Saturday, May 02, 2015

Narendra Modi's 100 smart cities

From "Every thing you wanted to know about Narendra Modi's 100 smart cities": "On Wednesday, the Union Cabinet finally took the bull by the horns. It cleared an approval for Rs 48,000 crore to be allocated to the Smart Cities Mission, with Rs 100 crore to be given to each city per year for the next five years." More in the article but it is not clear what smart cities are going to be like. Modi's inspiration seems to be China fro earlier reports. Here, in an interview, Paul Romer discusses about Charter cities, China's efforts and in passing about Modi and India. Some excerpts:
"Q: The idea of Charter Cities originated from Hong Kong and Shenzhen, am I right?
Romer: The two most interesting precedents for Charter Cities are Hong Kong and Shenzhen, so it does have some origins here. They each played important roles in fostering reform of the Chinese economy. But it is an approach that can be used in any country that wants to implement reforms, even a developed country like the United States. It turns out that this is a unique time in human history when it is possible to start many new cities because there is an enormous, unmet demand for city life.
Q: What are the essential elements of a Charter City?
Romer: In one sense, the essence of the idea is the notion of a Startup City. You have a chance to start a city anew.
Then the question is: “What can you accomplish with that? What are the things that will be required to make it successful?” I think what is unusual about a Startup City, as opposed to an existing city, is that you can propose something new without having to go through a long process of consultation and agreement amongst the people that might be affected by a change, one that would inevitably mean that a change that some people do not want is imposed on them. With a Startup City, you can propose something entirely new and let people choose whether they want to live under its rules, as embodied in its charter, the document that specifies its founding principles. People who want to try the reform can go there, and people who don’t, they don’t have to. With a startup, you can have reform without coercion.
This is part of the insight that Deng Xiaoping had in pursuing Shenzhen. As he explained later, he wanted a way to open the Chinese economy that avoided long argument and contention about what types of change to pursue and how to pursue them.
The idea is also closely related to the idea of a special zone, but it is a specific type of special zone.
Q: But don’t you think Shenzhen is a bit more like a Concession Zone?
Romer: I think there was some risk that it would be used as Concession Zone and who knows what kinds of compromises it took to make sure that it took off. But it seems clear to me that the fundamental motivation in establishing the four initial special zones, of which Shenzhen was the most successful, was to achieve local reform quickly in hopes that this would induce reform throughout China. To an overwhelming degree, the measures implemented in Shenzhen pass my two tests for reform: they have been adopted as permanent policies and they have spread to the rest of China."
Bits about India:
 "Q: In recent years, development economists focused on three research areas, namely the effects of international aid as favored by Jeffrey Sachs, the political economy effects on growth as promoted by Daron Acemoglu and James Robinson, or the experimental economics on growth championed by Esther Dulfo. How do you view the three theories of catch-up growth that are now the hottest in research?
Romer: You know, I actually don’t agree with any of these three. I think urbanization is the thing we’ve got to study. Consider the case of India. If it wants to get better access to the technology that already exists around the world, and make this technology available not just to an elite, but to all workers, even workers who are getting their first formal sector job that pays them a wage, they will have to have gateway cities that invite foreign workers and firms to come operate in India. And gateway cities that invite people from rural areas throughout India to come join them. Unfortunately, India is not building gateway cities that work. If you look at any of the Indian cities right now, they are as polluted as Chinese cities right now. The traffic congestion is horrible. They exclude new residents from rural areas.
In this context, think about what Jeff Sachs has proposed about providing more aid. There is nowhere near enough aid available to bribe Indians into building cities that work if they don’t want them. Change the political economy of India? Great if you can. But how? Where is the evidence that you can change things in a way that raises standards of living? As my friend Edwin Lim has observed, democracy in India has totally failed to provide such elementary basics as child nutrition or education for girls, failed even compared to neighbors like Bangladesh. And experimental economics? Cameras for teachers? Or as Lant Pritchett has put it in a recent blog post, do we really want to devote so much academic effort to experimental analysis of policies like women’s self help groups? [] Where is the evidence that you can generate Chinese rates of growth from measures like these?
I think the new prime minister in India understands how important urbanization is to the future of his country. It is the make-or-break issue for India right now. But I think it’s going to be hard for him to do anything about this. They have a proposal for 100 Smart Cities that tries to address the problems they face, but it remains to be seen whether this will make any difference. I wish they were thinking seriously about letting some new jurisdictions enter as startups and compete for residents with all the failing ones that they already have."

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