Pinochet 2.0: US economist talks Honduras' military dictator into establishing a private city owned and regulated by offshore corporations

Honduran president Porfirio Lobo came to power in a military coup and presides over the most murderous nation on earth. Now he has announced hastily assembled plans to desginate a region in his country to be a "charter city," owned and operated by offshore corporations, a plan inspired by a Chicago-trained economist called Paul Romer from NYU's business-school. The city will have all its laws -- labor laws, environmental laws, criminal codes, civil codes -- set by a private corporation that is unaccountable to anyone except its shareholders, to whom it will owe a duty of maximum profit. Honduran activists have attempted unsuccessfully to have the nation's supreme court hear their case, which rests on the legality of ceding governance over sovereign territory to foreign powers, and on indigenous land claims.

Critics say it will allow a foreign elite to set up a low-tax, sympathetically regulated enclave where they can skirt labour standards and environmental rules.

"This would violate the rights of every citizen because it means the cession of part of our territory to a city that would have its own police, its own juridical power, and its own tax system," said Sandra Marybel Sanchez, who joined a group of protesters who tried to lodge an appeal at the supreme court.

Ismael Moreno, a correspondent for the leftwing Nicaraguan magazine Envio, compared the charter cities to the banana enclaves, which were run on behalf of a foreign elite. He also spelled out the environmental risks, particularly if one of the development sites is the Sico valley, an area of virgin forest on the Mosquito Coast.

"This model city would end up eliminating the last agricultural frontier left to us," he wrote.

Chicago's economists have a grand tradition of helping military dictators establish unregulated zones where human rights take a backseat to profit, including their enormous contributions to Augusto Pinochet's murderous regime, which established the fundamental kinship between high profits and death squads.

Honduras to build new city with its own laws and tax system to attract investors [The Guardian]

'Catastrophe': Critics Slam Neoliberal Plan for Privatized Cities in Honduras [CommonDreams]

(via MeFi)


        1. Actually, that’s an important distinction. A regime established to enable the upper classes to kick around the lower classes will not allow the lower classes to be armed. The gun control will, of course, deprive the charter city of Libertarian support as soon as we wingnuts find out.

          The other side of the story is that if they do allow guns, that disproves the theory that this is a matter of capitalist oppression.

          BTW, what are the actual facts?

      1. I think that this is one of those situations where you let your money emigrate to enjoy the freedom while you sit at home where it doesn’t suck and whine about how much it costs to keep it that way…

    1. Here’s an idea: let’s take up a collection to give every member of the Tea Party free airfare to this Libertarian Wonderland.  I wonder if we could get Soros to bankroll the idea?  As Americans abroad, they would still be entitled to filthy socialist Medicare and Social Security, but it will still be far cheaper than letting them continue to play chicken with the national credit rating.

  1. Dystopic cyberpunk with state-cities ruled by corporations ceases to be fun when it becomes real.

    1. Man, we don’t need speculative fiction, this stuff has been going on for centuries. This is just the latest instance.

  2. ” … a Chicago-trained economist called Paul Romer  …”

    Is he “called” Paul Romer?  In the sense that he has some “real” name other than Paul Romer?

    I would have thought “Chicago-trained economist Paul Romer” says it all, without the condescending implication of doubt as to his name.

    PS, yes, this plan is an affront to humanity. But we should maintain the courtesies and dignities, until we are actually ready to hang a man for his crimes.

      1. No need to send him anywhere. In that city, I’m sure someone will see the market demand for a human-hunting park inside city limits.

    1. His real name is Mammon, (as in “Mammon est nomen daemonis”) but don’t say it three times in a row or legends from the ancient writings of the Freshwater Economist villagers say you’ll find yourself choked to death in the night by an “invisible hand.”

  3. Actually, in a perverse way i almost look forward to it. Much like attempts at pure communist states i sort of want to see how well it will (not) work out. Like communist regimes i’m not actually happy with the inevitable pain and suffering for those not in command who would live under the regime, but it could be an interesting experiment and object lesson. Of course if (when) it inevitably goes horribly wrong i’m sure there will be many who, like some supporters of communist regimes, will trot out the “No True Scotsman” argument as to why that proves nothing about the viability of corporate/”pure capitalist” oligarchies.

      1. The Soviet Empire under Stalin and the Mao Dynasty of the Han Chinese Empire come to mind – as does Cambodia under Pol Pot.  The only way these aren’t pure communist states is if you write “and everything worked out perfectly and everyone was happy” into the definition of Communism just like the Capitalists write into the definition of Capitalism when they claim that there’s never been a *real* capitalist state.

        1. Just like the capitalists write what into the definition of capitalism? A little hand-waving there? A little too uncomfortable with the communist theorists/a little too comfortable with the western rah-rah capitalism socialism equals living in toilets propaganda, are we?

          After all, you were the one raising the qualifier of purity.

