Sunday, September 23, 2012

Model city to use laws of Texas

Some supporters of a plan to build private cities in Honduras have described it as creating "a little Canada" in the country.
It turns out the backers of the first city to win government approval want to create a "little Texas" on the country's Caribbean coast.
I've written about the model city plan here and here. The notion is that the private cities would be a chance to start from scratch, with the rules made by technocrats and the investors. Instead of fixing Honduras' problems, you create new states within the country with different laws, policing, education and health systems and tax structures. Crime and corruption would be banished. The constitution would apply, but basically the owners would have something close to their own country to run.
That raises obvious concerns. The interests of the owners and investors might best be served in ways that are bad for Hondurans living in the new cities.
But the idea is appealing in a country facing widespread poverty and weak institutions of all kinds. 
The first developer - owner? - is off to bad start. 
MKG Group hasn't offered many details in Honduran news reports or on its website.
But CEO Michael Strong was more forthcoming with, which presented this report.
 “Once we provide a sound legal system within which to do business, the whole job creation machine – the miracle of capitalism – will get going,” he said.
And the new legal system, separate from laws on the rest of Honduras, would be based on Texas state law, because it has few regulations.
“It will be Texas law with more freedom of contract," Strong told Fox News. "Texas scores well on state economic freedom rankings,” he explained.
Our goal is to be the most economically free entity on Earth,” he said.
Music to libertarians' ears. But does that mean no minimum wage, no employment standards, no health and safety rules?
Strong also said the new city would have no income, sales or capital gains taxes. (Honduras' existing factory zones offer foreign business investors 10 years of no taxes, although income taxes still apply.)
Which raises questions about who will pay for the vision of better health care, education and policing. 
The biggest problem might be where MKG has chosen to share its plans for the new city.
The private city plan is controversial and facing political and legal challenges in Honduras.
Yet the report is in English and available on the Internet. Few Hondurans speak English, and about 85 per cent don't have Internet access.
The concerns about private cities are, in part, that the owners won't care about the interests of Hondurans, or will at least put the interests of foreign investors first.
MKG's decision to share details with Fox News and an English-speaking audience, before informing Hondurans, will add to those concerns.


Bernard said...

This is something that should concern people everywhere. The idea that things would work better without any system of democratic rule has never shown to be functional in the long term. Without democracy there can be real legal system because all laws are based on the premise that they are neutral and unbiased in how they are applied. Laws only function if there is a fair mechanism for how they are created, if the company change the laws as they wish they can avoid being held to account.

The very idea that MKG Group would import laws created in another country and then in a state famous for writing bad laws is crazy. Would this mean when a law changes in Texas it would change in Honduras?

This is utterly insane as an idea. It is only slightly better than the new colonialism China is practicing.

What Honduras needs is free speech, free press, a fair and affordable court system, utterly impartial police and civil servants, and secure rights to their land. Once it has that in place and invest in education the country will thrive over the next generation.

Honduras still ranks very low in the TI corruption perception index,only Haiti and Venezuela in the Americas are significantly lower. There is a very direct corelation in the world between a high HDI and democracy and low corruption. End the corruption is the best bet, not making freaky super gated communities

paul said...

No argument in principle, Bernard, but I yet to see how you can get to "free speech, free press, a fair and affordable court system, utterly impartial police and civil servants, and secure rights to their land." The Transparency Index ranking dismal, and in 2010 a survey found 73 per cent of businesses said they had made "informal payments" to public officials. Crime is rampant and 90 per cent are not solved. They brought in Colombians to administer lie detector tests on the police in an effort to deal with corruption; 33 of the first 70 failed. If the rate holds, almost half the police could be sacked. (And then what? Thousands of ex-officers turning to crime?)
A report this week estimated up to 25 per cent of government spending is lost to corruption. And on and on.
You can see the appeal of model cities.
The risks are real. And paradoxically, the very failures that make the idea appealing to some also mean that Honduras is likely incapable of providing needed oversight.

Bernard said...

I have no easy answer because once corruption becomes entrenched in a society it becomes very hard to remove it. Do you know if the Open Society Foundation is doing much in Honduras?

For a long time I have wondered if it would work for mature democracies to adopt and mentor emerging democracies? As an example have Honduran civil servants be paid to come and work for several years in Canada but meanwhile lend Honduras some senior Canadian civil servants. You could do this with the police and the military as well. I have no idea if it would work, but by taking these people out of the system there and giving them a chance to see that it can be done differently may hasten the change in the culture.

Do think as a concept it could work?