nice starting point. But I want to make sure that we’re kind of giving more believing and more active inequality of opportunity.

Gene Tunny  40:28

Yeah, and there’s probably another episode in that, talking about how we improve that. But yeah, just wanted to check on that. Because that’s, that’s clearly one of the big issues. Yeah, but I hear about the dream hoarders Is that what you call them in the States? Of hurt? That’s one of the terms that’s been applied to your just that self perpetuating elite or whatever? Have you referred to it? So yeah,

Charles Dunst  40:52

I’ve never heard that one. But that’s a good one. Yeah,

Gene Tunny  40:54

I think that’s what yeah, I’m trying to remember who wrote that book. I’ll put a link in the show notes. So yes, it seemed a bit overly negative to me. But, but I think the data do show that the US is not as there’s not as much social mobility, as people might think, and not as much intergenerational mobility as you might like, relative to some other countries. So I think that’s an uneven in Australia, and in Britain, it’s not as high as as we would hope so. Absolutely. Good point. Okay, Charles Dance from the Asia group. Thanks so much for your time. I really appreciate it. And good luck with the book. I’m sure it will go. Well, I think the message is an important one. And I really enjoyed reading it. So thanks so much. Thank you. Okay, I hope you found that informative and enjoyable. I think Charles is someone we’ll be hearing a lot more from in future years, so I’m very glad I could interview him about his first book. I must say I was impressed by Charles’s passionate advocacy for democracy, and his call for existing democracies to provide better examples to other countries. I hope that Charles is right that we can inspire movements for freedom in non democracies by improving our democracies at home. Maybe that’s a vain hope, but at the very least our own countries will be better run. In our conversation, Charles and I touched on a few ways that democracies could be strengthened. I liked how he talked about improving our education system so that all children get the best start in life. I found a link to the book on the dream hoarders that I was reminded of while chatting with Charles and I’ll include it in the show notes. I think it’s worth having a look at. As always, feel free to email me at contact at economics explore.com. I’d love to hear from you. Thanks for listening. rato thanks for listening to this episode of economics explored. If you have any questions, comments or suggestions, please get in touch. I’d love to hear from you. You can send me an email via contact at economicsexplored.com Or a voicemail via SpeakPipe. You can find the link in the show notes. If you’ve enjoyed the show, I’d be grateful if you could tell anyone you think would be interested about it. Word of mouth is one of the main ways that people learn about the show. Finally, if your podcasting outlets you then please write a review and leave a rating. Thanks for listening. I hope you can join me again next week.

43:46

Thank you for listening. We hope you enjoyed the episode. For more content like this or to begin your own podcasting journey. Head on over to obsidian-productions.com

Credits

Thanks to Obsidian Productions for mixing the episode and to the show’s sponsor, Gene’s consultancy business www.adepteconomics.com.au

Full transcripts are available a few days after the episode is first published at www.economicsexplored.com. Economics Explored is available via Apple PodcastsGoogle Podcast, and other podcasting platforms.

Categories
Podcast episode

Charter Cities: A Public-Private Partnership (PPP) model w/ Kurtis Lockhart – EP147

In episode 147 of Economics Explored, Kurtis Lockhart, Executive Director of the Charter Cities Institute, tells us about the benefits of charter cities – cities with their own rules or charter, independent of national or subnational governments. Kurtis argues the best way to implement charter cities is via public-private partnerships (PPPs). Learn about the fascinating work the Charter Cities Institute is involved in around the world, particularly in sub-Saharan Africa, with a view to stimulating economic development and lifting millions out of poverty.  

You can listen to the episode via the embedded player below or via podcasting apps including Google Podcasts, Apple Podcasts, Spotify, and Stitcher.

Here’s a video clip of Kurtis’s conversation with show host Gene Tunny to give you a flavour of what is covered in the episode.

About this episode’s guest – Kurtis Lockhart

Kurtis Lockhart is Executive Director & Head of Research at the Charter Cities Institute. Kurtis is also a PhD candidate in political science at the University of Oxford. His research examines the effect of institutional reforms on public goods provision with a regional focus on sub-Saharan Africa. At Oxford he has taught both quantitative methods and African politics. 

In the field, Kurtis has previously worked as a Research Manager for the International Growth Centre (IGC), for Warc Africa (both in Sierra Leone), and for the ELIMU Impact Evaluation Center in Kenya where he managed the implementation of several randomized control trials across many different sectors (health insurance, rural electrification, tax administration, and legal aid). Kurtis has also completed consulting projects with both Oxford Development Consultancy and with Warc Africa. He holds an MSc in Development Management from the London School of Economics where he graduated top of his class, as well as a BA in Economics and Development Studies (First Class Honors) from McGill University. 

Find him on Twitter @kurtislockhart.

Links relevant to the conversation

The Charter Cities Institute 

Podcast Archives – The Future of Development (Charter Cities Institute podcast)

Paul Romer: Why the world needs charter cities 

The Charter Cities Institute on Twitter: @CCIdotCity

Transcript: Charter Cities: A Public-Private Partnership (PPP) model w/ Kurtis Lockhart – EP147

N.B. This is a lightly edited version of a transcript originally created using the AI application otter.ai. It may not be 100 percent accurate, but should be pretty close. If you’d like to quote from it, please check the quoted segment in the recording.

Gene Tunny  00:01

Coming up on Economics Explored…

Kurtis Lockhart  00:05

As an organization, CCI’s vision is to empower new cities with better governance; to lift tens of millions of people out of poverty. So, we’re all about poverty alleviation.

