Published on CapX and by the Foundation for Economic Education.
It was also translated into French by Contrepoints and into Czech by Nechtenasbyt.cz. It was also highlighted here as well as on Spanish free market newssite libremercado.com
Much
has been written about how to deal with the current refugee and migration
crisis, but an actual comprehensive solution hasn't been provided. According to
some estimates, one year ago, there were around 60 million refugees in
the world. In 2015, around one
million of these 60 million entered Europe by sea, which
already caused a massive political crisis. Even those who’re keen to allow more
migration should realise that even tripling the numbers allowed in last year
would only provide solace to a tiny part of those in need. There is a more
structural and comprehensive solution however. It combines the idea of “start-up cities”
with simple historical precedents: to create a new city, very similar to Hong
Kong, to welcome refugees.
The example of Hong Kong
What
was Hong Kong otherwise than a city governed by Western officials and populated
largely by refugees from Maoist China? If it was possible for the British to
provide a safe home for millions of people on the run in much more challenging
times, why wouldn’t it be possible for the whole of the developed world – not
just Western countries – to give any refugee the most precious thing the
developed world can offer them: the protection of the rule of law, which has
propelled the US, Canada, Europe, Japan, and parts of East and Southeast Asia
to the levels of wealth they enjoy today.
I propose
to create what I call “free havens”, which really are newly created cities, governed
by officials from countries with a high level of rule of law, and where any
refugee could go to. This idea is very similar to the concept of “startup
cities” or “private
cities”, whereby cities would be created by private
investors from scratch in a bid to create a much nicer place to live than in
existing cities and to provide a more beneficial investment climate by offering
a much stronger protection of property rights than elsewhere. A territory
should be rented from a state, similar to how the British leased Hong Kong from
China for 100 years, but this time a fair price should obviously be paid to the
landlord.
Where?
Where
would this be located? It could be anywhere really where nobody lives, given
that only around three percent of the world is urbanised. A similar proposal
was made by Egyptian businessman Naguib Sawiris, one of the richest men in
Africa, who has offered to buy an island off Italy or Greece in
order to rehouse hundreds of thousands of refugees. He has identified 23 uninhabited islands of which he’d like
to buy one to host refugees, but the Greek government wasn’t interested. Other
alternatives would be to create it inside Syria or Libya after liberating an
area from terrorist groups. Perhaps an offshore territory owned by Britain or
France could be suitable, for example one of the two areas in Cyprus which
currently host British military bases. If no State would agree, a more
ambitious variety of the plan could be to locate these cities on newly created
islands.
Politically unrealistic? Less than
one would think: the only proven method to protect external borders results in
the emergence of large off-shore centers for refugees:
Does
this proposal sound politically unrealistic? Less than one would think. A
similar campaign to create a “refugee nation” was started by American entrepreneur Jason Buzi, and many other
prominent people have endorsed the idea, including Bob
Pleysier, who headed the Belgian government’s
asylum department for a long time and knows the ins and outs of the problem. The
more people realise this challenge can’t be dealt with by tampering in the
margins, the more they are warming to the idea.
Reality is slowly pushing politicians towards the idea, but rather
indirectly.
Both in Australia in 2013 and in Europe in 2016, the so-called “Australian
solution” of border control was implemented when the
pressure on the external border really became too massive.
This
solution involves telling anyone who tries to enter illegally to await
their asylum a
pplication in refugee shelters near the border
or off-shore, so they no longer have a terrible incentive to risk their lives
but still retain the right to apply for asylum.
In Australia, this effectively brought
down the recorded number of people drowning in
Australian waters to near-zero from at
least 1000 in the 13 years before . To realise this,
Australia created off-shore shelters in Papua New Guinea.
In March 2016, Europe’s politicians decided to try a whole new approach
in Greece, in desperation to avoid another Summer of discontent, following a
strong increase in the popularity of right wing populists across Europe. Since
then, only five people would have died in trying to make it from Turkey to Greece, a sharp decrease from the 805 who died last year in Greek-Turkish waters. This coincided with a sharp 95%
drop in asylum seekers arriving in Greece from
Turkey.
