Skip to main content

"A crisis is a terrible thing to waste."  -Paul Romer, University of Chicago-trained Economist with the Marron Institute and Charter Cities proponent.    

  Shortly after taking power,  Porfirio Lobo, then president of Honduras, and prompted by a young aide Octavio Rubén Sánchez Barrientos, sought out the assistance of Paul Romer, son of former Colorado Governor Roy Romer and a proponent of endogenous growth theory, which holds that economic growth is primarily the result internal institutions and processes within a given nation state.  According to Barrientos, the Charter City or "special development region" (SDR) was initially proposed during the presidency of Rafael Leonardo Callejas Romero, who had restructured Honduras' economy along neoliberal lines in the early 1990s.  According to Barrientos, a charter city would be free from the restrictions of the central government, like democracy and self-rule:

Journal: Who will control the charter city, and how will it insulate its economy from the political pitfalls that have plagued Honduras in the past?

Sanchez: It has a lot to do with the government structure of the SDR. It is designed so that the central government has no power to intervene in this region. You may have all kinds of political crises outside of the region, but the region can make long-term plans without getting bogged down by national problems.

The city will be led by a governor, who will be accountable to a body called the Transparency Commission that functions like a board of trustees. Nine independent experts will be appointed to the commission and will be charged with the hiring and firing of the city's governor. The commission can include anyone from anywhere in the world. It can include Hondurans expatriates, foreigners or well-respected Hondurans who reside in the country. The commission can also be reformed so that it can grow and incorporate other members beyond the initial nine.

 The key to the success of the city is granting it a very high degree of autonomy. Once we finish deciding which areas of the country will be affected by this project and we set up the governance structure, it can run on its own--forever.

Journal: Is there another body, like a legislature, to which the Transparency Commission will be accountable?

 Sanchez: At this point there is no other institution or governing body besides the Transparency Commission. Eventually there will be a legislature, which is required once the city population reaches a certain level.

 At that point, if a member of the Transparency Commission is not acting appropriately, the people of the city can decide to amend the basic law--the constitutional statute--and create a different structure. But initially there will be very few people in the city.

If you think this sounds familiar, you may recall a crisis regime imposed on New York City with a similar governance model.  And it should perhaps come as no surprise that Romer's employer, the Marron Institute, was also commissioned by Detroit's Emergency Manager to study alternative governance models for Detroit, post-bankruptcy.  

 The Marron Institute is a project funded and guided by Donald Marron,  the founder and chairman of Lightyear Capital LLC, a New York-based private equity firm focused on financial services investing.  Before founding Lightyear, Marron served as Chairman and Chief Executive Officer of Paine Webber Group Inc.  In 2000, Paine Webber merged with UBS, making UBS the world’s largest wealth manager. This also corresponded to the firm's entry into the market for municipal securities:

UBS AG entered the U.S. municipal market on Nov. 3, 2000 with its purchase of PaineWebber Inc., a full-service securities firm with a municipal bond department that ranked as the second-busiest senior manager of municipal bonds, according to Thomson Reuters. UBS AG was formed with the merger of the Union Bank of Switzerland and Swiss Bank Corp. in 1998.
 According to his profile at Lightyear, Mr. Marron served as chairman of UBS America through September of 2003. The UBS municipal securities desk became notorious for bid rigging schemes:
The Justice Department, the Securities and Exchange Commission, the Internal Revenue Service and 25 state attorneys general entered into the agreement with UBS, which admitted that, from 2001 through 2006, several of its former employees repeatedly manipulated the bidding process when local governmental entities or nonprofit organizations sought to invest the proceeds of municipal bond offerings.

The conduct of UBS and its employees “corrupted the competitive process and harmed municipalities, and ultimately taxpayers, nationwide,” said Assistant Attorney General Christine A. Varney, who oversees the federal antitrust division. “Today’s agreements with UBS ensure that restitution is paid to the victims of the anticompetitive conduct, that UBS pays penalties and disgorges its ill-gotten gains.”