Gene Tunny  00:17

Welcome to the Economics Explored Podcast, a frank and fearless exploration of important economic issues. I’m your host, Gene Tunny. I’m a professional economist based in Brisbane, Australia, and I’m a former Australian Treasury official.

This is episode 147 on Charter Cities. We’re going to learn what Charter cities are exactly, and what progress has been made setting them up. My guest this episode, is Kurtis Lockhart, Executive Director at the Charter Cities Institute, and a PhD candidate at Oxford. One important takeaway for me from this episode was the importance of having a genuine partnership with host countries. So, Charter cities aren’t seen as Neo colonialism.

In the show notes, you can find relevant links and details of how you can get in touch with any questions, comments, or suggestions. Please get in touch and let me know your thoughts on this episode, or have any ideas that you have for future episodes. I’d love to hear from you.

Right on, now for my conversation with Kurtis Lockhart on Charter cities. Thanks to my audio engineer, Josh Crotts for his assistance in producing this episode. I hope you enjoy it.

Kurtis Lockhart, Executive Director at the Charter Cities Institute, welcome to the program.

Kurtis Lockhart  01:33

Thanks so much, Gene. I’m happy to be here.

Gene Tunny  01:36

It’s great to have you here. I’m keen to learn about what you’ve been up at the institute. As an economist, this is a concept that’s I’ve been fascinated by since, I think it was Paul Romer, famous Economics Professor Nobel Laureate, if I remember correctly; he had this great TED Talk, probably about eight years ago now on Charter cities. I’ll put a link in the show notes.

To begin with, Kurtis, could you just tell us a bit about the Charter Cities Institute, please? Where’s it located, what you’re doing, what your mission is, please?

Kurtis Lockhart  02:17

The Charter Cities Institute is a 501C3. That just means a nonprofit Think Tank and nonprofit research organization. We are headquartered here in Washington, DC. There’s a Zambian office of CCI in Lusaka, that we’re really proud to have opened late last year. That now has three full time staff there, so we’re ramping up quickly there. And I can break down CCIs activities around Charter cities into a few buckets. And they’re all-around building the ecosystem for Charter cities. So, one is around just research, right? So, we provide very nerdy, longer papers on academic jargon and that you’re more e-con inclined audience members would probably resonate with, around why Charter cities are an idea whose time has come. Why they are; we think they’re convincing from a public policy standpoint, to pursue, and why we think that they could be game changers in terms of economic growth, and spurring economic development. So, that’s research, in addition to this longer, more academic oriented pieces, we also, you know, we want to start a movement, and we want people to be involved. You also need to communicate it in other forms, like blogs, like media outlets in more popular press, and exactly like I’m doing with you here today, Gene, on podcasts. So, that’s the research bucket.

The second bucket is around events; we host various events and conferences and summits. One other things that we’re really excited to do, later this fall is co-hosting a conference, a two-day conference with MIT in Boston. They have a sustainable urbanization lab there. And we’re hosting a two-day conference with them, where the first day will be focused on academics; talking about this idea of Charter cities and new city developments as a way to grapple with really rapid urbanization that we’re going to experience as a species over this century. And then the second day, we’ll be less academically inclined and more focused on practitioners and policymakers and new city developers themselves.

So, we’ll go from, the abstract and the academic on day one to the practical and the real world on day two. And I think that’s really necessary in a new space like this with a new novel idea is to get those two silos talking to each other and that’s one of the key things that we see CCI doing in terms of building the ecosystem. So, first bucket – research, second bucket – events.

The third bucket of activities that CCI engages in, is around technical assistance and partnerships. So, engaging in and providing advisory to new city projects on the ground to get these things built in thriving new Charter cities out there in the real world.

Gene Tunny  05:24

Great. I mean, I’m keen to learn about new cities being built. And because this Charter cities idea, it’s designed to stimulate economic development to improve outcomes for people out there in the real world. So, you’re keen to learn what’s going on there? Would you be able to explain first, what is a Charter city? How do you conceptualize it? How would you describe it, Kurtis?

Kurtis Lockhart  05:48

Our simple definition of a Charter city is new city with new rules. And there are two pieces of that: the city component, which is the built environment, or the urban space, and the rules, which economists, have a fancy jargon word; institutions for rules. And economists of all stripes pretty much come to agree that the fundamental determinant of long run economic growth, long run economic development, is institutions and governance. And the issue is, across a lot of countries, low-income countries, lower middle-income countries in the Global South, you have poor governance and poor institutions. And they’re really hard to change. So, we see Charter cities as a mechanism to bring about deep reforms needed in governance and institutions that can then lead to increases in long run economic growth, which is, we think, the major way to lift masses of humanity, from poverty, to prosperity, in its short amount of time as possible. And that’s the main reason; I can go more into why we think that Charter cities are a great mechanism to bring about that institutional reform and institutional transition, if you want. But I’ll pause there.

Gene Tunny  07:17

So just first, why is it called a Charter city? The Charter, is there an actual charter that you give to the city? Is that the idea there’s a document or a set of principles, a set of rules? Is that the idea?

Kurtis Lockhart  07:32

Yes. So, I mean, it comes from history, where new jurisdictions being settled, were granted charters; and basically charter is a standing for the new rules that apply in this new jurisdiction. And it’s a stand-in for institutions. That’s what we mean by charter. And then city, I always break it down by those two words, because that’s what we’re all about at CCI is cities, which is about the physical, geographic space, and urban planning, and land use regulation, and how the city is kind of planned, it is super important. Transportation, urban infrastructure, the built environment. And then on the other hand, the charter, right? That’s what you could call the soft infrastructure of the city, which is the rules that govern different policy domains in a city. Both of the soft and hard infrastructure need to be right, in order for a city to thrive.

