Politics & Policy

Terrorism, Foreign Aid, and ‘Free Cities’

The experts consider a novel proposal.

Last week on National Review Online, Newt Gingrich and Ken Hagerty proposed a free-market strategy to “subvert global terror by providing hope and opportunity in the Third World.” Could “Free Cities,” which take their inspiration from Hong Kong’s success, provide a market-friendly alternative to foreign aid as it is presently handled? And could they make a difference in the war on terror?

J. D. FOSTER

Freedom works: There’s probably no more powerful sentence in all of public policy. Freedom works to expand the scope of human activity, to allow people to explore their own talents, strengths, interests, and humanity. Not incidentally, freedom also works to build economic prosperity. Former House majority leader Dick Armey was certainly on to something when he named his new organization “FreedomWorks.”

So it should surprise no one that Armey’s revolutionary brother-in-arms, former House speaker Newt Gingrich, has come up witha new way to make freedom work around the world. He observes that freedom works very well for Hong Kong, which, despite its proximity to the Communist Chinese colossus, has used its treaty-ensured freedoms to become a remarkable economic and political success story. Gingrich’s notion is a simple one: If it worked for Hong Kong, it can work elsewhere.

Government-to-government aid cannot defeat the terrorists or even materially improve the quality of life of those trapped in poverty abroad; but what Gingrich calls “Free Cities” could do both. Updating Jack Kemp’s venerable idea of enterprise zones, he proposes that the U.S. negotiate bilateral treaties with receptive foreign governments to create designated pockets of political and economic freedom. Within these pockets, U.S.-style laws establishing economic and political freedom would be guaranteed for 50 years. The U.S. would teach and advise on how these systems work, and direct foreign aid toward these Free Cities. In turn, these cities’ more fertile environments and comparative advantages would lure foreign capital. The net result: pockets of prosperity based on economic freedom.

Free Cities would provide examples across the globe of the power of free peoples to prosper themselves and their communities. There is no better way, perhaps no other way at all, to defeat terrorism and government repression than with a plethora of examples of hope and freedom. Freedom works abroad, too.

J. D. Foster is Norman B. Ture Senior Fellow in the economics of fiscal policy at the Heritage Foundation.

VICTOR DAVIS HANSON

The Free Cities idea is intriguing, as long as we recognize that today’s “free cities” are free-market, capitalist places such as Singapore, Hong Kong, or even some of the Gulf-sheikhdom urban centers, which are run largely on authoritarian principles, albeit not murderous ones of the sort we see in Africa and parts of South America and Asia.

But creating enclaves of free-market economics and constitutionally protected freedoms as atolls in surrounding seas of statism and autocracy, it seems to me, would entail some sort of transnational IRS/Amnesty International in order to ensure the compliance of what I’m assuming are not otherwise liberal societies.

And given that the U.S. is awash in debt, seemingly tired after two wars, and now more protectionist than free-trade in spirit, I wonder how willing U.S. private and public interests will be to invest time, capital, and labor in creating mirror images of America in places that otherwise have had very different cultural paradigms (e.g., a free Benghazi or Tirana).

I understand the ink-blot theory — that once these entrepreneurial zones get going, they will swell and others will emulate them — but in all candor I am not sure the U.S. has the will, resources, or skill, whether privately or publicly, to take something like this on.

If large swaths of Detroit are turning into urban prairieland as Stockton becomes a sea of foreclosures and New York capitalists face the prospect of 65 percent aggregate income, FICA, state, local, and capital-gains taxes (in addition to rising sales, property, and inheritance taxes), we might first try the idea here at home. How about a free New York, or a free Oakland?

– Victor Davis Hanson is a senior fellow at the Hoover Institution, the editor of Makers of Ancient Strategy: From the Persian Wars to the Fall of Rome, and the author of The Father of Us All: War and History, Ancient and Modern.

YEUNG WAI HONG

It is a noble idea to plant the seed of freedom around the world, and I support it wholeheartedly. There is just one problem: Which country would willingly give 400 square miles of its land (about the geographical area of Hong Kong) to the U.S. to carry out this great experiment? Hong Kong came into existence as a result of two wars and three treaties. In 1984, Communist China acceded to the “one country, two systems” proposal of allowing Hong Kong to carry on with its colonial ways for 50 years (to the year 2047), as its own economy was in shambles. Had China been the economic powerhouse then that it is today, it is rather doubtful that it would have so readily acknowledged the inferiority of its socialist system.

Intriguingly, around the time when Hong Kong’s “one country, two systems” model was being formulated, Communist China invited the government of Singapore to carry out an experiment in Suzhou, a city near Shanghai. They were asked to develop the Suzhou Industrial Park in Singapore’s own image. This experiment failed, and the industrial park was unceremoniously given back to the Chinese, who then turned it around and developed it into one great success story.

A stone’s throw from Hong Kong is the place that comes closest to Gingrich’s idea of a free enclave — Macau. The Chinese ceded it to Portugal some 400 years ago, not as a commercial entrepôtlike Hong Kong but as an enclave for Catholic missionaries. This was not a viable economic option, and in time, Macau got into the casino business. It has overtaken Las Vegas as the largest casino hub in the world, as it is the only place on Chinese soil where gambling is legal. As a booming economic behemoth with a legal framework that is still in a very early stage of development, Macau clearly serves a useful function for those officials who have to find a way to account for their unaccountable wealth. So, yes, we have a real-world case. But is Macau really an example of what we should aspire to?