    1. The kibbutzim were collectivist, and they were mostly successful. No famine, no blood bath. Only kids not getting used to it and the external reality changing. But the kibbutzim still stand, changed, yet still part of a dream. 

        1. So? Day to day they were as collectivist as anything we have seen. And they were successful. So, voluntary collectivism is possible. 

          There are many social models that could be useful for our civilization, but maybe they are not suitable for large groups, or they need more advanced decision making and communication tech that we have had so far. The coops in Emilia Romagna era interesting too, but not even close to the Kibbutzim in terms of commonality.

          1.  i think what he is getting at is, they COULD be collectivist, only because someone else was protecting them and allowing them this ability. when you have to deal with global economics,peace treaties, trade treaties, and the omnipresent threat of war or invasion, it becomes harder to be collectivist.

          2. I might be wrong, I am possibly wrong, I need to learn a lot more, but, AFAIK; it was the other way around. The kibbutzim defended the nascent Israel, and some authors claim that without the kibbutzim Israel would not have survived. Some kibbutzim are documented to have participated in defense efforts, and maybe even in offense. 

            Golda Meir lived for a while in a kibbutz and when she retired she moved to another kibbutz. She died there. So “global economics,peace treaties, trade treaties, and the omnipresent threat of war or invasion,” are not incompatible with kibbutzxim per se, even if they _might_ have to have some sort of federal organization. A co-op of co-ops. I am not sure, not a political scientist.The main point is that many things haven’t been tried yet.

  4. Cory, I expected better from you!  The Honduran government is rife with corruption, so escaping that legal system is a good thing! Watch the TED talk from the guy who originally proposed it:

  5. I don’t believe this is for the 1% of America, it’s really for the narcos. With Mexico going to hell, and the pressure is on in Guatemala, Honduras with it’s extremely weak social structures and rotten to the core civil servants is a narco’s playground. Narcos have family too, and secure areas where their next of kin can live in peace and quiet, with first world standards and an opportunity to spend all that money they’ve made is sure to be a hit.

    1. “From recent newspaper reports, I learned that the Honduran agency responsible for public-private partnerships had signed an agreement about a RED with a private company. When I asked for information, I was told that I could not see this agreement.

      This was a departure from the standards of transparency that the administration had led me to expect. It was also a departure from the role for the Transparency Commission outlined in the Constitutional Statute passed by the Honduran Congress.”

      Well, that seems to be where he draws the line, I guess

  6. Holy shit, Romer — I corresponded with by email when he was at Stanford, and received a reply (after some back and forth) that was both so brutally fractured and offensive that I became legitimately convinced he could have dementia. Chicago ain’t necessarily all bad. This individual, I can personally attest to being perversely anti-social.

  7. “These sad saps. They come to Rapture, thinking they’re gonna be captains of industry. But they all forget that somebody’s gotta scrub the toilets. What an angle they gave me- I hand these mugs a cot and a bowl of soup, and they give me their lives. Who needs an army when I got Fontaine’s Home for the Poor?”

    1.  If for nothing else, Bioshock deserves a place in history as the game that gave geeks a social conscience ;-)

  8. The “most murderous nation on earth”?  I’m not saying Honduras isn’t a contestant but the field is large with a lot of claimants.  The Syrians have been popping about 200 to 300 civilians a day for several months now and the Sudanese always have a genocide or two cook’in.  For my money I’d say that this year the Syrians will be a clear winner in the “Most Dead Bodies” category and that the Sudan will maintain its lock on the “Highest percentage of population killed” award.  The Central American guys come up with the odd innovation, such as Samoza’s technique of bombing his own cities which the Syrians have picked up and expanded, but they just don’t have the ‘stick-to-it’ness to be front runners.

    We live in a lacklustre age.  Where are the new Masters of Murder to match the Hall of Fame giants such as the old Soviet Empire or Red China?  Who has the gumption to slaughter even one million of their own citizens in peacetime these days?

      1. So do I.  What complicated, oddball definition of “murder” would exclude any of what I’m talking about?

    1. This isn’t intended to be a “Galt’s Gulch”. Rather, it’s a way of building a semi-autonomous semi-authoritarian state that benefits from its relative security compared to the state that surrounds it. This attracts business, so security and safety would be paramount.

      Think of Hong-Kong run like Singapore.

      Now, this specific city probably won’t resemble anything like that… BUT—if a city like this should succeed, what we should be afraid of isn’t libertarianism run amok, but rather the cries for more colonialist outposts in the developing world, and the cries for less democracy and less autonomy. As much as I hate internet libertarians, I can’t really pin this one on them. It’s more the Thomas-Friedman-worshipping, “If we could just be a little more like the Chinese” crowd that worries me…

    2.  Shut ’em up in the depths of a mosquito-infested mangrove swamp, that is.

      Such places are not kind to Yanquis – before long, they turn to strong drink and indiscriminate fratricide.