Gene Tunny  08:39

So, it’s a new city with its own rules. So therefore, you either need to carve out, or you need to carve out territory from an existing country. I mean, you’ve got to; most of the world’s is going to be covered by sovereign nations, isn’t it? Like, how does this work? I mean, you have to get the agreement of a government, is that right to get a new bit of land and have your own rules? Is that correct?

Kurtis Lockhart  09:09

Yeah. So, this is a great time to bring in Paul Romer, who you alluded to in the first question. So he had a TED Talk back in 2009, that you talked about, where he coined this term Charter cities and defined this concept to begin with, or at least early versions of the concept. And his model, Romer’s model of Charter cities is what we can call the foreign guarantor model to Charter cities where he advocated for a high income, well governed country like Canada to come into a low income poorly governed country like Honduras, and Honduras would cede a large city scale chunk of land to Canada. Canada would then effectively you know, import its good institution. And in that delimited chunk of land that it’s been ceded, and because of that institutional shift towards good institutions, and being administered by Canadians; I’m Canadian, so I’m kind of, patting myself on the back right now, then you would therefore, get economic activity, you’d attract investment, you’d get business formation. And those things would spur sustained rates of growth moving forward, and you get all these good outcomes.

So that was kind of Romer’s foreign guarantor model – a candidate coming into Honduras. As you’ve brought up now, that idea was seen as controversial by a lot of people because it has implications for sovereignty, right. A lot of Hondurans are going to say, wait a second, you’re telling me that we don’t have sovereign control over all of our Honduran territory, and we’re ceding that sovereignty to foreigners? Like no, I did not agree to this.

Well, I think that critique, that sort of, Neo colonialism critique is a bit misguided in certain ways, nonetheless, it’s real. And it rubbed a lot of people the wrong way and was seen as controversial. So Romer tried to implement this model in Honduras, and in Madagascar, and it didn’t work out so well, and then he sort of, receded from this charter cities movement. So, the Charter Cities Institutes, CCIs model is different from Romer’s, We advocate for Public Private Partnership, a PPP between a host country and an urban developer. And ideally, it’s an urban developer from that host country so that they know the context, they have appropriate connections and whatnot. And the reason we think that’s better is basically two reasons:

One is it sidesteps all of these issues of sovereignty that are implicit in Romer’s model, right. This space of land that the developer is going to build is not at all, a separate entity. It is part of the sovereign jurisdiction of the country, subject to its constitution, subject to its criminal law, subject to its international treaties. The only other things that it has kind of special control over is commercial law and everything else other than those three things; constitution, criminal law, and international treaties.

So, number one, it sidesteps these issues of sovereignty implicit in Romer’s model. Number two, we think that this PPP model does a much better job aligning incentives between the urban developer on the one hand, and both the host government and the population, the city residents on the other. The reason is because, urban developers make their profit from the appreciation in land values over time, right? And so that’s their main incentive; is to maximize land values. How do you maximize land values? Well, you attract as many people, as many residents and businesses to your city as humanly possible. How do you do that? You create a livable city, you govern that city well, you provide urban services and urban amenities to the businesses and residents of that city and you will attract more residents and businesses, and therefore see land values increased.

So, we think that aligning incentives is done much better under this PPP model than the foreign guarantor model. It’s a lot sort of, analogous to, you could say, the way a shopping mall is set up. I think that’s a good model in a lot of people’s heads, maybe your listeners. You have a shopping mall, where there’s the mall owner, and then they rent out storefronts, or store space to various shops. And the shopping mall owner provides public goods like lighting, garbage removal, and cleaning and security to the public space within the mall. And in exchange, they get rents from the various stores within the mall to the extent that it then therefore attracts foot traffic to those various stores, and therefore the force base within that mall increases. That benefits the shopping mall owner. So, it’s a very kind of similar model and you can use that as an analogous thing to the way it aligns incentives.

Gene Tunny  14:50

Right. You mentioned that Paul Romer had; there were some practical examples of this that he was involved in. He was advising them, was he? And they just didn’t work out. Do you know why they didn’t work out? What were the problems that occurred?

Kurtis Lockhart  15:07

His full involvement is still unclear; the extent to which was involved. I know that the Hondurans in particular saw the Ted Talk that both you and I have alluded, and I think he was the adviser to the President, really resonated with him. And so, he called Paul Romer and got the Presidential in support and they said, let’s go with these things. And there were a few, several iterations that I don’t want to go into all the history. But eventually, this new Charter cities law, you could say was passed called the ZEDE law, which basically stands for the Zone for Economic Development and Employment. And Romer, as part of this law was placed on the transparency commission. So, there was like an oversight board, that would make sure there’s not a lot of, abuse going on with these zones and the developers kind of, given a lot of powers within these special jurisdictions, these ZEDEs,

The issue then became that potential developers or deals started to arise between folks that wanted to govern these ZEDEs and the government that were being held without the oversight or input from the transparency commission. So, Paul Romer said, okay, I’m done with this, you’re kind of, not at all going about this in a transparent way that I had signed up for. So, he left the ZEDE project.

There have since been a few that he’s started. I think there are three in operation right now, including well known one called Prospera, on the Island of Roatán.

Gene Tunny 

Sorry, Roatán; where’s that? Sorry.

Kurtis Lockhart 

Roatán is an Honduran Island. Those were the first kind of, ZEDEs under this law, a socialist was elected president last fall in Honduras. And she was elected with one of her platform planks being the abolishment of this deadly law. The Honduran Congress just passed that abrogation earlier this year. And so that’s kind of a huge blow to this ZEDE regime.

