4est_4est_Gump
Run Forrest! RUN!
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Remake Detroit, or Empty It
We should restructure its entire government into a free-enterprise zone, or encourage people to leave.
James Pethokoukis, NRO
We should restructure its entire government into a free-enterprise zone, or encourage people to leave.
James Pethokoukis, NRO
If Detroit were its own city-state — a bizarro version of prosperous Singapore — it would be a place the U.S. State Department would regularly issue travel warnings about, where “long-term, protracted conditions make a country dangerous or unstable.” Detroit’s murder rate, for instance, would be higher than that of all but a handful of other countries. The Democratic Republic of Detroit would also be relatively poor, with annual per capita income of around $15,000, making it a middle-income country like Mexico.
Except Detroit would be a nation in decline rather than on the rise. Detroit would be a nation literally dying off, its shrinking population abandoning territory the central government could no longer afford to supply with basic services. Oh, yeah, its disastrous public finances. Well, maybe those would be a minor bright spot in this alternate reality: Detroit could always pay creditors, at least for a while, with devalued Fords, the local currency named after one of its founding fathers.
Eventually, however, this shrunken, crime-ridden, impoverished city-state — with no one willing to bail it out — might be forced to make a choice: capitalism or collapse. Out of options, it might just make the China choice. A key part of Deng Xiaoping’s pro-market economic reforms in 1979 was the creation of four Hong Kong–inspired “special economic zones” of liberalized labor laws and tax incentives to attract foreign investment. One of these little pockets of economic freedom, Shenzhen, located just north of Hong Kong itself, is now a center for technology manufacturing and one of China’s richest cities.
The stunning success of China’s economic experiment showed economist Paul Romer how better rules and institutions could work wonders for economic growth. Romer has proposed that developing nations allow the creation of “charter cities,” where the host nation would provide a large, uninhabited piece of land to be governed by market-friendly rules and perhaps run by a foreign government. Workers, businesses, and investors from anywhere could move in and out freely. Basically, Hong Kong in a box, ready for delivery. For example, instead of giving foreign aid to some poor African nation such as Mauritania, New Zealand and Norway might partner together to run a charter city there. With good governance in place and cheap land and labor available, the theory goes, private investment would pour in.
Although Romer’s concept remains just a fascinating thought experiment — a deal with Honduras fell through in 2012 — and was intended for what used to be called “Third World nations,” why not turn abandoned Detroit into New Detroit, a business-friendly charter city where taxes are low and regulation light? Governance could be guaranteed by some outside entity. Although neighboring, well-run Canada is an obvious choice, maybe an American city could play the role in exchange for a cut of future tax revenue. Reason Foundation analyst Shikha Dalmia suggests Houston as a candidate.
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If Detroit can’t fix itself, maybe Washington could help, with an idea proposed by economist Enrico Moretti, author of The New Geography of Jobs: People living in areas of high unemployment, such as the Motor City, could receive part of their unemployment check in the form of a relocation voucher. The idea might even inspire a film, Escape from Detroit.