  9. Chicago economists didn’t “help establish unregulated zones where human rights take a backseat to profit” in Chile.  This is a commonly held misconception.

    Milton Friedman gave a series of public lectures to private foundations in Chile.  While he was there he met with Pinochet for 45 minutes and gave him the exact same advice he gave to dictators in communist countries, which he thought would end hyperinflation and liberalize the economy.  That’s the extent of the “help” he gave.

    Friedman described Pinochet’s dictatorship as “terrible” and “despicable.”

          1. Oh, well, if you’re going to ignore actual arguments and simply attack the source without pointing out why, there must be no point in discussing this.

          2. wysinwyg, I expect an honest reasonable response to the facts in the argument.

            All sources in political/policy debates have biases.  If we just say, “Oh, that source has a particular point of view, so I won’t even investigate the arguments made by him,” then reasonable discussions regarding politics and policy would never take place.

            Cato has many people with conflicting viewpoints working for it.  So does Think Progress, so does the Obama administration.

            Arguments are what matters.  Not the organizations which employ the people making the arguments.

          3. Arguments are what matters.  Not the organizations which employ the people making the arguments.

            I disagree.  Viewpoint is important.  People at Cato and Reason are especially motivated to defend Milton Friedman even if they have to strain logic and cherry pick evidence to do so.  You claim there are diverse perspectives at those outlets.  That’s not my experience, but even if it was true I’m pretty sure fawning sentimentality for Milton Friedman is not a huge point of debate in those venues.

            Now sure, Klein has opposite biases and maybe we shouldn’t take her seriously either.  But it would help your case substantially to find some independent reason not to believe Klein rather than taking the words of folks that are, again, ideologically motivated to defend Friedman whatever the cost.

          4. wysinwyg, you’re making a lot of assertions without evidence.  Lots of folks at Reason and Cato have described the ways in which and the issues on which they disagreed with Friedman.  They disagree with each other regularly.

            You accuse them of straining logic and cherry picking evidence, without showing them doing it. Where does Norberg do this in his review of Klein’s work?

            What is an “independent reason” to criticize someone’s work?  If Norberg points out that Klein is factually wrong and provides evidence to demonstrate this, why does it matter that it was Norberg who did it?

            You’re essentially telling me that a Democrat can’t criticize a Republican’s assertions because Democrats aren’t independent.  A Muslim can’t criticize a Christian.  An atheist can’t criticize a Catholic.  That’s ridiculous.  How would people ever have productive disagreements?

            Facts exist outside these ideological structures and should be judged on their own merits, even when the facts are being presented by people you disagree with.

            This is how people who disagree on things have honest conversations.  They don’t prejudge the person, but rather focus on the arguments that person is making.

            So, instead of finding reasons to not even look at the facts presented by Norberg, because he’s one person in a large organization that supports ideas you disagree with (and ideas you do agree with, by the way), why not read what he’s written and address his arguments?

          5.  Actually, I didn’t “accuse” anyone of anything.  The only thing I “asserted” is that Reason and Cato are heavily biased on the subject of economic policy and even more biased on the personal legacy of Milton Friedman. 

            Incidentally, I responded to the arguments directly and that comment doesn’t seem to have showed up on the page.  To put it briefly, Norberg didn’t point out that Klein was “factually wrong”.  Norberg’s entire argument was based on an economic freedom measurement developed by…surprise…libertarians!  The only “facts” cited that aren’t distortions of Klein’s arguments (see her response, linked in the second article) are these economic freedom statistics.  But using economic freedom statistics that are predicated on the goodness of libertarian policies is begging the question.

            You’re misinterpreting my position re: bias.  Let’s put it this way: if I want to know whether Obama is an American citizen should I ask A) A republican, B) a democrat, or C) the county clerk’s office in whose district Obama was hypothetically born?  Pretty obviously option (C) — I want independent verification of the facts free of the ideological spin either democrats or republicans would put on it.  Similarly, if you want to show Klein’s wrong, you should find some measure of economic outcomes that isn’t outright predicated on the superiority of libertarian policies to do so.  It would also help if Norberg hadn’t distorted Klein’s arguments so badly in the first place.

        1. Considering that Pinochet’s secretary of labor and mining, Jose Pinera, is a distinguished senior fellow at the Koch brothers funded and controlled Cato Institute (They also control and fund the Reason Foundation) they have zero credibility with their historical revisionism. American Libertarianism is Fascism marketed in a thin wrapper of civil liberties and anti-war rhetoric. Same old snake oil economic policies, Social Darwinism and superman mythology marketed with a new and improved label. No thanks.

          José Piñera 


          1. The Koch Bros. “control” the Cato Institute and the Reason Foundation like George Soros “controls” Media Matters.

            If you can’t rebut the points made in the article, you should just say so, instead of resorting to the exact same techniques conservatives use when they can’t rebut points made by organizations like Media Matters.

