May 5, 2012 – In today’s Ottawa Citizen, MLI’s Brian Lee Crowley writes about how Canada is an ideal partner for developing countries seeking institutions that promote progress and growth. This column is based on the Macdonald-Laurier Institute’s recently released paper by Brandon Fuller and Paul Romer, Success and the City: How charter cities could transform the developing world. The full column is copied below:
By Brian Lee Crowley, Ottawa Citizen, May 5, 2012
After the First World War the question on everyone’s lips was “How are you gonna keep them on the farm after they’ve seen gay Paree?”
Canadians and Americans from a largely rural and agricultural society had flocked to Europe and not only beat the Kaiser, but also saw some wondrous sights in Paris, London and Berlin, glimpses of a life literally worlds away from rural Saskatchewan or Iowa.
While they didn’t generally stay in gay Paree, they came home and moved to cities everywhere in North America. At the beginning of the 20th century roughly 90 per cent of Canadians lived in rural Canada, and the rest in cities. By the end of the century the proportions had essentially reversed.
Our forebears didn’t move just for the bright lights. They moved chiefly because life in the city made them and their children better off. On the farm people have to be more self-sufficient, and do a little bit of a lot of things. In the city there were more kinds of jobs, services, goods and education, so more room for specialization. That shift from the countryside to the city was probably the single biggest factor behind the vast increase in the standard of living we have enjoyed compared to our great-grandparents.
And of course immigrants to Canada overwhelmingly choose the cities in which to settle for the same reason.
Canada’s experience is not unique. What is unusual in global terms, however, is how far out in front we and other industrial countries are in the transition to urban living. The rest of the world is working hard to catch up, however.
Of the seven billion people in the world, only about half of them live in cities. But by 2050, according to the UN, the world’s population will have increased by 2.3 billion, whereas the population of the world’s cities will have increased by 2.6 billion. All of the population increase over the next 40 years will take place in cities, and another 300 million people will move from rural areas to the cities.
As Paul Romer, one of the world’s leading economists, said in a talk he gave in Ottawa last week, all this means that there is a serious shortage of cities in the world. He points out that much effort is spent trying to tear down the barriers to trade between countries on the grounds that this will increase the world’s wealth by a few percentage points. But you pull more people out of poverty faster by simply moving them from the country to the city.
Simply moving a worker from a developing country to a developed one like Canada or the U.S. increases their earning power several times over. Moving from chaotic disorganized societies to ones with strong institutions such as functioning infrastructure, police, courts and the rule of law is the most powerful anti-poverty tool there is. But not everyone can change countries.
The central development challenge of the coming decades, then, will be to help developing countries establish well-functioning cities. Simply moving from rural Mexico to Mexico City or backwoods Philippines to Manila will increase each person’s standard of living, but far less than it might. That’s because these places don’t have those strong institutions that allow people to get the best value out of their skills and abilities.
For example, for cities to work well, you have to have good infrastructure, things like power, water and transport. But those things require investment, tying up billions of dollars in capital that has to be paid back over many years.
There’s the rub. Because these societies so often are corrupt, don’t respect contracts and don’t have independent judges to adjudicate disputes fairly, people with the money and expertise don’t want to invest in urban infrastructure in the developing world. Those who do face the constant risk that a Hugo Chavez or a Vladimir Putin will simply take their investment and leave them high and dry.
It is the poor who pay the costs of such corrupt practices, not just because they have to grease the palm of officials to get things done, but because they have to accept crumbling infrastructure and substandard services at high prices. As a result, says Romer, the citizens of poor countries often end up paying the most for basic goods such as electricity, if they have access to it at all.
The solution, Romer argues, is not more aid. Instead it is to get countries like Canada to work with developing countries to create local greenfield “charter cities” with the rule of law, trustworthy police, protection for investors and other rules that make cities work. Then let the locals choose where they want to live. Chances are they’ll choose Canada — or at least the life that Canadian-style rules make possible.
Brian Lee Crowley is managing director of the Macdonald-Laurier Institute, an independent non-partisan public policy think tank in Ottawa: macdonaldlaurier.ca.