I think the three ZEDEs that are currently in place, that were passed before that law came in or was abolished, aren’t going to be abolished, they still have the ability to function. But obviously, if you’re an investor, and you see a president in place, that is hell bent against this concept of a ZEDE, that’s going to likely give you pause about getting involved. So, it’s great for the space. But I think what the Honduran example goes to show you is that you need legitimacy. And you need buying from the local population. And I think the way that the ZEDE law was passed in Honduras in the early days, did not at all, have that legitimacy necessary for long term success.

Gene Tunny  18:19

Right. Did you mention Madagascar as well? I can have a look into it. It’s just fascinating, I wasn’t aware that that was happening. And I mean, if I can get Paul Romer, on the show in the future, or, I’d love to chat with him about that. But you did mention Madagascar, was that right?

Kurtis Lockhart  18:38

Yeah, Madagascar happen. I think Paul Romer met with the president whose name is long, and so I’m not even going to attempt to say it, but they had a conversation and the president, I think was on board. But for many other reasons in addition to this one, what was happening is I think a South Korean company was going to come in and get a large tract of land, and the local population didn’t like that idea. So, a kind of protests broke out. Again, this is somewhat related to the Romer presidential conversation, but there were other factors involved that spurred the protests and riots. So the reform didn’t end up going through. Both attempts, well-attempted and in the Honduran case, it did get implemented, t just hasn’t been very successful. They didn’t end up having an enduring impact and Romer has since receded.

Gene Tunny  19:39

I was interested in that point you made about the new; there was a new government in Honduras and it’s a socialist government. They’re not going to like a Charter city. If you think about it, because is the idea of a Charter city, it’s going to have more liberal or more free market institutions, lower taxes, lower tariffs, more business friendly regulations, is that the idea? That they want to try and replicate what Hong Kong was in a few decades ago. I mean, Hong Kong is still a prosperous place. But there’s concerns about the, the administration or the influence of Beijing in Hong Kong now. Is that the idea that it’s; you want to have a free market type of city state? Is that the idea?

Kurtis Lockhart  20:34

By our simple definition of Charter city being new cities with new rules, that’s a pretty politically agnostic definition, right. So, if you think about it, that could be taken on either end of the spectrum and ran with. I think the model that CCI advocates for is more in line with what you’ve been saying. So, liberalizing and introducing market-oriented reforms, just because if you look at history and how well you know Hong Kong has done and Zen Jen has done and Singapore has done and Dubai has done when they’ve liberalized, that would seem to indicate that that’s a good idea to do. And then you contrast that with reforms on the other end of the spectrum and how those worked out. And I think that effective option is pretty clear from history.

But that’s not to say that we have been approached by, for example, indigenous groups that are interested in this model of Charter cities, because they want as a group, and want to push for an advocate for more decentralized, and devolved authority and autonomy over the jurisdiction that their group resides in. And they see this Charter cities model as a potential way to do that. So, I wouldn’t label that as kind of libertarian or free market fundamentalism in any way; that’s more just an indigenous group seeking some more ability to control their own fates. And I think this is an interesting avenue of the Charter cities movement is around this kind of more traditional local groups that are pushing for more reforms or more powers over their areas.

One other things that; I’m from Vancouver So, I’ve been following this. I guess, developments around this section of Vancouver that’s reserved, a first nation’s reserve, it’s called the Squamish nation. And they own some very, the reserves on some very prime real estate within Vancouver, and just as other in thriving cities elsewhere in Vancouver, real estate prices are astronomically high. And so, what this Squamish nation decided to do was partner itself with an urban developer and say, hey, instead of letting this very pricy and scarce, urban land lay vacant, and just dedicating it to a park or something, let’s build some skyscrapers. Let’s build some housing and apartments for Vancouverites. We have an equity stake in this development. We partner with this urban developer that they bring in the technical expertise and the financing to get the project built. The urban developer benefits, we benefit as the Squamish nation, and each of our members can benefit and was voted positively, overwhelmingly by the Squamish nation. And now, this indigenous group is going to benefit immensely from an urban development project. It’s also going to provide a lot of housing that’s very sorely needed in the city of Vancouver.

So, there’s win-win situations. And I think the model of Charter cities can span the gamut between these helpful models that indigenous groups can like as they want more devolved authority, all the way to more libertarian like sea steading models or something like this have in the past.

Gene Tunny  24:10

I remember listening to an episode of, I think it was Ross Roberts econ talk show about see steady, it just sounded like something that couldn’t work. I couldn’t see how that would be feasible. You just have to give up too much of your lifestyle. I mean, like I often complain about regulations where I live here in in Brisbane in Australia, but I do recognize that there are a lot of good things about living in Brisbane and I couldn’t imagine as much as I am relatively free market and I do have some sympathy for libertarian views. I couldn’t imagine going on to; I don’t know what would you go on to, an oil rig or something or you’d have to buy an island somewhere, I suppose. But I mean the amount of investment you need to get a critical massive population, don’t you? I mean, they’re all these things that you’d have to get right.

But I guess we can talk about your Charter city model in a minute and how that’s going to work and how it’s going to grow and develop.

I want to ask you about this concept of institutions. So, you’re talking about institutions and how important they are to economic development, and then they facilitate trade, and they facilitate innovation. Now, there was a great book about, I don’t know, maybe a decade or so ago, why nations fail, and that really emphasized the importance of institutions. And the problem is in some many developing economies, the ones that can’t get beyond that, per capita income of a few or a few thousand US dollars a year or So, they’re trapped because those institutions are so bad, and they’ve got kleptocrats in charge, and they’ve got marketing boards, which are extracting surplus, and you’ve got all of these really bad institutions. I mean, Reimer gave an example of regulations that mean that electricity companies won’t, they’re not covering a lot of the population. So that’s where you really want the Charter cities, is it in developing economies, particularly in Sub Saharan Africa? Is that where your focus is?