          2. Why don’t you try and address why the Cato Institute employs Jose Pinera, Pinochet’s secretary of mining and labor? It’s hard to make the case that the Libertarian movement can be absolved of the taint of Fascism when you defend the Pinochet regime and embrace his cronies.

          3. Ian, we’re not talking about institutions and movements.  We’re talking about assertions made and answered by individuals.  There are lots of people at Cato who disagree with lots of other people at Cato, just as there are lots of Democrats who disagree with lots of other Democrats.  If you cite someone who works for the Obama administration, it would be wrong for me to ignore their assertions and just say, “Oh, well, the Obama administration was wrong about some things and even did some bad things, so I can ignore anything said by someone who works for the Obama administration.”

            There is no single “libertarian movement,” just as there is no single “liberal movement.”Look at the arguments.  Address the facts.  Maybe I’m wrong.  It happens all the time.

          4. Ian, I don’t address it, because it’s irrelevant to the argument at hand.  The Cato Institute employs lots of people with different viewpoints and backgrounds.  It doesn’t represent “The Libertarian Movement,” as such a (single) thing doesn’t exist.

            There are ultra-conservatives at Cato and there are folks who are more liberal than Obama.  Naomi Wolfe made some factual assertions about history.  Johan Norberg refuted those assertions. Now, if you could demonstrate that Norberg has been dishonest in the past, then maybe it makes sense to not even look at his argument.If you can’t, then why not address the arguments presented?

        2. First of all, no citations, no bibliography — “demonstrably and dramatically” may be going a little far given that Norberg doesn’t actually seem to be making a factual case.

          The argument also seems to be based on two equivocations:
          1. That “Friedmanite economics” necessarily refers specifically to the ideas of Milton Friedman as opposed to his students, their students, and the rest of the intellectual legacy.  Considering how often neoliberals and libertarians like to smear anything to do with Marx by associating it with Stalinism this seems disingenuous to me.  There’s no contradiction involved in saying that neoconservative policies were heavily influenced by Friedman’s ideas and Friedman would not approve of neoconservative policies.
          2. The little bit of factual information Norberg provides are economic freedom ratings from the Frazer institute.  Here’s where the complaint of institutional bias comes in.  The economic freedom measure he’s using is defined by libertarians using measures that libertarians think are appropriate.  If someone (Klein, say) disagrees with the assumptions underlying the scale then using the scale to disprove Klein’s assertions is begging the question.  This is why a less biased source would really help your case.  Hence my comment earlier.

          Edit: I wrote this before I read Klein’s response to Norberg’s original article. I see I was exactly right about number (1). Klein was talking about Friedman’s intellectual legacy, not Friedman himself. Klein also points out that Norberg was himself factually wrong on Friedman’s views on the Iraq war, so again “demonstrably and dramatically” seems rather hyperbolic.

          1. I see your point and I will totally grant you that their disagreements about what market liberalization has done requires more objective reports and analysis, because they both have particular ideological viewpoints.

            But when I say, “demonstrably and dramatically,” I’m speaking specifically about Klein’s characterizations of Friedman’s acts and positions.

            Klein has stated that Friedman supported the Iraq war.  He most enthusiastically and vocally did not.  That’s just a fact, and it requires no analysis whatsoever.

            Klein has said, “I never said Friedman was a ‘neo-conservative.'”

            But, as Norberg points out, she wrote the following:

            “Only since the mid-nineties has the intellectual movement, led by the right-wing think-tanks with which [Milton] Friedman had long associations—Heritage Foundation, Cato Institute and the American Enterprise Institute—called itself ‘neoconservative,'” (p. 17)

            “Friedman … laid out what … would form the economic agenda of the neoconservative movement” (p. 56)

            “the neocon movement — Friedmanite to its core” (p. 322)

            “Friedman’s intellectual heirs in the United States, the neocons”(p. 444)

            That Klein claims to have “never said Friedman was a ‘neo-conservative,'” when it is objectively true that she did, is indicative of a narrative which is “demonstrably and dramatically” inaccurate.

            Klein wrote that Friedman acted as “adviser to the Chilean dictator.”

            In fact, Friedman never worked as an adviser to, and never accepted a penny from, the Chilean regime. He even turned down two honorary degrees from Chilean universities that received government funding, because he did not want to be seen as endorsing a dictatorship he considered “terrible” and “despicable.” He did spend six days in Chile in March 1975 to give public lectures, at the invitation of a private foundation. When he was there he met with Pinochet for about 45 minutes and wrote him a letter afterward, arguing for a plan to end hyperinflation and liberalize the economy. He gave the same kind of advice to communist dictatorships as well, including the Soviet Union, China, and Yugoslavia.

            Again, these are documented facts.  When two evolutionists argue about punctuated equilibrium, it’s complicated and you need lots of independent sources.  But if one of those evolutionists denies writing things that we have on paper or describes the actions of another scientist in a demonstrably false way, it’s fair to judge that evolutionist on those false claims.

