Gurgaon, India : Lessons for a Free Cities Future

This post comes from Thousand Nations contributor Zachary Caceres–Editor

Alex Tabarrok, one of the editors of the brilliant work The Voluntary City, wrote today about a recent New York Times article on the Indian city of Gurgaon. The city is a rapidly-growing metropolis, currently with the 3^rd highest income per capita in India. Thousand Nations readers will find especially interesting the city’s unique political circumstances:

Gurgaon was widely regarded as an economic wasteland. In 1979, the state of Haryana created Gurgaon by dividing a longstanding political district on the outskirts of New Delhi. One half would revolve around the city of Faridabad, which had an active municipal government, direct rail access to the capital, fertile farmland and a strong industrial base. The other half, Gurgaon, had rocky soil, no local government, no railway link and almost no industrial base.

As an economic competition, it seemed an unfair fight. And it has been: Gurgaon has won, easily. Faridabad has struggled to catch India’s modernization wave, while Gurgaon’s disadvantages turned out to be advantages, none more important, initially, than the absence of a districtwide government, which meant less red tape capable of choking development.

In other words, Gurgaon is a bustling, flourishing testament to the power of good rules – even when competing against areas with ‘better’ infrastructure.

Tabarrok points out that for-profit corporations swiftly filled the ‘institutional vacuum’ left by the absence of government by investing billions in Gurgaon. Health clinics, electricity, water, roads, and a security force outnumbering the ‘real’ police are all provided privately. One leading Indian business magazine has ranked Gurgaon the number one Indian city to work and live.

Michael Strong has argued for innovation in legal systems with the allegory that the US Post Office will eventually be competed away by superior entrepreneurial alternatives like Gmail and FedEx, rendering America’s favorite monopoly a slush-fund subsidy for junk-mailers. In Gurgaon, this is literally what has happened: private couriers meet the needs of residents because the ‘official’ service was unreliable.

Unfortunately, not everything about Gurgaon works well and many services are underprovided to regions of the city – especially areas filled with working poor. Tabarrok refers to Gurgaon as a series of oases: highly developed islands owned and operated by for-profit institutions with subpar connections to one another. Many commenters have scolded Tabarrok for interpreting the city’s development too charitably, since traffic and blackouts in these underprovided regions remain a serious issue. But somewhat ironically, these complaints are almost entirely regarding the provision of public goods in the areas between private developments. These regions were one of the few responsibilities actually left to the government:

Developers built the infrastructure inside their projects, while a state agency, the Haryana Urban Development Authority, or HUDA, was supposed to build the infrastructure binding together the city.

This striking divide is an unfortunate case study in the power of incentives. Tabarrok recommends to readers that the solution to this problem is in ‘scaling-up what works’. This is precisely the idea behind the private cities component of the “Free Cities” project, familiar to many Thousand Nations readers. Large-scale development projects like the 30 billion dollar Songdo City in South Korea do not risk the problem of the ‘oasis’ since it has, well, ‘scaled up what works’. Michael Strong’s quasi-‘Georgist’ proposal to use land-value dividends to provide funding for Free Cities also ameliorates this trouble. Well-functioning and efficiently provided public goods will only increase the value of the land on which the city rests by encouraging commerce and immigration. Marrying this to incentive programs like “Citizens Dividends” or “Flexi-wage” (official salaries tied to City growth-rates) means a positive feedback loop, benefiting city developers and residents, rich and poor alike.

Gurgaon is far from ideal, but it hints at the bright future ahead for innovative projects like Free Cities.