If, like me, you are still waiting with bated breath to learn the UK government’s strategy for generating economic growth, I fear the wait may be a long one. In an effort to save money, the Conservative Party Ideas Department has clearly been closed down.  More levelling up funds will reach the prosperous South East than will find their way to the Red Wall. The result will be a red rout at the next election leaving Keir Starmer’s incoming government to search for the few socialist policies that the Tories have yet to steal.

So what can those of us of a libertarian bent who believe in small government and low taxes do while this slow motion train wreck unfolds over the rest of the decade? One option might be to go and live in a new kind of place called a Charter City. A what? Well, you may not have known it until now but there’s an organization called the Charter Cities Institute and they define a charter city as one which “can help improve governance in a limited geographic area by giving local officials authority to implement best administrative practices as well as commercial regulations. By improving governance and institutions, charter cities can create a more competitive business environment that attracts investment, creates more jobs, and improves the lives of millions. They are one of the best public policy tools to ensure rapid urbanization jumpstarts long-term economic growth, rather than poverty, in emerging economies.”

If you’re looking for examples of purpose built cities designed to foster economic growth then one obvious example is Dubai. If you travel on Emirates airlines you can watch a video that shows Dubai as little more than a desert in the 1970s and then contrasts it with today’s Manhattan-like skyline. Back in 1980 the combined GDP of the United Arab Emirates was $75 billion. By 2017 it had reached $689 billion. An even bigger example is Shenzen in China which was a fishing village when I was born and is now a bustling high tech metropolis of 13 million people. Average income per capita rose from $137 per year in 1980 to $13,997 by 2017. Shenzen was the prototype for Deng Xiaoping’s reforming policies that began at the end of the 1970s and which look like being snuffed out under the Xi the Dictator. And then there’s Singapore, that strange hybrid of free market capitalism and authoritarian politics that has become one of the world’s leading financial centres. Average GDP per capita has rocketed from $428 in 1960 to $64,582 in 2018.

The concept of charter cities is the brainchild of Paul Romer, former chief economist at the World Bank and winner of the 2018 Nobel prize for economics. He recognised that the key barrier to economic growth is bad management of the environment in which hard working people are willing and able to build businesses that create jobs and wealth. By freeing up a new city from all the old baggage of regulations, rent seeking and corruption, it should be possible to give these people wings and let them fly. I suspect he’s read Atlas Shrugged and been impressed by the flight to Galt’s Gulch of all those disaffected pioneers.

At the heart of the charter city concept is the recognition that things have gone terribly wrong with the way our countries and our urban population centres are being managed. Look no further than the anaemic GDP growth figures in most Western countries to see that a fresh approach is needed. Given this starting point, it’s hardly surprising that two of the biggest sponsors of this new approach are those arch libertarians Peter Thiel and Milton Friedman’s grandson Patri.  Friedman’s first venture into news ways of living was the Seasteading Institute which aimed to create autonomous environments floating on the oceans. Wacky? Probably. Well intentioned? Certainly.

Today, the focus seems to be on low income countries where corruption has been rife and living standards have fallen far behind the rest of the world. The Charter Cities Institute has a four step cookie cutter model for creating your very own metropolis. First, acquire a greenfield site so that there is no historical baggage or NIMBYism. The funding for the land purchase and development costs tends to come from private sources so that there is no strain placed on the economy of the host country. Then, create new administrative entities to administer the city, pass laws and manage the functions that you need when lots of people live in one place. This involves a potentially awkward dance between the officials who govern and the investors who finance the project to make sure goals are aligned.

These local officials are then given wide ranging powers to adopt best practice in how to run the city, provided they comply with criminal law and international treaties. The exciting part is that they get a clean slate on which to create the rules for business, land registration, taxes, immigration and labour laws. The fourth leg of the system is a speedy process for dispute resolution, something that the West’s snail pace lawyers and regulators wouldn’t recognise if it bit them on the arse.

There are a number of small scale charter city projects underway in Africa including Itana in Nigeria whose backer, serial entrepreneur E Aboyeji, says will be more like Delaware then Shenzen. In other words a business friendly, low tax location for Africa’s digital nomads. Another is Nkwashi 36 kilometres from the Zambian capital Lusaka. It’s early days but with a 360 square metre plot costing just £10,000 there’s plenty of scope for capital appreciation.

Like any radical new idea, there have been teething troubles.  A project called Reedy Creek in Florida was well advanced and was heavily funded by the entertainment giant Disney. When they fell out with the governor over their woke agenda the powers that be abolished the district with the stroke of a pen. Meanwhile, the only law in the world specifically enabling charter cities, the Zones for Economic and Employment Development in Honduras, has just been repealed. For more than a decade the projects had been mired in controversy, and when the president who had supported them was deported to America on drugs charges and replaced by a left-wing government the end was inevitable and swift. What central politicians give, central politicians can take away.

But the idea remains an intriguing one. Speaking at the launch of a secondary cities initiative in Malawi last year, this quote from Kurtis Lockhart, Executive Director of the Charter Cities Institute, gives some idea of the scale of the opportunity:

“In the next 30 years, 1 billion Africans will be moving from the countryside to cities. On average three new cities could be created per month for the next 28 years. This will be a challenge (GR – no sh*t, Sherlock), which needs stakeholders to come together and do something about cities.”

Patri Friedman certainly thinks it’s a problem worth solving. In 2019 he launched Pronomos Capital, a $10 million venture fund with a mission to ‘build prosperous cities that uplift entire regions”. The fund is already invested in the aforementioned Nigerian project plus a West African financial centre and a potential new project in Bhutan, currently the only carbon neutral country on the planet.

As it becomes ever clearer just how screwed up our Big Governments are becoming, there’s a lot to be said for Patri’s enthusiasm. Let me leave the last word to him:

“When the old systems are really failing, it’s an opportunity for small countries to do brand new things to create the new Hong Kongs and Singapores. The key ingredient is not that a country has a trillion dollar GDP. The key ingredient is that it has a group of dedicated people in the government who want to help their country and are open to new ways of doing it. And we’re just seeing more and more of those around the world.”