            If Norberg has said things that are as blatantly false as Klein has said, then he, too, should be judged by that.

            And, for the record, I’m not a libertarian.  I believe strongly in universal access to healthcare and education.  I disagree with Milton Friedman on a large number of issues, but I have nothing but respect for the man and his efforts at honestly addressing the proper role of government.  Paul Krugman described Friedman as “a great man and a great economist.”  So, it especially irks me to have someone dishonestly attack his character.

          2. But when I say, “demonstrably and dramatically,” I’m speaking specifically about Klein’s characterizations of Friedman’s acts and positions.

            Once again, Klein herself points out that a) she’s criticizing the legacy, not the man and b) Norberg doesn’t seem to have his facts straight on Friedman either.

          3. Klein has stated that Friedman supported the Iraq war.  He most enthusiastically and vocally did not.  That’s just a fact, and it requires no analysis whatsoever.

            Dude, Klein gives a link to Friedman specifically supporting the Iraq war in her response to Norberg’s first article.  If you’re going to make such a big deal about people ignoring your biased sources maybe you should, I dunno, make a play at being a little more fair-minded yourself?

            link I’m giving Klein’s translation, assuming that you do not speak German.

    1. It was Friedman’s BFF Hayek that really had the vapors for Pinochet:

      As long-term institutions, I am totally against dictatorships. But a dictatorship may be a necessary system for a transitional period. At times it is necessary for a country to have, for a time, some form or other of dictatorial power. As you will understand, it is possible for a dictator to govern in a liberal way. And it is also possible for a democracy to govern with a total lack of liberalism. Personally, I prefer a liberal dictator to democratic government lacking in liberalism. My personal impression. . . is that in Chile . . . we will witness a transition from a dictatorial government to a liberal government . . . during this transition it may be necessary to maintain certain dictatorial powers, not as something permanent, but as a temporary arrangement.

      1. So being against dictators, except for some that may be necessary temporarily, counts as “having the vapors” for an example of one? That seems a stretch.

        Hayek was just being realistic, and he was proven right. The only viable choices at the time were Allende and Pinochet. If Allende had triumphed, Chile would have ended up with a Cuban-style Communist regime. For Cuba, that’s meant going from being the richest (per capita) country in Central and South America to being the poorest. In contrast, Pinochet did give up power, Chile is now a stable democracy and has done quite well economically.

        As for the main topic, I’ll reserve judgment, but support it as an experiment. I think the predictions of inevitable death and destruction are coming from people with the vapors.

        1. Cuba is poor because the US has kept it isolated for half a century. The Pinochet regime killed and tortured large numbers of people. If you find that acceptable, you’re commenting on the wrong website.

          1. Not to mention that the Neo-Nazi regimes in the region, that the US pumped billions into, were by comparison with Cuba, toilets.  I’ve heard it said that Cuba was the only place where someone didn’t try and sell you their sister on your way out of the airport.  The Cubans are justifiably proud of what they’ve accomplished in the face of the US’s crybaby, sore loser antics – none of which have ever had anything to do with Human rights or even ideological differences.  Castro was considered to be a hero in the US for his cleaning out of the out-of-control gangsters who were running the place before him.  He was given a ticker-tape parade down Wall Street.  Then he said he wanted to nationalise the sugar industry.  Oops!  Big Sugar told their employees in government to label him a communist and start military operations against him and that was that.

            Don’t think that Big Sugar has that kind of pull?  Remember when Monica Lewinsky said that she had given Clinton a blow-job when he was taking a call in the Oval Office?  Who was the call from?  Who will the President of the United States interrupt a blow job to take a call from?  Big Sugar.

          2. I completely disagree with U.S. policy regarding Cuba, but Cuba is poor mostly because of totalitarian Cuban policies.  The U.S. is, I believe, the only country that has an embargo against Cuba, and that’s hardly enough to keep Cuba poor.

          3. The U.S. is, I believe, the only country that has an embargo against Cuba, and that’s hardly enough to keep Cuba poor.

            Look at a map for an understanding of why the US’s relationship to Cuba is the one that matters. Also look at how the US has manipulated other countries’ relationships with Cuba (and other outcasts) by withholding aid, trade, etc.

          4. I don’t mean to imply that the U.S. hasn’t negatively affected the Cuban economy.  Hell, the embargo costs the U.S. something like a billion dollars a year.

            I’m only saying that any and all countries that have severely limited the ability of citizens to choose their own professions and have laid claim to all economic activities have had failed economies.

            As immoral and illogical as the U.S. embargo has been, the Cuban government didn’t need its help to have a failed economy. That’s just a natural consequence of such severe restrictions of trade (and freedom in general).

          5. The Cuban government has been relatively benign in comparison to the right-wing Latin American dictatorships backed by the US. Still, having only a nominally democratic system and a single party state, it’s rife with corruption. The government deserves credit for standing up in the face of US imperialism and neoliberalism and the embargo has major negative effects on its economy, but it also has a lot of problems of its own making.