Kurtis Lockhart  26:35

Yeah, I would say that’s accurate. As an organization, CCIs vision is to empower new cities with better governance to lift 10s of millions of people out of poverty. So, we’re all about poverty alleviation. And so our focus does tend to be on those places in low and lower middle income countries, because that’s where most of the poverty lies, almost teleologically. And so that’s where we focus our efforts. And, like, I want to go into the mechanism of institutional change that sort of our theory of change, because you kind of alluded to that we’re talking about kleptocracy and marquee awards and sort of incumbents that kind of dominate the current rule set in the current system. And I think this is really important.

Some of your listeners may be familiar with, not just Why Nations Fail, which is a fantastic book on institutions, but also a book called The Rise and Decline of Nations by Mancur Olson. And he writes about this phenomenon called, The Logic of Collective action. And in essence, you get collective action problems when you have concentrated benefits and dispersed costs. So, what do I need? Let me unpack that. I’ll give an example. So, the main example given in the book and in the States is around sugar tariffs. So, you have these Florida sugar farmers that because of this sugar tariff in the States, sugar therefore, in the US is a lot higher per unit than elsewhere. That tariff puts a lot of money and profits in the pockets of these sugar farmers. Because there are a few farmers, they’re really incentivized and mobilized to go lobby their politicians to keep this sugar tariff in place and not abolish it.

On the flip side, consumers of sugar like you and me that maybe go to the store to buy a bag of sugar once every year for like a few bucks, we are maybe going to have to pay 50 cents extra because of this tariff. And while the group of consumers that are impacted by that 50 cents is huge, much larger than the number of farmers, because that impact is so small at 50 cents is so sort, of trivial. We, I mean you are not going to get all mobilized and angry and co-lobbying our politicians to abolish this tariff. That is completely the opposite for the farmer, they are going to be mobilized.

And so, you get this bad equilibrium for these rules where despite the tariff being suboptimal for society as a whole, it is continued because of this dynamic of the logic of collective action. And you can apply this example with the sugar tariffs to institutions writ large. There are incumbent political elites that are currently benefiting from the status quo institutions, right. So, they have every incentive to see the status quo institutions continued and undermine attempts to reform them, despite reforms, potentially bringing these institutions into a much better and more optimal equilibrium. And because, on the flip side, everyone maybe, has to deal in that place with those institutions, maybe as to kind of, give a bribe once every three months or so. We’re not hugely, hugely impacted in our day to day lives, or perhaps we have other worries to worry about. We are less mobilized as a group of citizenry to push for institutional change on a national level, than the small group of political elites who currently benefit from the status quo are at mobilizing to keep those subnational suboptimal institutions in place.

So, we see Charter cities as a way to, instead of attempting to pass national level reforms, where you’re going to get and threaten all of these political elites interests, and therefore those elites are going to try and stymie and undermine reforms. We see Charter cities as a way to circumvent those interests in elites by situating themselves in a delimited, small geographic space. Ideally, greenfield space where it’s sparsely populated, so you’re not bumping up against any of these incumbent elites interests, and therefore, these spaces can get a lot deeper institutional reforms than otherwise possible. And so that’s the mechanism and theory of change, and why we think Charter cities are this great policy tool to get very deep and needed institutional reforms.

Gene Tunny  31:28

Okay, we’ll take a short break here for a word from our sponsor.

Female speaker  31:33

If you need to crunch the numbers, then get in touch with Adept Economics. We offer you frank and fearless economic analysis and advice. We can help you with funding submissions, cost benefit analysis studies, and economic modelling of all sorts. Our head office is in Brisbane, Australia, but we work all over the world. You can get in touch via our website, http://www.adepteconomics.com.au. We’d love to hear from you.

Gene Tunny  32:02

Now back to the show.

So, could you now tell us please, Kurtis, where your institute is involved in new Charter cities? Like where are we talking about? Where will these cities be? Where are they in the development cycle? What’s happening? I’d love to know.

Kurtis Lockhart  32:22

So, we are an organization CCI, we were founded in 2017. So, we’re in year five, that’s in the think-tank world, we’re still a baby. And, it does take a long time to build driving new cities. So we’re talking on the timeline of decades, not years.

We are involved in several projects. They are nascent, so I’ll go over some of them. One of them is in Lusaka, Zambia, just outside Lusaka, Zambia, it’s called Nkwashi. It’s a Charter city, a new city development that’s aimed at 100,000 residents. And its anchor tenant is anchored around a university. So, what the model is, is to have this stem University of science, technology, engineering, math, attract really bright smart Zambians to this university, train them up in STEM subjects, and then connects those graduates that STEM graduates with remote work in either Europe or the states. And that does two things. I mean, you’re going to earn more being employed by these European and American tech companies – number one.

Point number two, these graduates are also going to earn in American dollars or euros and that allows them also to hedge against the volatility of the Zambian kwacha, which is really tied to copper price, copper price fluctuations, which can be it can experience really wide swings. And so that’s the model for Nkwashi. Nkwashi attracted its first few residents; I think it’s a few years in operation, the groundwork foundations have been laid for the building of the university. There’s also a feeder school, a high school that will attempt to feed students into the university called Explore Academy; that’s I Nkwashi.

