New Republic Takes Weirdly Pants-Wetting Look at Honduran ZEDEs (Free Zones)


The New Republic (which, yes, still exists after the self-important fleeing of most of its staff after Franklin Foer ceased being its editor for the second time) takes an unsupportedly pants-wetting look at the frightening thought of free-market-y economic and legal reform in parts of the disaster zone of Honduras. I have reported and written extensively on this process, now going under the name ZEDE for "Zones for Economic Development and Employment," most recently in August and at most length in July 2013.

The basic idea is carving out some territory in Honduras that could operate under fresh legal and economic rules, in the hopes that would spur economic growth above Honduras' current dismal record.

TNR's absolutely nutty headline, ""I've Seen All Sorts of Horrific Things in My Time. But None as Detrimental to the Country as This," reflects the unfounded and indeed unexplained fears of veteran local journalist Sandra Maribel Sanchez quoted in the story, who seems to be driven to vapors at the thought that someone, somewhere could have a chance of a freer economy or better legal institutions in her homeland. (Vague talk of mafias run amok in a country already strongly riven by crime and violence, and fears of environmental degradation, are in the story, but otherwise even most of the Honduran voices in the story are at least guardedly pro-the ZEDE experiment, making the headline all the stranger.)

Reporter Danielle Marie Mackey does a decent job on the history of the ZEDE idea and its complicated political process through the clotted Honduras system, giving fair voice to some of the ZEDE idea's defenders (though she overstates the role of economist Paul Romer, which is explained at length in my earlier reporting linked above).

But her story is framed by its headline as a scared presentation of some un-scary facts: that there is a distant possiblility that some people and businesses in Honduras may get to function under legal and political rules that are different, and maybe more conducive to wealth-creation, than those ruining the country as a whole; and that some of the people involved in managing the process are avowedly pro-free-market.

(As a fact-checking aside, Grover Norquist, one of the apparently scarily free market members of the Committee for the Adoption of Best Practices that is helping run the ZEDE process, is not a vice president of Polaroid, as the story states, and ZEDE intellectual pioneer Mark Klugmann's name has two ns at the end.)

Mark Lutter, an econ student based in Honduras who works on the ZEDE process, in the PanAm Post critiques the attitude behind the TNR piece:

Rich countries are rich because they have good institutions. Poor countries are poor because they have bad institutions. This is not some conspiratorial conservative viewpoint….Rather, that institutions matter is a consensus among economists. It is supported by some of the most cited economists: Daron Acemoglu and Andrei Shleifer, as well as numerous Nobel Laureates….

The basic problem is that Honduras, along with many other third-world countries, does not have functioning courts or police. Nor do they have basic rights to engage in commerce with others. If a Honduran wants to start a business, he must pay 39 percent of his per capita income, and he must wait 82 days to get the requisite construction permits. Economic growth is not possible without the creative destruction that comes with new businesses.

Further, experiences around the world have shown that when a country or region adopts good institutions, economic growth follows. Hong Kong, Singapore, and Dubai are classic examples. China, following Special Economic Zones, and South Korea are two more….

Of course, this does not mean the ZEDEs will be successful. As in most third-world countries, as well as a number of first-world ones, corruption is always a problem. The ZEDEs might be used to enrich already wealthy politicians and their families. However, Honduras would not need ZEDEs if it already had good institutions. The trick is getting a first-world legal system out of a third-world one.

If that trick works, to quote a phrase, it could be "the most un-detrimental thing" to ever happen to Honduras. If it doesn't work, well, not much can be worse than a murder capital of the world whose economy is 1/5 dependent on remittances from people in the United States.

Reason TV did a great video series from Honduras on the ZEDE concept:

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  1. I thought the New Republic went out of business or is now a chain of coffee shops and internet cafes or something.

    1. That’s funny, I thought the same thing about Hondouras.

      1. No silly, they didn’t go out of business. They just relocated to Arlington Virginia and reopened under a new name.

        1. You might be right, is the new name MS13 or something? I have seen signs here in Colorado advertising them “opening soon”.

    2. TNR is supposed to be re-opening in Jan 2015 I think.

    3. Polaroid is more out-of-business than TNR but their name lingers on attached to press releases for vaporware and low-end Chinese electronics.