In implementing something like the “Australian” approach, Greece prevented asylum seekers from continuing their journey from the Greek islands
close to Turkey to mainland Greece, while before they could make it to Greece’s
mainland and then on to the Balkan and Germany very easily. However, despite
the success of cutting the number of deaths-at-sea, just as in Australia’s case,
the conditions in Greece’s so-called “hot spots”, where people are detained,
are very troubling. The same must be said of Australia’s off-shore shelters. Of course the
EU and Greece could have only copied the good aspects of Australia’s approach,
while avoiding the bad ones, bud sadly, this didn’t happen.
Apart from this EU-induced policy change in Greece, two other major
factors contributed to a sharp drop in drownings between Turkey and Greece. In
the first place, there was the closure of the so-called “Balkan route”, with
countries from Austria all the way to Macedonia implementing border controls,
thereby preventing asylum seekers from making it to Germany and Sweden, where
many desire to go. Secondly, there was the “EU-Turkey
deal”, whereby Turkey promised to crack down on human smugglers and accept to “take back” both
irregular migrants and asylum seekers, with Greece declaring Turkey a “safe
country” so this would be legally possible. The implementation has been fraught
with problems, but both factors did disincentive people not to risk their lives.
How different this is from the situation in the water between Libya and
Italy, where an increasing number of people is trying to make the risky
journey, with a lot of drownings as a result. There, on the “Central Mediterranean Route”, almost 2.900
refugees died in 2015 and already 2.606 in the first half of 2016 alone.
So far, well-intended coordinated military actions to save the lives of those trying to make it and combat human smugglers,
have largely failed to stop human smuggling. More problematically, they have served to convince more people to risk their lives at sea. A well-intended
operation to save lives is seen by many as a ferry for migrants keen to cross
the Mediterranean. The House of Lords has acknowledged there is some validity in claims that these operations “act as a magnet
to migrants and ease the task of smugglers”. Also the Libyan coastguard
explicitly warned, to no avail, that the EU's "Operation
Sophia" boosts migrant smuggling,
explaining that "people, when they get rescued, call their friends to tell
them that there are EU vessels only 20 miles from Libyan waters to save
them."
To have a deal with chaos – ridden Libya is much harder still than it is
with Turkey, so eventually also Italy will be forced to consider what Greece
has done: to tell those applying for asylum that they need to await their
asylum claim somewhere.
If the EU would create more temporary refugee shelter where asylum
seekers are told to await their asylum claim, the pressure to provide decent
standards will increase. Some people will be granted asylum, but others won’t.
If the numbers remain as big as they are today, these kind of temporary refugee
shelters may be overwhelmed and people may be forced to stay there for longer
periods.
According to a top
UN official, Europe must prepare for the arrival
of millions more refugees from the Middle East and Africa as “young people all
have cellphones and they can see what’s happening in other parts of the world,
and that acts as a magnet.”
Given the pressure which can be expected in the new few decades, with
Africa’s population expected to more than double in 40 years, creating an
actual city with law enforcement will then seem much less like an
overambitious, costly plan than welcoming lots and lots of people in dodgy off-shore
shelters where they have no perspective. Hence, events on the ground may drive
policy makers to this solution.
How would such a “startup
city” for refugees look like?
Would companies invest in such a “startup city” for refugees? Certainly.
When facing the choice between Ethiopia, Pakistan, or a place run by countries
with a high level of rule of law, it shouldn’t be excluded for the likes of
Ikea, Nestle, Coca Cola or Apple to consider moving production capacity over
there.
When wondering how to run such a place most efficiently, Hong Kong
springs to mind. Sir John James
Cowperthwaite was the British
civil servant who acted as Financial Secretary of Hong Kong after World War II.