The other ones worth mentioning are a Talent city, in Nigeria. The founder of Talent city, his name is Iyinoluwa Aboyeji. He is one of the most successful Nigerian tech founders in the country. He’s co-founder of Andela and Flutterwave, two or the more successful African tech startups and unicorns. So, he wants to give back to the Nigerian tech community that’s growing really rapidly. But he sees the biggest constraint on that tech ecosystem in Nigeria as tech talent. And so, he wants to establish this space, this jurisdiction with new rules that especially allow for freedom around things like crypto and more innovative technologies, and provide very reliable digital infrastructure, and power and electricity, and all those things that you need in order to function as a tech company in the modern world. So that’s talent city.

Another one in Nigeria is called Enyimba Economic city. It’s in the south west, not on the outside of Lagos like Talent city, but in a place called Abia State, and that’s in the Delta region. And so those familiar with Nigeria know that the Delta region is sort of the oil and gas sector, oil and gas region of Nigeria. This city is aiming for 1.5 million residents, it would in phase one, be oriented around logistics and processing around the O&G sector in the Delta region. But it envisions and phase two and phase three, to expand beyond that focus on logistics and O&G processing, to having a university and a world class research hospital, because some of the social sector provisions in the south and southeast of Nigeria are just really, really lacking. And so that’s probably our biggest and most ambitious, single project.

The other, and this is the most recent project that we’re engaged with is in Malawi. And we’re really, really excited. So, we’ve just signed an MOU with the National Planning Commission in Malawi, who have spent the last three years coming up with these secondary cities plan. This plan is really and this has happening across the continent. It’s aimed to address this challenge across a lot of African countries of really rapid urbanization. As it stands right now today, Malawi, is actually among the least urbanized countries on planet Earth. It’s about 17% urbanized. But what we’re going to see in the next 30 years, 28 years to 2050 is Malawi’s urban population is going to more than triple. And so very kudos and plaudits to the National Planning Commission, they see this trend and say, okay, well, we need to get our ducks in a row, and plan for this really, really rapid urbanization in advance. So, the secondary cities plan that they’ve created, and they launched on May 31, I spoke at the launch, it lays out eight new secondary cities, and lays out the spatial development plan for those eight cities.

Malawi is a North South country. So, the cities are spread out from the north, all the way down to the south. What we are going to do as CCI, after we’ve signed this MOU, and we’re now an official implementation partner of this secondary cities plan. We’re in the process with the National Planning Commission, the Ministry of local government, the Ministry of lands, the president’s office, writing up the special jurisdiction laws that are going to apply to these eight secondary cities across Malawi.

So, this, to me is one of the most exciting projects because we have, government buying across a slew of needed ministries, including the President. There’s already been a lot of resources and thought put into this over a sustained period of time. So, you have a demonstration effect that there is that political buying. The plan is already in place for these eight secondary cities. And we’re getting in at the ground floor to shape the legal jurisdiction around those eight cities. So, this is a huge opportunity for us. And we’re really excited about what we’re seeing in Malawi.

Gene Tunny  38:56

Yeah, that’s fantastic. Are you involved in getting any of the financing or any funding from say, World bank or other donors? Do they get any funding from those organizations? You mentioned PPP, Public Private Partnerships? So, there’s an infrastructure developer, or what did you call it? An urban developer or a development company that develops it and they’ve got some deal with the government that the government will not pay them for providing infrastructure? How does that work, Kurtis?

Kurtis Lockhart  39:30

One of the roles that we will play as implementation partner is to help facilitate financing. This is one of the constraints I think most African cities and towns face is this ability to adequately finance urban expansion, right. It’s the most rapidly urbanizing place on planet Earth. In Africa, the estimate is that almost a billion people are going to move into their cities over the next 30 years. So this is a huge transformation. Yet, African towns and cities are not able to issue municipal bonds to the same level that historically, European cities and American cities were able to tap in order to fund and finance urban infrastructure.

So we see these kinds of municipal bond markets in Africa are either kind of, really nascent, or more commonly just nonexistent. So we want to help number one, come up with a de risk model of municipal bonds. And number two, help fill that financing gap by not just kind of public sector debt in the bond market, but also deifies. Like you mentioned the World Bank; the IFC is a World Bank arm that invests in privates. I know, the Millennium Challenge Corporation was also at the launch of the secondary cities plan in Malawi on May 31. And they’re involved in work in Malawi. So, they would be great partners, because they focus on infrastructure growth and institutions.

You have the municipal bonds that need to be figured out, that’s on Malawi, you have the DFIs that will be involved in financing as well. And then the hope is that once those two financial pillars are in place, that a third financial pillar will be then convinced that this is a good idea, and that’s the private sector. Typically, in these new emerging frontier markets, it’s the government that needs to get its house in order, and then the DFIs that come in ahead of the private sector, and that’s a signal to the private sector that okay, this is now a place where I can do business and start offering different financial instruments to.

Gene Tunny  41:47

Can I just clarify Kurtis DFI, do you mean Development Finance Institutions, the World Bank, Asian Development Bank, etc? Is that right?

Kurtis Lockhart  41:58

Yeah, that’s exactly right.

Gene Tunny  41:59

That’s okay. I was just wondering, because I used to work in the Treasury in Canberra, we call them IFIs. I think International Finance Institutions, or I can’t remember. I remember there was some sort of abbreviation or acronym…IFIs.

Kurtis Lockhart  42:12

IFIs is more fun than DFIs. So, I’m happy to go by if IFIs.