          6. I don’t claim that Cuba doesn’t have plenty of problems of its own making, but they should be viewed in perspective of it being the closest “enemy” state to the most powerful country in the world.

          7. Cuba is a relatively benign Latin American dictatorship, in that it tortured and killed a smaller percentage of its population than others.

            That doesn’t make it praiseworthy.

          8. Boy is THAT an understatement. 
            The execution squads, the forced nationalization of large portions of the economy, the wholesale imprisonment of journalists/homosexuals/dissidents, the attempts at fomenting revolution in other countries…

            But the fact that they don’t like us seems to be a mitigating factor for large portions of people to whitewash those travesties. 

          9. But the fact that they don’t like us seems to be a mitigating factor for large portions of people to whitewash those travesties.

            Likewise, the fact that he wasn’t a socialist seems to be a “mitigating factor for large portions of people to whitewash” Pinochet’s travesties.  Which was the whole point of bringing up Cuba in the first place.  Congratulations, you’re all caught up.

        2. It’s done well since Pinochet is out of the picture and his policies reversed by democratically elected left leaning administrations. It’s worthwhile to note that their last president, Michelle Bachelet, was tortured and exiled by the Pinochet regime. As well, thanks to Pinochet, Chile was left with the burden of the greatest economic inequality in Latin America and still bears the scars of that regime with an inadequate private pension scheme.

          It’s economic freedom for a few, murder, torture and privation for the rest.


        3. Err, what?

          Chile is now a democracy in spite of Pinochet and meddling by the US, not because of it.

          It’s debatable just how communist it would have become had the US left well enough alone during Allende’s time; other states that had such dramatically communist policies like universal healthcare have actually succeeded.

        4. Pre-Castro Cuba was only rich due to the officially sanctioned criminal empires there.  If money from White Slavery and narcotics adds to a nation’s Happiness Quota then shouldn’t we add the Narco-Syndicates’ cash flows to Columbia’s GNP and declare it to be a Model State too?

          There was never any evidence that Allende was going to be anything other than another corrupt, mildly socialistic politician.  Far from being a way-station on the way to a democracy Pinochet’s horror show was nothing but an unnecessary detour to that goal.  He didn’t leave because he figured that he could lay down the heavy burden of anti-communist “tough love”.  He was kicked out because he exhausted the patience of his US puppet masters through pranks such as murdering US citizens on US soil.

        5. Allende was democratically elected.  That alone makes him different from Castro. And it’s ridiculous to pretend to know that Allende would never have given up power.

          Even if one disagrees with his economic intentions, there was no reasonable justification for killing the man and replacing him with a dictator.

          The fact that Pinochet did give up power in no way excuses the mass murders he oversaw or diminishes the injustice in the fact that he wasn’t in prison when he died.

        6. It’s amazing, that even with decades of perspective, some people can think Allende=Castro and Pinochet was a swell guy.  I guess Francisco Franco did alright by Spain, too. 

          Pinochet gave up power when he’d decided it was good for him, not good for the country. He simply chose to retire; he “gave up” nothing. And he did it in a way that his ass was covered. He was a revolting human being.

        7. Pinochet oversaw the worst recession in Chilean history 10 years after taking power. After 1982, he nationalised the foreign debt (but not the assets) of conglomerates and made it the collective responsibility of the Chilean people –  who had experienced a steady decrease in the standard of living for the bottom 80% of earners – to pay that debt. Under the austerity programme of the 1980s, unemployment stayed above 20% nationally and 40% in poorer areas of Santiago.

          Pinochet did not “voluntarily” step down. His hand was forced by strikes and protests, which became broadly supported by even the middle classes in around 1983/4, and by the open opposition of the Catholic Church. It became obvious that even his supporters in the army would not let him stay in power longer than the 1989 date set by his plebiscite of 1980 unless he gained legitimacy from the people of Chile. He convincingly lost the 1988 referendum.

          When he left power, wage levels were lower than they had been at the end of the 1970s and half the population lived below the poverty line. The richest 5% received 80% of income. Per capita growth declined by 2.5% over the last decade of his rule.

        8. You don’t even have to read between the lines to see that he clearly prefers a dictatorship of the elite to an actual democracy. Just despicable. It’s no surprise though, once you scrape away all the platitudes about “liberty”, defending existing hierarchies is what’s really at the core of right wing/libertarian belief.

        9.  “If Allende had triumphed, Chile would have ended up with a Cuban-style Communist regime.”

          Clearly, sir, you have smoked too many of Henry Kissinger’s funny cigars.

  10. [insert a variety of “compelling and reasonable explanations” why Internet Libertarians will continue to live under the “iron heel of statism” instead of putting their money where their mouths are and moving to MKG Groupistan here]

  11. Blaming Friedman for Pinochet is beyond stupid. And the sentence that begins “Chicago’s economists…” is deliberately misleading. I hate that you malign my great city by tagging it in this way. As if “Chicago” ideas are the real problem, not greed, corruption, and unchecked power.