He's considered the architect of its economic success. Having watched Chinese
refugees arriving, he concluded they seemed to be getting along fine if left to
themselves, so he made it the crux of his policy for
the government not to do much to help refugees, beyond
giving them freedom, security, the rule of law and a hard currency. His
administration did provide public housing, but not much more. This policy of positive
non-interventionism has been extremely successful despite later
developments of more intervention. That
some Chinese capital had moved to Hong Kong did play a role in the Crown colony’s
success, but the fact that the Chinese border was closed meant the city experienced an economic miracle in the decades
following World War II against all odds. The Economist described it
in 1977 as follows: “A businessman setting up shop in Hong Kong finds low
taxes, no foolish government interferences…a government leaning over to
encourage him to make as much money as he can. He finds, blessed discovery, no
politics.”
Crucial for the success of the development of Hong Kong was of course
the fact that it could rely on British rule of law. This is also what
proponents of “startup cities” want: to enable people living in
corrupt juridisdictions to somehow enjoy the benefits of a higher quality of
legal protection.
One
example is a project to develop so-called “LEAP-zones”,
something which Honduras allowed, under the name “ZEDE”.
These are semi-autonomous zones on the territory of a certain state, with distinct legal, economic,
administrative, and political (LEAP) protection for job creators. There,
investors can count on the protection of US rule of law, which makes the
project different from more traditional schemes to boost investment through
reduced regulations or lower tax rates. The LEAP-zone project in Honduras may
however not be a roaring success yet, given reports that it seems to
be struggling with disputes over who owns
the land identified for it.
This reminds of prominent development economist Paul Romer’s project to
develop a foreign-run “charter city” in Madagascar and therefore lease out
farmland to South Korean concern Daewoo, opening up the hub both to migrants
from nearby countries as well as to locals. Regretfully, the project collapsed in 2009 after the country experienced a coup, apparently partly
triggered due to anger towards the project, which was denounced as treason.
The
lesson of these two experiments is obvious: such projects can only work if they
are being developed on land which isn’t claimed by anyone and if they enjoy the
same level of rock-solid independence from foreign intervention of Hong Kong.
Who would take the lead?
The
European Union may not be perfect, but it does has some experience with “rule
of law”-missions. Part of its EULEX-mission in Kosovo was to administer justice
in the most delicate sectors over there. There have been major problems with the implementation, but at least Kosovo has known
some kind of stability. Either way a crucial difference between free havens and
the mission in Kosovo or historical Western “colonies” would be that anyone
moving to such a place would do so voluntarily.
Of
course, it’s clear that if the whole thing would be a private venture, things
may be run much more efficiently, given that it’s not weak taxpayers but
assertive shareholders of companies keen to see return on their investment that
would be monitoring the project. Still, as Paul Romer’s experience in
Madagascar teaches us: this is such a massive project that recognition by State
actors in any way or another will be vital for its success.
What about
the cost?
The Belgian State’s police and justice system
costs around 3 billion euro per year, to serve 11 million people. Obviously a
lot more would be needed to provide basic infrastructure, but to find funding,
the EU’s 130 billion euro budget
could be used. Anyone dealing with it knows massive spending improvements
could be made. More than 270 billion euros are still being
transferred to the already plentiful pockets of agricultural landowners,
including the Queen of England, between 2014 and 2020. With Brexit, a major
reform of the EU Budget is needed and given how the EU’s agricultural policies
have been hurting developing countries for decades, it wouldn’t be such a bad
idea to start looking there.
In any case, the refugee crisis has so far proven
to impose a very high cost anyway. Germany's IFO institute has estimated the cost for Germany to be about 20 billion euro per
year, although many other economists have claimed that to the extent these
people can be integrated they’ll prove an economic boost.
Why would such a “Free haven” offer standards of justice and safety that are sufficiently high to make such a project succeed, so people would actually voluntarily want to go there, and companies would actually want to invest, thereby freeing up the resources needed to compensate the host State to actually allow such a Free haven to exist on its territory?
The answer is simple: For this project to be a success, it needs to become more safe than the most unsafe place in the world and its investment climate should beat the most horrible place on earth to do business, to attract those fellow human beings who actually have to survive there at the moment. Surely that shouldn’t be too much of a challenge. Would it really be so hard to do better than North Korea, Syria or Congo? Either way, the modest solutions have failed.