Gene Tunny  42:18

Right oh, yeah. Sorry, I interrupted you there. We’re talking you’re going to help sort of, sort out financing and all that. One thing I’m wondering is about the deal or the relationship with the host country? Because I mean, one of the; and you would have thought about this. I know, and this is why I’m interested in your thoughts on it. How do you constrain or tie the hands of the host country of the host government? Because I mean, one of the risks is that you have this thriving Charter city, and the economy is going gangbusters. And, everyone’s wanting to move into it. And if you’ve got lower taxes, or it’s running itself, the host country, their finance ministry, they’re going to look enviously on this little Charter city, aren’t they? And, I mean, they’ll want to get a piece of the action. So, isn’t there a risk there that they could then impose? They could ramp up taxes, they could try and, take, extract some money out of the Charter city, and that threatens the viability of it. How do you deal with that situation?

Kurtis Lockhart  43:32

You hit on what I think of as probably the biggest risks to Charter city projects. And that’s just the fact that there’s a political risk. And, the urban developer is going to enter into a public private partnership in a point in time with a particular political regime. And because these city projects are decade’s long projects, the project is going to span multiple political regimes. And so how do you as the developer know that the political regime that’s agreeing to the public private partnership today, is going to also agree to that same public private ship, public private partnership tomorrow, when that political regime has changed or altered? How do you know that there is a credible commitment? So that risk of the government’s killing the birds that laid the golden egg is ever present.

We’ve thought of this, and there are several ways that we can go about trying to mitigate that risk, that political risk of expropriation, two of the simplest, I think, are just about, again, aligning incentives. One, I think, within that public private partnership, there should be a revenue sharing agreement that’s embedded. So, every year the developer within that jurisdiction collects user fees, they collect taxes, they collect land leases, right land lease rents, from those within that jurisdiction. And I think a proportion or percentage of those funds should be remitted to the host country so that every year, the country gains something in their coffers from the success of that Charter city. Therefore, it has less of an incentive to, see that pot of money that it gains every year, destroyed.

Another way to do exactly that is by giving an equity stake in the development company, to the host country, right. So, if the urban developer succeeds immensely, as has happened in kind of Sangen, and Singapore, and Hong Kong and Dubai, and the city grows, 5, 10%, on average year on year, then the post country also reaps huge rewards from that success. So those are two pretty simple ways to align financial incentives.

Another simple way is that there are organizations that do offer political risk insurance MIGA, M-I-G-A, I forget what the acronym actually stands for, but they are the entity under the World Bank Group of organizations that offers political risk insurance. A few other things that could be attractive to help mitigate this risk is floating the development company and publicly trading the development company. So, then you have big sort of institutional investors within that host country, like pension funds, for example, invested in the success of this Charter city, and whether we like it or not sort of business elites, and political elites kind of talk with each other and influence each other. And if the political elites are threatening to expropriate the Charter city, and that’s going to have adverse consequences for the pension fund folks. They’re going to raise a stink and say, hey, don’t do that, that’s going to hit our pocketbooks, and we might not support you in the next election. And so that could also be some cover.

Another way, and I think this is this is probably really effective, is to include sort of an objective, international organization in the project. You mentioned the World Bank. So, by including the World Bank in a Charter city project, whether that’s alone, or I don’t know, if they would do equity investments in a private company, that would more be IFC, which is their private arm. But including them in the project would mean that if the political elites decide to expropriate or jeopardize or threatened interfere with that Charter cities project, and the World Bank is involved, that means they’re also jeopardizing a bunch of other loans and projects that the World Bank is investing in their country. And they’re also jeopardizing their access to concessionary loans and finance that the World Bank offers their country. So, they would not want to, ideally, they would not want to do that.

So, there’s a bunch of ways to lessen the risk, to de risk, but you cannot fully get rid of that risk of political expropriation, just because, again, unlike Romer, our model doesn’t create a new sovereign, right? These are not sovereign entities, they are subject to the constitution, and criminal law and international treaties of the host country. And so that’s sort of an ever-present list. But again, I just listed off a bunch of ways you can help de risk and mitigate that risk such that it’s, it’s less, much less likely to occur.

Gene Tunny  49:01

I just wanted to ask, those examples you gave of how you can de-risk. Have they been any of those been applied? Or is that just your ideas of how you can de-risk?

Kurtis Lockhart  49:12

I know revenue sharing agreements are part of it. And I know for example, Enyimba Economic city, which I mentioned in Nigeria, both the state government, located in Abia state, as well as the federal government in Nigeria, have equity stakes in the Enyimba development company. And so that risk mitigation technique has been implemented there. There’s also a revenue sharing agreement embedded in the PPP.

When it comes to others that I recommended; it’s not a Charter cities project, but it was a pipeline project in Cameroon. And it was, oil was discovered in Cameroon and Exxon Mobil at the time. I think this is the late 90s or the early 2000s. Exxon Mobil saw an opportunity there to operate in the country. But there had been some protests in the past about the oil sector. So, ExxonMobil was worried about, engaging in all this upfront investment and investing all this capital only to have these protests breakout and then to have to, leave the country. So, they wanted reassurances, they wanted a credible commitment on the part of Cameroon and the Cameroonian government, that that wouldn’t happen. And that also the sort of funds, the revenues derived from the pipeline project would not be expropriated by the Cameroonian government. So, it is what both the Cameroonian government in negotiation with ExxonMobil agreed to, was there would be this escrow fund, that the revenues flowing from the pipeline project went to, and there would be a council approving disbursements from that escrow fund. And some of the spots on that council would be appointed by Exxon, some of the spots on that council would be appointed by Cameroon, but that basically, the tie breaking vote on that council would be the World Bank. It was seen as sort of legitimate from both sides from both Exxon and in the Cameroonian government. Any sort of dispute or kind of corruption or revenue issue was sort of mitigated by having the World Bank involved. Again, for this reason that I brought up earlier that the World Bank is involved in a lot of these low and lower middle-income countries in terms of a bunch of infrastructure projects, or health projects, or education projects, and gives loans of various sizes and numbers to a bunch of really important political projects across the country. If they’re involved, the host government is much less likely to interfere with and expropriate the project than otherwise would be the case. So, I use that example, as kind of illustrative of that, of that power of that risk mitigation technique.