    1. Forget Pinochet for a moment… the supply-side theories of economics that came directly from University of Chicago’s school of economics continues to impact Chile and Chileans to this day. Chile’s economy is almost wholly given over to the whims of the private sector. Social security is privatized, the majority of the labor force work as independent contractors with no ability to organize, the healthcare system is one giant hand-out to a private-sector healthcare oligopoly, etc. We could call it “freshwater economics” if it makes you feel any better, but the impact that particular school of economic thought has been deep and lasting in Chile. Greed and unchecked power are exactly what that school of thought praises as the right way to go.

      1.  I would like a citation that Friedman or Romer praised greed and unchecked power. I won’t claim to be an expert on Honduran politics. But Hong Kong DID benefit from being outside the massively corrupt Chinese government. So much so, that they enjoy slightly more freedom and enterprise even today. I am not arguing in favor of supply side economics, I think the choice of words matter, and tagging the city “Chicago” in this post does a disservice to the city.

        1. There’s a long history of ghoulish neoliberal ideologues with ties to Hyde Park. There’s a reason the “Chicago” tag exists.

          1. The only ideas that are ghoulish are ones that are enforced at gunpoint. I have yet to see any economist propose that.

      1. Is this a joke, or do you really think that the economic policies of the government of Chicago (and Illinois) are based on the recommendations of the Chicago school of economics? The last time I checked, Chicago (economic) folks were rather opposed to the high taxes, high regulations, cronyism, nepotism, and corruption favored by Chicago (government) folks.

          1. Hah – exactly. Chicago is being run into the ground by the *other* thuggish morons with their own horrible set of failed economic ideas. 

            School system, city infrastructure, total lack of civil corruption – doing great!

          2.  CPS has been and is run by unelected wealthy neoliberals appointed by our neoliberal mayor.  Our mayor (and the last one) who believe in charters and privatization.  We’ve had ages of neoliberal bosses and boards with CPS. You may want to actually read up on our school system before posting…..

            I’ll get you started:  Arne Duncan, Obama, Rahm Emmanuel, The Walton Family, Bill & Melinda Gates, Paul Vallas, Jean Claude Brizard, Education Reform Now, Tea Party….

        1. The last time I checked, Chicago (economic) folks were rather opposed to the high taxes, high regulations, cronyism, nepotism, and corruption favored by Chicago (government) folks.

          You act as if neoliberals have principles.  Rahm Emmanuel is running the city like a neoliberal dream.

  12. Although its laws weren’t set by private corporations, I’d say that Shenzhen in the 80s was for all intents and purposes a real and pre-existing version of what’s being proposed here for Honduras. 

    1. Romer’s original idea was to mimic exclaves like Hong Kong—more secure, liberal islands in a sea of greater turmoil. The sin here isn’t so much the hubris of “going Galt” but rather the unabashed return to colonialism.

  13. Military dictator? Cory…you seem not to have done your research. Lobo is a civilian. The coup perpetrators were all civilians. There was no military coup in Honduras in 2009, except in the eyes of some journalists with a grudge. What there was was a civil coup, perpetrated by congress and the supreme court of Honduras. 

    I know that this is only a side issue to your post, but to see you botch your headline like that makes me question your impartiality.

    1. What nonsense, Zalaya was kidnapped in the middle of the night by the military and flown out of the country. His sin? He raised the minimum wage. Now, Honduras is one of the most dangerous countries in the world for human rights, environmental, labor and indigenous activists as well as journalists. A lawyer for landless peasants was just assassinated there. How coincidental that he was opposing this very project when he was murdered.

      1. His sin? He raised the minimum wage.

        And tried to violate the Constitution by making it possible for him to stay in office longer.

        1. Zelaya violated the constitution (which was written under the auspices of a military dictatorship) by polling the public on if they wanted to amend it. Hmm, we can’t find out if the people want to amend it or not, can we? Please, term limits are an anti-democratic device to prevent people from reelecting politicians that represent their interests. The financial elite can always find a new empty suit to run.

          Honduran Truth Commission Rules Zelaya Removal Was a Coup

          1. Ian, my point is not whether the military flew him out of the country; they did. My point is that they were obeying the civilian Congress and the Supreme Court’s orders when they did so.

            General Vasquez did not take office, civilian Roberto Micheletti, President of Congress, and next in line in Constitutional succession did. But the coup was already illegal because they extradited a honduran citizen, which is unconstitutional.

            Lobo was elected president, despite an international campaign to stop the election. The words “military coup” were their favorite rallying cry.

            The truth commission’s report absolved the military and condemned Congress and the Supreme court. It was a coup, but the culprits were not the military.

