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Paul Romer, Intellectual Heir to Henry The Lion?

June 9, 2010

The July-August issue of the Atlantic features a warm profile of Paul Romer by Sebastian Mallaby, who says the first Charter City was medieval Lübeck:

HALFWAY THROUGH THE 12TH CENTURY, and a long time before economists began pondering how to turn poor places into rich ones, the Germanic prince Henry the Lion set out to create a merchant’s mecca on the lawless Baltic coast. It was an ambitious project, a bit like trying to build a new Chicago in modern Congo or Iraq. Northern Germany was plagued by what today’s development gurus might delicately call a “bad-governance equilibrium,” its townships frequently sacked by Slavic marauders such as the formidable pirate Niclot the Obotrite. But Henry was not a mouse. He seized control of a fledgling town called Lübeck, had Niclot beheaded on the battlefield, and arranged for Lübeck to become the seat of a diocese. A grand rectangular market was laid out at the center of the town; all that was missing was the merchants.

To attract that missing ingredient to his city, Henry hit on an idea that has enjoyed a sort of comeback lately. He devised a charter for Lübeck, a set of “most honorable civic rights,” calculating that a city with light regulation and fair laws would attract investment easily. The stultifying feudal hierarchy was cast aside; an autonomous council of local burgesses would govern Lübeck. Onerous taxes and trade restrictions were ruled out; merchants who settled in Lübeck would be exempt from duties and customs throughout Henry the Lion’s lands, which stretched south as far as Bavaria. The residents of Lübeck were promised fair treatment before the law and an independent mint that would shelter them from confiscatory inflation. With this bill of rights in place, Henry dispatched messengers to Russia, Denmark, Norway, and Sweden. Merchants who liked the sound of his charter were invited to migrate to Lübeck.

The plan worked. Immigrants soon began arriving in force, and Lübeck became the leading entrepôt for the budding Baltic Sea trade route, which eventually extended as far west as London and Bruges and as far east as Novgorod, in Russia.

Read the whole thing. A few things about it are heavy-handed: the headline says the whole idea is politically incorrect; Mallaby suggests Romer rejected the “libertarianism of his Silicon Valley home” by claiming rules matter more than hard technology—what??–and he also frames charter cities as neo-colonialism lite. That makes it sound more confrontational than it is, but Romer added some thoughts on his blog:

In the discussion of the modern proposal for charter cities, the article picks up the language of “neo-colonialism” that some charter city critics use in an appeal to emotion. Yet, the article uses the term dispassionately and gets the logic exactly right: If it’s neo-colonial for a family to move from a poor country to a charter city, it’s also neo-colonial for the same family to move to Vancouver. In the end, the important ethical question is whether people from poor countries should have more choices about where to live.

If the critics who appeal to emotion want to frame the debate in terms of colonialism, we should distinguish the coercive brand of colonialism that the British used to invade India from the opt-in brand of colonialism that Indians employ when they migrate to London.

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