Gene Tunny  52:15

Right. Now, I do want to just ask about special economic zones. This idea of a Charter city, this is broader than a Special Economic Zone, S-E-Z or SEZ because you’ve got people living there, haven’t you? You want to actually establish a city? It’s not just a sort of an export processing zone or whatever it says is, is that right?

Kurtis Lockhart  52:40

Yeah. So, there are a few main differences between a special economic zone and a Charter city. They’re kind of analogous in that both are delimited jurisdictions with different rules, right. But there are a few main differences that we think make Charter cities much more impactful than SEZs. One is just size, right? So Charter cities are cities scale, SEZs are usually much smaller and more narrow. And that just affects how many people and how many businesses can agglomerate within a particular area. Both you and I, being economics nerds, we know the importance of agglomeration economies, and this is why cities are fantastic, because of all these agglomeration economies. So, that’s number one is size.

Number two is SEZs tend to be focused on a single or one or two different sectors or industries. So, you have textile or manufacturing, or tech hubs, those types of zones that have one sector that they really want to focus on. Whereas, Charter cities are mixed use and multisector. They’re cities, right.  There’s not just an industrial component, there’s also a commercial component, and very importantly, residential component.

A lot of zones and industrial parks don’t have people living there, right? And again, that impacts this urban agglomeration potential, and we really, really want conglomeration economies to take off. So, the mixed use so multisector and the residential component are super key differentiator.

The third difference is around governance and the rule set. SEZ legislation, when it’s passed, is sort of, you could say setting stone; my whole thing is humility. So, we’re not going to get the rule set exactly perfectly right at the beginning of these things. And the zone operator or administrator is going to figure out that, okay, hey, we didn’t get this law that we wrote, five years ago, completely right. There are a few clauses that are causing us a lot of problems that we need to change pretty quickly, otherwise, these businesses aren’t going to like it. When that happens with SEZs, they have to go to higher tiers of government or Parliament even and get Parliament to pass an amendment or pass a new SEZ law. As you can imagine, that takes a lot of time and slows the reform process down immensely. And, usually the reform doesn’t even happen at all. And so that hurts business dynamism and the ultimate success of those zones. Whereas, Charter cities, we devolve that ability to change the rules over time, down to the city administrator and the city operator. And so instead of having to do that slow process of every time they need to change, they have to go up to higher tiers of government, they can make those changes really quick on the fly as needed within the Charter city. So, those are the four main differences.

Gene Tunny  55:44

Good one. Okay. Just finally, I’ll try and sneak this in. You’re doing a PhD at Oxford. Are you nearly finished? And is it on Charter cities?

Kurtis Lockhart  55:51

Yes, I have a year left. I mean, I’m knocking on wood right now. I am doing a Doctorate in Political Science at Oxford. It’s focused on political decentralization. So, a couple of the articles will be around New City developments and Charter cities, and the potential of these for economic growth and prosperity around the globe. So, that work really aligns with the work that CCI is dedicated to.

Gene Tunny  56:18

Brilliant. Okay, Kurtis has been fabulous. I’ve really enjoyed and I’ve been blown away learning about what you’re doing. And the sheer potential of Charter cities is something that excites me. So terrific work, I’ll put links to your institute and to your social media in the show notes. I really enjoyed the conversation. If there’s anything you want to say to wrap up, please do otherwise. Yeah. I’ve really enjoyed it. And thanks so much.

Kurtis Lockhart  56:50

Yeah, thanks so much, Jean. I will just say if people are hearing this, and they want to learn more and get involved in the Charter cities movement, we are starting and has started a coalition this year called the next 50 Cities Coalition. So, it’s really easy to sign up, you can sign up as an organization, or even an individual, and you’ll get notifications of upcoming events and conferences, you’ll get newsletters and all that stuff. So, I’d encourage you to go to our website, Chartercitiesinstitute.org. And it’s backslash nxt50. And you can join the movement that way.

Gene Tunny  57:26

Great. I’ll have to look into that. I mean, one of the things I found fascinating about this conversation, you talked about the indigenous people in Canada, we’ve got indigenous people in Australia. I don’t know whether any of the indigenous leaders in this country have been thinking about Charter cities, but that’s something I might follow up. Yeah, absolutely fascinating. Kurtis Lockhart from Charter cities institute. Thanks so much for the conversation, I really enjoyed it.

Kurtis Lockhart  57:51

Yeah. Thanks so much, Gene. This has been fun, appreciate it.

Gene Tunny 

Okay, ciao.

Gene Tunny  57:56

Okay, that’s the end of this episode of Economics Explored. I hope you enjoyed it. If So, please tell your family and friends and leave a comment or give us a rating on your podcast app. If you have any comments, questions, suggestions, you can feel free to send them to contact@economicsexplored.com and we’ll aim to address them in a future episode. Thanks for listening. Till next week, goodbye.

Credits

Thanks to the show’s audio engineer Josh Crotts for his assistance in producing the episode and to the show’s sponsor, Gene’s consultancy business www.adepteconomics.com.au

Please consider signing up to receive our email updates and to access our e-book Top Ten Insights from Economics at www.economicsexplored.com. Also, please get in touch with any questions, comments and suggestions by emailing us at contact@economicsexplored.com or sending a voice message via https://www.speakpipe.com/economicsexplored. Economics Explored is available via Apple PodcastsGoogle Podcast, and other podcasting platforms.

Exit mobile version