            Zelaya has now re-entered the country. His wife is a presidential candidate. It’s time to move on.

          2. Until the assassinations of labor, human rights and environmental activists and journalists end and the perpetrators are brought to justice, it’s not time to move on.

          3. The assassinations are a different symptom of a much older problem that caused the coup. (Of course I deplore them.)

            Many of the murders are motivated by endemic corruption which is older than Zelaya. Some of them can be traced to the tentacles of the Mexican cartels (which is new). Others are motivated by ideology and a renaissance of the Cold War in Latin America (which was the motivation for the coup). Others are merely rebellion against rich landowners, such as Miguel Facusse, Honduras’s richest man.

            The cold war mentality of left vs. right was resuscitated by Hugo Chavez, and has awoken the horrors of the old death squads of the 80s. I suspect the very same war criminals are behind them. The fear of Zelaya’s friendship with Chavez leading to a re-founding (democratic coup) of Honduras as a socialist state was the primary motive for the coup, and the US’s reluctant hedging. The examples of how Venezuela, Bolivia and Ecuador re-wrote their constitutions to put socialism into their very heart put fear in the hearts of the right wingers in Honduras.

            In other words: the coup was a symptom of a decades-old problem; The left-right paradigm of division and hatred. This world view had faded after the fall of the Soviet Union and China’s move toward craven capitalism. Its return was slow and violent.

            But left and right are meaningless in our globalized society. We need justice, not socialism nor capitalism. Both economic models failed: see the economies of Russia, the US, Europe, China, Venezuela for evidence.

            The solution is on a perpendicular dimension to left and right, it is up versus down on the Cartesian axis of justice vs. corruption. Once corruption is gone, the perpetrators will have nowhere to hide. Currently, they are hidden by powerful protectors among the political elite.

            Democratic Socialism is what our continent needs, but before we achieve it, we need to erase our cold war paradigms and clean up our governments. Chile is a good example here.

            I agree that the assassins must be brought to justice. I don’t agree with the war between socialism and capitalism.

  14. Paul Romer was affiliated with the Honduras charter city project but he *quit* the project when the government violated its own process by bypassing the transparency commission it had set up to oversee the creation of the charter city and signing a private agreement. Here’s a link to his public statement:
    And a key quote: “Qn: Prof. Romer, are you still working with the government of Honduras on the creation of a RED – a Region Especial de Dessarrollo?  Or on what some have called a model city? 

    Ans: I and the other people who were named to the Transparency Commission wrote a public letter to President Lobo stating that we have no ongoing role in the project. Personally, I have also resigned from the CORED advisory committee.
    Qn: In the beginning, you were an active supporter of the RED project. What changed? 
    Ans: From recent newspaper reports, I learned that the Honduran agency responsible for public-private partnerships had signed an agreement about a RED with a private company. When I asked for information, I was told that I could not see this agreement.
    This was a departure from the standards of transparency that the administration had led me to expect. It was also a departure from the role for the Transparency Commission outlined in the Constitutional Statute passed by the Honduran Congress.”

    EDIT: Here’s a link to a published version of Romer’s statement, in a leading Honduran newspaper (La Prensa):

  15. Not wanting to dwell on the specifics of this situation (I’m not terribly familiar with the details of the Honduran situation, and the Guardian is terribly one sided) – in principle, charter cities are not such a bad idea.

    Let’s be frank, one of the big impediments to growth in developing countries is bad governance and corruption.  Yes, you can blame imperialism, western protectionism, etc etc – and to an extent that’s true.

    But you also have to accept that some countries have done markedly better than others – and IMHO a lot of that boils down to lack of corruption. Charter cities, from what I’ve read, are intended to set up a well governed, independent area, specifically NOT controlled by the corrupt surrounding state but entrusted to another state (or group of states).  Sounds like a good idea – at least good enough to try.

    1.  Wachovia and BoA launder billions of dollars of Los Zetas drug money and I’m supposed to believe that private corporations are magically exempt from the risk of corruption?

    2.  And who do you think they have to BRIBE to set up that marvellous private city on someone else’ sovereign territory? And where do you think the sudden honesty should come out off when the very foundations of that initiative are the military coup and subsequent corrupt and sadistic regime which enabled that very project?

  16. What would be the appropriate name for the style of government this city-state will have? Oligarchy? Aristocracy? Plutocracy? A dictator selling or ceding some of his power to warlords?

    I’d be curious to see a comparison between this place and the “special economic zones” in the Philippines and elsewhere. Sounds like this one in Honduras will be sovereign and separate from the state or dictator, or that’s their goal. SEZs already have “low-tax, sympathetically regulated enclave[s] where they can skirt labour standards and environmental rules.”

  17. We’re looking at this like it could be a pure libertarian experiment. But will this be significantly different from looking at Somalia as a libertarian experiment? What’s the difference — somewhat less melanin in the warlords and inhabitants of this “charter city” compared with those in Somalia?

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