26 September 2015

A place for the stateless: Can a startup city solve the refugee crisis?

By Mark Lutter

Refugees have dominated the front page the last few weeks. With ongoing crises in Syria, Africa, and elsewhere in the Middle East, the problem is unlikely to go away. The UN reports that there are nearly 60 million refugees worldwide, and 20 million have crossed international borders.

Policy proposals to help the refugees typically take one of two forms. First, go after the problem. For Syria, this would mean stopping the civil war and creating a sufficiently peaceful situation that people do not flee. The second is to open borders. The White House announced plans to take in 10,000 refugees, while the EU proposed to accept 160,000.

Stopping the cause of the refugees is not a feasible solution. Iraq remains a mess after 12 years, hundreds of thousands of troops, and hundreds of billions of dollars. Stabilizing Syria would likely require even more treasure, lives, and time, even if we ignore Russia’s support for the Assad regime.

Similarly, resettling refugees is politically problematic. The US and the EU are planning to take in less than .3% of the total refugees, and fewer than 1% of the refugees who have crossed borders.

Further, most of Europe does not even want to accept 160,000. Germany, a key supporter of settling refugees, recently closed their border. More asylum seekers will enter illegally, but even with generous estimates, they will be less than 5% of total refugees.

Millions of people have resettled elsewhere in the Middle East, primarily Turkey and Lebanon, but many are living in camps that are rife with disease and suffer from poor sanitation, poor shelter, and little to eat.

In this context, there have been two prominent recent proposals to create new city states for refugees. The first proposal, dubbed Refugee Nation, the brainchild of Jason Buzi, a bay area real estate mogul was presented in July. The second came from a short tweet from Naguib Sawiris, an Egyptian billionaire who proposed buying a Mediterranean island and founding a new state for the refugees.

While both proposals have received a lot of press, there have been few details. As someone who has thought a great deal about creating institutionally autonomous cities, I thought I would offer some thoughts based on what I have learned.

When determining the success of a new country or city, the most important three things are laws, laws, and laws (with location being a distant fourth). Acquiring land, setting up tents, and giving away food and water will only create a giant refugee camp — not a city. To create a sustainable, livable city, where refugees want to move, there must be jobs, and for there to be jobs, there must be enterprise, and for there to be enterprise, the law must encourage it.

In practice what this means is that a refugee city must have economic freedom. Entrants must be free to own property, trade with each other, start businesses, and become productive citizens.

Currently, neither Buzi nor Sawaris appear to understand the importance of law in the success of a new city. Buzi mentions law only twice in his ebook, once with regard to immigration laws, a second time referencing a general law of equality. In an interview, Sawaris says, “We will use these people and provide them jobs to build a new city on the island.”

However, no matter how rich Sawaris is, ultimately he will not be able to house and feed all the refugees. What he can do is create a system which would ensure the refugees the ability to house and feed themselves.

The key here is institutional autonomy, the ability to have a set of laws different from the country from which the land is bought. Whether it is the creation of a new nation, as Buzi wants, or merely a new system in an existing country, such as Hong Kong, is less important. What matters is for the refugees to have an opportunity to create wealth and improve their well-being, rather than being dependent on aid.

Autonomy is the trickiest part of the negotiation, as Sawaris notes, and he is only considering passports and entry visas. Countries sometimes view establishing autonomous regions as giving up sovereignty. However, the number of special economic zones has skyrocketed, and a refugee city would simply be a special application of a special economic zone, and an especially worthy one at that.

Luckily, there are several organizations which are dedicated to creating autonomous zones, though they have not yet applied their logic to the refugee crisis.

The best known is Charter Cities, founded by Paul Romer, which looks to transplant legal systems from successful countries to rural areas in unsuccessful countries to jumpstart economic growth. They have experience negotiating with countries for institutional autonomy and would best be able to implement a new legal code.

The Startup Cities Institute tries to bring entrepreneurship to city governance itself. This would be particularly applicable to a small scale effort to grow a new city, rather than investing billions of dollars before the first residents arrive.

Lastly, the Seasteading Institute seeks to use competition to improve governance by opting out of existing nation states by building cities in the ocean. They have thought a great deal about the problems facing floating platforms and small islands, which would be useful to any project in the Mediterranean.

Ultimately, those serious about creating an institutionally autonomous city to house refugees need to consider the governance of that city. The long term success of the project will depend on it.

This article was originally published by the Foundation for Economic Education. It can be found here.

Mark Lutter is writing his dissertation on proprietary cities at George Mason University, and is a contributor at the Foundation for Economic Education.