UBS said in a statement that it was pleased to have resolved the matter. “The underlying transactions were entered into in a business that no longer exists at UBS, and involved employees who are not longer with the firm,” the statement said. The company also said that it had made provisions for the settlement in prior quarters and it therefore “will have no effect on the firm’s future financial results or on any current business of UBS.”

 Marron's turn to urban governance is not his first foray into politics.  In 2002, he served on a Council on Foreign Relations task force that stressed the need to create public-private partnerships to enhance domestic security.  Their recommendations included Freedom of Information Act (FOIA) exemptions, removal of federal procurement restrictions designed to foster competitive bidding and intelligence sharing.  His known campaign contributions  reveal a bipartisan streak with a preference for Republicans, but his associations in the Washington/New York technocrati are considerable:  Marron is associated with, among other institutions, the Center for the Study of the Presidency, Council on Foreign Relations, Fannie Mae, the Council on Foreign Relations and the Center for Strategic and International Studies.  Nor are these shallow relationships; Marron has served as a director, chairman and trustee for any number of them.

  It is not so much that Marron is part of a global cabal as he is part of a network.  And this network is very interested in urban governance, for reasons that Marron himself expressed quite recently:

What was your vision for the NYU Marron Institute on Cities and the Urban Environment?

John Sexton (NYU President) approached me with the idea because there wasn’t a school anywhere for the study of cities in the broader sense.

Today, over half of the world’s population – 3.6 billion people – live in cities. And by 2050, that figure is expected to nearly double to 6.3 billion. The impact of this growth demands that the basic elements of a city be addressed: environment, poverty, infrastructure, communication, real estate, and transportation. However, there is no single place where people can go to study how to manage cities. This is important because cities are growing bigger and becoming more complex.

New York has done well because Mike Bloomberg knows how to build and manage entities, but he also had the capability to recruit a management team unlike any other city. His leaving office brings up the question as to how we train and recruit the talented people that Bloomberg was able to bring to our city.

 Returning to Romer, the charter city initiative appeared dead by late 2012, when the Honduran Supreme Court voted to strike down the initiative as unconstitutional:
Last Wednesday, the Honduran Supreme Court ruled that last October's alterations to the Honduran constitution removing national territory from government control were unconstitutional. A branch of the court had come to that conclusion earlier this month, but because the decision (4-1) was not unanimous, the full court convened to vote. It struck down the legislative decree 13 to 2.

President Porfirio Lobo, one the project's biggest supporters, was upset by the decision, insinuating that the court was influenced by external economic and political interests. He encouraged Hondurans to go to the Supreme Court to look for the jobs that the body's ruling had denied them. "I'm sure they're not thinking about the harm they're doing to the Honduran people," he said.

But the Court sided with those who had opposed the cities as neo-colonial and undemocratic. Ramón Custodio, head of the Honduran Human Rights Commission, praised the decision: "Honduras will continue to exist as a country that does not permit the fragmentation of its territory like fabric being sold for scraps."

 In an interesting parallel development, Michigan voters scrapped Public Act 4 of 2011 just weeks after the Honduras court decision.  In both cases, the ruling class was undeterred: a lame duck legislature simply passed a virtually identical law a month after the referendum, and the Honduras coup regime removed the problem judges and the new justices of the Honduran Supreme Court approved a rehash of the Charter City project in the form of "ZEDEs," or Zones for Employment and Economic Development:
After the first venture failed in court, the Honduran National Congress approved on January 23, 2013, a new Law for the Creation of Special Development Regions. With this revised legislation, the Constitutional Chamber of the Supreme Court agreed to review the case from Ávila Sarmiento against the creation of what were now known as ZEDEs, and the chamber sought the input of the Honduran Ministry of the Public.

The lawyer’s argument then targeted Articles 294, 303, and 329 — that the ZEDEs would infringe upon these. Even more than the specific articles, though, she contended that the zones would contradict the unalienable principles of the constitution as the fundamental law of the Honduran territory.