  2. I don’t understand the pant-shitting angle, as Lutter points out, these types of zones are all over Asia and the Middle East. Why do they all of a sudden become sinister when in Latin America?

    1. because if those nearby brown people figure out how this sort of things works, they won’t come here to create new Dem voters.

      1. That’s part of it.

    2. Not true. ZEDEs aren’t just another kind of Special Economic Zones they are autonomous entities that will even have their own legal systems, security forces, and even laws.

  3. In the comments section:

    “This isn’t right. It’s completely lets off the hook the government that is supposed to be looking out for the peoples’ interests and providing basic services. Liberalism requires one to suspend reality and run straight to denial. It’s a failed ideology.”

    Failed indeed.

  4. Nothing quite like the continual “argument from authority”…if nobel laureates believe, wellllll, you better to, dammit.

    1. He’s not asking you to take their word for it, as he provided links to scholarly works by those economists that back up the argument. I don’t see how your cheap sniping is any kind of refutation at all.

    2. the authority is a citation to augment the argument; it’s not the basis for it. Feel free to ignore the nations listed as examples of good and bad.

  5. reflects the unfounded and indeed unexplained fears of veteran local journalist Sandra Maribel Sanchez quoted in the story, who seems to be driven to vapors at the thought that someone, somewhere could have a chance of a freer economy or better legal institutions in her homeland

    Why it’s almost as if latinos culturally support socialism or something

    1. Yeah, those crazy socialist Hondurans and their their private cities. The Chileans are even worse.

    2. That’s not exactly true. The current Honduran government pursuing ZEDE isn’t close to being socialist.

      The problem has more to do with a lack of governing authority interspersed with severe authoritarian regimes — there is effectively no classical liberal tradition extant in the country. (That is not the same thing as supporting socialism.)

    3. One person = all latinos. It’s like your a bigoted moron or something.

      1. The writer of that New Republic article was white. Therefore all white people are Socialists. /Jeremy logic

  6. This truly is the difference between leftists and capitalists , I mean I don’t care if people want to live on a Kibbutz, but leftists just can’t stand it if someone else wants to live in a free market system.

    1. Among the many virtues of libertarianism is that it is the philosophy of minimal imposition.

    2. The collective cannot succeed if capitalist wreckers are allowed to operate outside of the system undermining the collective and bribing its skilled workers to leave. This is why socialism was a world revolutionary movement. The Marxists realized that until they controlled the world, they would never succeed.

      These people are just the retarded intellectual grandchildren of the old Marxists. They are not smart enough to understand why things outside of the collective must be destroyed but they still have the feral instinct to know that it needs to be done.

      1. Of course I understand this and the Berlin Wall and the DMZ in Korea are perfect examples.

    3. This truly is the difference between leftists and capitalists , I mean I don’t care if people want to live on a Kibbutz, but leftists just can’t stand it if someone else wants to live in a free market system.

      The reason for this is because free market systems tend to take resources and people from collectivist systems because all the talented people would rather go to a place where their talents are rewarded. This is why there’s currently an ongoing massive flight of people to the American South from the North. It’s why people fled East Berlin to West Berlin and way millions upon millions of people have immigrated to America from all sorts of collectivist wastelands.

      As a result, the only way for leftists to create a stable collectivist society is to completely wall off that society from the outside world or to disallow anyone from swaying from leftist orthodoxy.

  7. If you were born with a government dick up your ass, went to elementary, middle, and high school with a government dick up your ass, attended any number of colleges that greased and re-inserted the government dick up your ass it will surprise no rational person that you will ejaculate government-centric cum from your fingers and mouth.

    1. I really need to learn to alt-text if I want to comment regularly here because a NSFW link to a Manga cartoon is called for in response.

      1. hmmm… is alt-text really want you want? I suspect that what you really want to learn is the html code to make links.

  8. This has all of the upside of 19th-century colonialism with very little of the downside — that is to say, if successful, this project will inject successful European institutions into the tiny country of Honduras without having to carve a path through the current elites, assault the citizenry, deprive persons of rights, engage in destruction of culture, etc. So long as the ZEDEs are in existence, investors will receive compensation based on how well the city was managed — how well the GDP does, what immigration numbers look like, etc. They get to run it with European courts and institutions instead of Honduran institutions, and the property owners get a significant amount in exchange for allowing use of their land for the ZEDE — much more well off than they would have been without the ZEDE buying their properties (IIRC the proposed site has ~200 people whose land has been purchased for the project; the rest is abandoned land).

