World Bank’s chief economist-in-waiting Paul Romer’s latest idea on urbanization should be taken seriously by the Narendra Modi government
Paul Romer is set to become the new chief economist of the World Bank this week. He made his mark nearly 25 years ago with an endogenous growth theory that gave primacy to the role of knowledge, not investment, in economic progress.
However, it is his latest idea that the Narendra Modi government needs to take seriously, since it recognizes the importance of urbanization in creating economic opportunities. Romer has called for the building of new charter cities with new rules. These can emerge as hubs of economic dynamism. An Indian parallel is the Presidency towns that were at the forefront of the first wave of Indian industrialization at the end of the 19th century.
Romer has controversially suggested that foreigners should run these cities in the developing world, prompting accusations of colonialism. But there is no reason why the government cannot drive the creation of new free cities that welcome enterprise, talent and capital.