More than 50 NGOs joined with Ávila Sarmiento to file the motion with the Constitutional Chamber against the ZEDEs. At that time, the coalition’s legal representative was Óscar Cruz, and he expressed his dissent on the grounds that the revised law was merely a new coat of paint: a “change of name for the project but not the purpose, to cede national territory to be the property of foreign investors, with their own laws, courts, and tax system.”

The decision of the Honduran court was never in doubt; Weeks after the Honduran courts rejected the Charter City initiative, the coup regime ejected the majority of justices who disapproved the law, and the sole dissenting justice who approved of the initiative was made public prosecutor:
The vote early Wednesday would replace four of the five justices on the constitutional chamber, a committee of the Supreme Court, whose justices have been serving since January 2009 and have been overruling Lobo's attempts at reform in the troubled Central American country.

Those include his plans to create private cities and to weed out corrupt and criminal police officers.

"The conduct of the judges endangered citizen security and is manifestly contrary to the interests of the state," said congressman Jeffrey Flores, a member of Lobo's National Party who introduced the motion.

The four justices released a statement calling their dismissal "illegitimate, illegal and unjust" and declared that they have a right to due process. It was unclear who would continue to sit on the court as congress had already named their replacements.

 This parallels developments in Michigan as well: In 2013, Rick Snyder signed a law that transferred the state Court of Claims to the Court of Appeals with judges to be selected by the Republican Supreme Court. The controversial bill was railroaded through the legislature over the objections of the Michigan State Bar, and reflected a clear attempt to shape the outcome of pending constitutional challenges to the neoliberalization of Michigan's economy.  

  The neoliberal framework for urban governance in the 21st century is many things, but it is not democratic.  As the struggles over water, unionization and urban governance in Michigan demonstrate, there are powerful factions within the political establishment that have managed to bypass democratic processes in order to push through laws that consolidate and concentrate power and wealth in the hands of the very network of technocrats, financiers and corporate institutions that crafted these laws.  The rise in wealth inequality is suffocating democracy at home and abroad.  Will we wake up before it is too late?

Originally posted to Detroit Denizen on Sat Aug 09, 2014 at 02:15 PM PDT.

Also republished by Motor City Kossacks and Community Spotlight.

Your Email has been sent.
You must add at least one tag to this diary before publishing it.

Add keywords that describe this diary. Separate multiple keywords with commas.
Tagging tips - Search For Tags - Browse For Tags


More Tagging tips:

A tag is a way to search for this diary. If someone is searching for "Barack Obama," is this a diary they'd be trying to find?

Use a person's full name, without any title. Senator Obama may become President Obama, and Michelle Obama might run for office.

If your diary covers an election or elected official, use election tags, which are generally the state abbreviation followed by the office. CA-01 is the first district House seat. CA-Sen covers both senate races. NY-GOV covers the New York governor's race.

Tags do not compound: that is, "education reform" is a completely different tag from "education". A tag like "reform" alone is probably not meaningful.

Consider if one or more of these tags fits your diary: Civil Rights, Community, Congress, Culture, Economy, Education, Elections, Energy, Environment, Health Care, International, Labor, Law, Media, Meta, National Security, Science, Transportation, or White House. If your diary is specific to a state, consider adding the state (California, Texas, etc). Keep in mind, though, that there are many wonderful and important diaries that don't fit in any of these tags. Don't worry if yours doesn't.

You can add a private note to this diary when hotlisting it:
Are you sure you want to remove this diary from your hotlist?
Are you sure you want to remove your recommendation? You can only recommend a diary once, so you will not be able to re-recommend it afterwards.
Rescue this diary, and add a note:
Are you sure you want to remove this diary from Rescue?
Choose where to republish this diary. The diary will be added to the queue for that group. Publish it from the queue to make it appear.

You must be a member of a group to use this feature.

Add a quick update to your diary without changing the diary itself:
Are you sure you want to remove this diary?
(The diary will be removed from the site and returned to your drafts for further editing.)
(The diary will be removed.)
Are you sure you want to save these changes to the published diary?

Comment Preferences

Subscribe or Donate to support Daily Kos.

Click here for the mobile view of the site