April 26, 2012

To Transplant or Not: Charter City in Georgia

   The ISET's has a great post about Lazika, the planned city near Zugdidi, on the Black Sea coast of Georgia. The New York Times also covered Lazika. While the New York Times focused more on investment, planning, and environment issues associated with the new city, Professor Feunfzig raised a very important question of charter government (ht: Paul Romer's charter city). If President Saakashvili's promise of new city comes through, can a city government start from scratch too?
So far President Saakashvili has been very successful in promoting democracy and capitalism in the former Soviet nation, Georgia. Rule of law is getting stronger. Corruption is on decline. Organized crime is nearly eradicated. Georgian's democracy is reviving after the Shevardnadze non-democratic regime.The Georgian economy is also recovering from the Russian protectionist trade policy by redirecting trade flows towards other countries. Overall, Georgia remains a middle-income democratic country with a lot of potential for economic growth.
   President Saakashvili pursues several goals by building a new city. First, he wants to increase urbanization rate in Georgia. Advocates of the modernization theory will give him a high five because from their point of view urbanization and modernization promote democracy and its consolidation. Second, Lazika will follow a concept of the Chinese urbanized economic areas. By building a new city with a world-class infrastructure, the Georgian government expects to attract foreign investors. This strategic move seems to be a part of the bigger plan of capital flow diversification and decreasing a share of the Russian investors in the Georgian economy.
   All these ideas sound great. To deliver these promises, the Georgian government will have to solve a political economy problem of commitment and credibility. The new city will need a world-class government that will be credible and committed to protect capitalism and democracy. Will the world-class buildings and infrastructure transplant a new political culture? We shall see it eventually.

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