    Best of all, because Honduras is such a small country with such a shitty military, there is an excellent chance that this city will be independent enough that investors will not be afraid of investing long-term. Honduras currently has a population of 8 million — if the ZEDE were as successful as Hong Kong (7 million), Singapore (5 million), or Dubai (2 million), Honduras would look like its ZEDE — rather than the other way around.

    1. But-but-but it make capitalism look good! And we know it’s terrible!

      1. All those cities he mentioned make capitalism look good. Yet leftists still wanna visit Cuba before capitalism “destroys” it. And they idolize South American countries with no food or toilet paper, and European countries with GDP lower than Mississippi. Reality is no obstacle to their belief.

        1. Leftists in Honduras are no better. They are perhaps less on board with the SJW dipshits, but they are more authoritarian and often idolize rank dictatorships within Latin America like Cuba and Venezuela.

          In a sense, the ZEDEs are the ultimate response in the voice vs exit debate — if democracy is preferable to prosperity, the ZEDE will not be successful; in any other case the Hondurans will vote with their feet for which model they find has the more appealing results.

    2. I hope it does to Latin America what the SEZs did to China. Then, the world is ours.

    3. What’s good enough for Honduras is good enough for Detroit.

  9. So when are the ZEDEs gonna get going already? The longer it takes the more time for some populist asshat to wreck it. Mas rapido!

    1. I think it’s great that they are taking their time. The situation is analogous to that of the post-Soviet Eastern Euro republics; designing institutions is far easier said than done and generally speaking it is not the early bird which catches the worm. Honduras’ ZEDEs have no other real competitors in the Western Hemisphere; they have time to ensure that their people are on board, that their judiciary won’t fuck with the project, that their investors are quality, that they have the room to capture and retain European institutions, that the Honduran constitution gives the city wide latitude, that those with land in ZEDE limits are well-compensated, etc.

      I for one am glad that they are not rushing. It is unfortunate that they lost Romer, but hopefully this does not deter them from getting the institutions they need.

      1. The post-Soviet Eastern European republics prove the opposite. The ones that reformed fastest and went full capitalist are the best off and remain the freest. These are the Baltic states. Poland was slower and is a little seedier. Ukraine was one of the slowest and barely reformed at all and look where it is now.

        1. You’ve misread Poland’s reforms. Their first major reform was in ’89 (on the cusp of freeing themselves of Russia); it was unsuccessful which prompted another series of corrective reforms which I read as having been less successful than either the Baltic States or the Czechs, both of which were late bloomers (so to speak) starting as they did in the early 90s with a chance to see what Poland did wrong.

          Of course, if the ZEDEs are as successful as either Poland or the Baltic states, they will be an enormous triumph for liberty in Latin America.

          (Ukraine simply never really did embrace capitalism, joining Russia in a fire sale of its assets to former communists for the most part. Unfortunately, people power efforts to rectify this haven’t seemed to pry them from Russia’s grasp or any closer to Western capitalism in the short-term either.)

  10. “I’ve Seen All Sorts of Horrific Things in My Time. But None as Detrimental to the Country as This.”

    The New Republic itself published an article earlier this year mentioning that Honduras has a murder rate of 90 per 100,000, the highest murder rate on planet Earth.

    So they already have the worst homicide rate on the planet, but special economic zones are the most terrifying thing to ever happen to that country.

    That’s some brilliantly insane logic.

    1. The New Republic also has gravitational pull on the order of the sun for narrow-thinking brains. Think super-suckage for flimsy-paid retarded progressives who think they are awesome when they are really fucking skull vacuums.

  11. The logistics of the project are being worked out by KOICA (Korean Investment something something) and some Korean Company that builds ports. It looks like it’s really going to happen. Apparently they will begin soliciting investors in 2015 sometime.

  12. I’m already stocking up on seersucker suits and looking for some land to buy so I can open up my banana plantation.

    1. Is this thing on a blue, sweet sea, Baron? Build some fucking huts and sell some booze so us mildly rich people can visit your shark-infested scuba-buba land.

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