Startup Cities as an historical pathway to success

The Historical Basis for Startup Cities

After the cultural collapse of cities in the Late Bronze Age at around 1150 BC, the Phoenicians rose to prominence. They developed a network that facilitated the free exchange of trade, culture, and ideas across the Mediterranean to build flourishing societies and a better human coexistence. They began to leave gifts across the Mediterranean to plant seeds of trust to rebuild cultural disintegration. If a community responded by reciprocating the gift, a trade network was created. An absence of reciprocation indicated that the community was uninterested in trading. By sending gifts across the Mediterranean, the Phoenicians aimed to implement a free trade network. To enable this trade, the Phoenicians established city-states like Sidon, Carthage, Berot, and Tyre, among others. These cities acted as a network of trading posts, what today would be viewed as free cities.

During the 17th century, institutional frameworks allowing city merchants to compete freely caused the European economy to thrive. Cities maintained legal autonomy, which empowered them to adapt their such frameworks to the needs of traders. Governments competed to attract local and foreign merchants, and thus trade, by continuously adapting their legal, financial, and commercial infrastructures. There were no predetermined winners of this competition because many cities had commercial potential. Leadership in commerce shifted between cities as a result of institutional changes. Amsterdam’s rise to commercial primacy in the 17th century was associated with its free market enterprises, which fostered an inclusive institutional arrangement protecting all merchants regardless of wealth, origin, or specialization.

Startup Cities in the 21st Century as a Means to Promote Prosperity in Developing Nations

Lately, two types of startup cities are gaining popularity. The first is a city working to emulate a startup, such as Miami, which under the leadership of Mayor Francis Suarez is attracting talent in the technology sphere by acknowledging the importance of and promoting new innovations such as cryptocurrencies and the blockchain technologies that underlie them. The second type is a city that is a startup in itself, such as Próspera in Honduras, a special economic zone designed to attract foreign investment and talent to promote prosperity in Honduras. This second type of city is particularly important, as it provides an avenue for growth in developing nations that are mired by poverty and lack economic freedom.

Ghanian scholar George Ayittey points out in his book “Africa Unchained” that free trade was indigenous to Africa’s economic heritage pre-colonialism. African communities inherently included separations of powers for checks and balances in their political systems, while their economic systems were mostly free market. However, after the heroic eradication of colonialism in most African countries in the mid-20th century, most revolutionaries failed to recognize how free markets were indigenous to the continent. They linked capitalism and free markets to colonial countries in the West. Consequently, African leaders embraced socialist and Marxist ideologies, foisting them upon the countries they now led. This resulted in state violence, rampant corruption, and environments hostile towards business. Most African countries rank poorly in the World Bank’s Ease of Doing Business Index, with Nigeria, Africa’s most populated nation, currently ranked 131st.

Much the way innovation and entrepreneurship in technology have transformed the world, the implementation of entrepreneurial social technology like startup cities would create a pathway to prosperity in developing nations like Nigeria. Special economic zones with reduced regulations and low taxes would attract foreign investment and business, creating employment opportunities for a nation’s citizens. Startup cities also allow for the experimentation of new laws and governance structures. Ideally, as a city attracts talent and business, making a country more competitive in the global marketplace, the country would implement the successful strategies of the startup city into the nation as a whole.

Fortunately, developing nations have already started to take the initiative of implementing startup cities, such as Próspera in Honduras. Countries have also been implementing smaller zone-based initiatives, like the Dubai International Financial Centre in the United Arab Emirates and now the Kigali International Financial Centre in Rwanda. Hopefully, as special jurisdictions and startup cities gain traction, more countries will start to implement them. This would enable a free trade system like the Phoenician’s, but on a global scale. Similar to Europe in the 17th century, more countries would continuously adapt their institutional frameworks, now to meet the demands of the 21st century, allowing them to compete with each other in a global marketplace. The resulting innovation could provide a pathway to prosperity for all.