Looking for a really alternative investment with copious risk? Have we got a deal for you! From the Washington Post:
“Investors can begin construction in six months on three privately run cities in Honduras that will have their own police, laws, government and tax systems now that the government has signed a memorandum of agreement approving the project…
The project’s aim is to strengthen Honduras’ weak government and failing infrastructure, overwhelmed by corruption, drug-related crime and lingering political instability after a 2009 coup…
The “model cities” will have their own judiciary, laws, governments and police forces. They also will be empowered to sign international agreements on trade and investment and set their own immigration policy.”
That’s right – not some kind of public-private partnership, but privately owned and operated cities governed by the investors. What are the odds of such a project succeeding? There is no real way to know, and the historical record is varied.
In the 1800’s, Chicago rail car titan George Pullman was eager to avoid the “labor problem” that had plagued much of the industrial world at the time. He sought to create a utopia for his factory employees, and established a town named after himself. It started out as a bastion of cleanliness and efficiency, but there was no voice for the residents in the town’s governance, no one could own their home, and Pullman dictated a strict code of standards which prohibited drinking and allowed for just one church – standards enforced by town “spies.” That being said, it was still good business for Pullman, whose control of the town yielded 6% annual returns. Unfortunately, the depression hit, and Pullman slashed salaries to cut costs without also dropping the price of rent or groceries, leaving the workers with little to no income at all. The hostility fostered by these inequities led to a violent strike requiring military intervention, and the ultimate dissolution of the intended utopia.
More recent instances seem to be flourishing, though. The Disney-run town of Celebration, Florida emerged with the new millennium, which the company marketed as a return to “innocence.” Like Pullman, Celebration earned praise and accolades for its appearance of perfection. The biggest difference, though, has been what came after the praise. Unlike Pullman, Disney decided to sell off the assets of Celebration, divesting its control of the town to a multitude of interested and wealthy parties. It still has many of the characteristics of the utopian communities of yesteryear, with residents asked to sign a sort of declaration of values, as the late Walt Disney had envisioned, and, in some ways, that may have paid off; their first murder didn’t come until 2010. It is still a young community, though, so time will tell.
We can only guess at what will come next as investors take the reigns in Honduras. Will it be reminiscent of idyllic Celebration, or will the unrest of Pullman be mirrored by discontent over foreign investors running the show? It’s certainly an interesting social experiment, but with so many variables and risks in the mix, this is one alternative we wouldn’t touch with a ten foot pole.