In short, I am all for the idea of free enclaves if we can get over two little hurdles: overcoming the nationalistic pride of the host country, and making the enclave useful to the host country and to the world at large.

Yeung Wai Hong is publisher of the Chinese-language Next Magazine in Hong Kong.

ARNOLD KLING

This seems to be the “Charter Cities”concept advocated by economist and entrepreneur Paul Romer, the big challenge of which is negotiating with the foreign government and convincing it effectively to give up sovereignty over part of its territory. Trying to persuade foreign leaders of the benefits of having a city under American-style law might be like trying to persuade Americans of the benefits of having a city under sharia law.

The economic thinking behind this idea is sound. The big need in underdeveloped countries is not material assistance so much as better social rules and less predatory government. The difficulty will be to get the political leadership of a country to see this as an opportunity rather than a threat.

Arnold Kling is an adjunct scholar with the Cato Institute and a member of the Financial Markets Working Group of the Mercatus Center at George Mason University. He is the author of Unchecked and Unbalanced: How the Discrepancy Between Knowledge and Power Caused the Financial Crisis and Threatens Democracy.

CHRISTOPHER PREBLE

Newt Gingrich and Ken Hagerty’s proposal to use private enterprise to elevate the less fortunate is neither novel nor objectionable. I question the wisdom of relying on a series of bilateral treaties to implement it, but their idea is otherwise consistent with the core conservative principles of individual responsibility and free markets. It should be commended on those grounds.

Where they err is in repeating the preposterous claim that terrorism flows from poverty, corruption, and despair. Free Cities would have little impact on whether future acts of terrorism are directed against Americans.

Of course, Gingrich and Hagerty are not alone in perpetuating this fallacy. President Obama argues that “extremely poor societies and weak states provide optimal breeding grounds for disease, terrorism and conflict,” and he proposes nation building as the cure. Though they favor a more market-based approach, the Gingrich-Hagerty proposal espouses the same flawed theories about what causes terrorism.

It is unfortunate that they feel the need to play this card. Academic research has disproved the poverty-terror link; so can simple observation. Some of the most notorious terrorists have been relatively well-to-do and better educated than their peers. Others have come from poor places (or were born to parents who did) but became radicalized in healthy and wealthy states, including Germany, the U.K., and the United States. In short, the poverty/poor-governance explanation for terrorism is bunk.

Gingrich and Hagerty play into this misconception by promoting their proposal as a weapon in the fight against al-Qaeda. They needn’t. Make the case for private-property rights and entrepreneurship. Continue to push foreign governments to relax restrictions on business. Shine a light on corruption. Persuade the public and policymakers that confiscatory taxation and burdensome regulations discourage private investment. Just don’t confuse these efforts with counterterrorism policy.

Christopher Preble is the director of foreign-policy studies at the Cato Institute and the co-editor, with Jim Harper and Benjamin Friedman, of Terrorizing Ourselves: Why Counterterrorism Policy Is Failing and How to Fix It.

MARK SIMON

When the Brits left Hong Kong, they left a low-tax, free-market, and modern port city with a just legal system that protected individual rights. They also left a few hundred million bucks in the bank. Not a bad legacy for colonial masters.

But these colonial masters also assembled one of the largest police forces relative to civilian population in the 20th century — a force aimed squarely inward to control the various uprisings that could have torn Hong Kong apart.

Assembling like-minded people in a single geographic area under a benevolent master may sound good. In 2003, the Marines’ cutting off the southern tip of Iraq and creating a new Hong Kong might have worked.But it would have been Marines, not a common set of ideas (which may or may not exist in a city populated by refugees), holding such a “free city” together and keeping it protected.

Also, the intentions and abilities of the people controlling those Marines would certainly be open to question. America is a just and kind nation, but let’s not fool ourselves about what it would take to rule, protect, and not exploit a foreign city under our hand. “Free” may not be the operative word in this plan.

Mark Simon is commercial director of Next Media in Hong Kong.

SAMUEL R. STALEY

The Free Cities concept is a bold, outside-the-box idea that should not be dismissed. The world economy is quickly moving from one where economic power was organized around national economies to one where economic power is created and organized around large, productive, wealth-producing cities. So, in terms of putting a finger on the source of growth and development, the Free Cities idea is spot on.

Second, Hong Kong and China’s “one country, two systems” concept is the right model. Hong Kong has many lessons to teach the West about wealth creation, and Gingrich’s concept of Free Cities updates the conceptual framework in which to think about how free economies can work in less-free political systems.

Third, while the concept seems like a stretch, there are historical precedents. The economic city-states of northern Europe that established the Hanseatic League (13th–17th centuries) created a fundamental foundation for the Industrial Revolution by promoting free trade and stable legal systems through inter-city alliances, agreements, and treaties. Similarly, the Italian city-states of the Renaissance (Florence, Milan, Venice, etc.) pulled southern Europe out of its economic malaise by nurturing their urban economies and bringing the rest of the nation with them.

In short, this is a bold idea worth taking to another level.

Samuel R. Staley is Robert W. Galvin Fellow and director of urban and land-use policy at the Reason Foundation.

NR SymposiumNational Review symposia are discussions featuring contributors to and friends of the magazine.

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