Book review., Books, Capitalism, Cities and the Wealth of Nations, Economic Growth, History, Imperialism, Import-Replacement, Jane Jacobs, Larry Sawers, Marxism, Nationalism, Politics, Research and Development, Technology, The City, The City State
[This is old material, being first published on Tychy in 2014 as part of a series on city states. For some time I’ve been wanting to reformat it as an independent book review.]
Jane Jacobs’ 1985 study Cities and the Wealth of Nations is far more successful as an attack upon the economic basis of nationalism than it is as a defence of the standalone city. Admittedly, once Jacobs is done with the nation then there is little else left, but she does not, in the end, screw the city-state to the sticking-place. She is ultimately resigned to the nation and to living “with our economically deadly predicament as best we can.” It is not that we have nothing to lose but our chains, but that Jacobs does not know how to get them off.
Jacobs reduces the cacophony of economic life to one clear note: import-replacement. This, she argues, occurs only within cities, and in fact cities emerge from the process itself. For Jacobs, “the huge collections of little firms, the symbiosis, the ease of breakaways, the flexibility, the economies, efficiencies and adaptiveness – are precisely the realities that, among other things, have always made successful and significant import-replacing a process realizable only in cities and their nearby hinterlands.”
The nation can either encourage import-replacement, by investing its considerable resources into education and infrastructure, or else it can obstruct the process with taxation and bureaucracy. Jacobs does not dismiss the possibility that national investment might be helpful, but she otherwise elaborates radically upon the nation’s obstructive properties. In economic terms, all nationalism, she implies, is synonymous with imperialism. If empires always “become too poor to sustain the very costs of empire,” then nations similarly commit suicide through their very efforts to survive.
“Most nations,” Jacobs warns, “are composed of collections or grab bags of very different economies,” and very often the bag will contain the horrendous economic trap of the “supply region.” These represent “inherently over-specialised and wildly unbalanced economies, hence unresiliant and fragile, helpless when they lose their fragments of distant markets.” A nation’s distress at witnessing the inevitable failures of its supply regions will lead it to roll out tariffs and development initiatives, thereby “draining” the import-replacing cities that are responsible for its wealth in the first place. Rural exports will likewise retard a city’s development by financing cheap imports that the city cannot afford to replace. To Jacobs’ eye, Taiwan and South Korea had thrived in the 1970s because they had lacked robust rural economies.
For Jacobs, a further disadvantage of the nation is that it imposes a single currency upon profoundly dissimilar economies. Ideally, a city should be able to “correct” a decline in its exports by devaluing its currency to produce an “automatic tariff and an automatic export subsidy.” Jacobs illustrates the failure of national currencies by way of an ingenious metaphor: a community of people with normal lungs, but with only “one single brain-stem breathing center” between them. If one breather is sleeping and another playing tennis, their bizarre mutual disability leaves them both inhaling at the same rate. Jacobs observes that in this scenario the “feedback control would be working perfectly on its own terms but the results would be devastating because of a flaw designed right into the system.” The same could be said, with greater relevancy to today’s economics, of national interest rates.
Nations and empires alike emerge from a need to pool the risk of cities and create “teams” of trading cities. To develop in the first place, these entities must acquire and nurture import-replacing cities; but “to hold themselves together as systems” and subsidise the less profitable regions in their portfolios they must institute “city-killing transactions of decline.” Nonetheless, Jacobs elsewhere asserts that each nation inevitably comes to serve “one overwhelmingly important city and city region,” whilst the others grow correspondingly “passive and provincial.” Only capital cities thrive from “transactions of decline,” and on these grounds a city such as Edinburgh would paradoxically owe its pre-eminence to paying for the economic failures of its competitors.
Although Jacobs had led grassroots campaigns against New York slum clearances and she consistently situates industry at the heart of economics, it would be a mistake to identify her as a left-wing activist. Her fundamental quarrel with the nation is that it is redistributive. Indeed, there is an attractive ruthlessness running through Cities and the Wealth of Nations; a passion for streamlining capitalism that looks back to the classic liberalism of the work whose title it takes the liberty of correcting, Adam Smith’s The Wealth of Nations (1776). PJ Taylor, in a 2006 “appreciation” of Jacobs’ writing for the journal Environment and Planning A, is possibly too squeamish when claiming that, “Jacobs’s position is a simple one: creation of economic life has to come before broaching the question of distribution.” Distribution or redistribution in fact emerges from Jacob’s logic as the national equivalent of thanatos.
For Jacobs, militarism and social welfare are, at least in economic terms, equally destructive. She comes down hard on international aid because it is simply a waste of money, in transplanting development projects to economies in which they are doomed from the start. That darling of the New Deal, the Tennessee Valley Authority, gets short shrift from Jacobs on precisely these grounds.
At times this may seem like a somewhat cranky devotion to economically validating the Protestant work ethic. Communities, it appears, have to pay their own way, and development “cannot be given. It has to be done. It is a process, not a collection of capital goods.” Unfortunately, the assumptions that underpin Jacobs’ economics today look far quainter than the redistributive social democracy that she was attacking. Jacobs was writing during a period of deindustrialisation in the West and stunning productivity within highly compact Asian “Tiger” economies; but before the monetarism and privatisations of the 1980s had put paid to the likelihood of a renaissance in Western manufacturing.
Were Jacobs around today, she would most likely maintain that she was right and that history had got it wrong. From the lofty vantage point of 2014, one cringes at Jacobs’ pronouncement that “huge unified realms” such as China “don’t hold much economic promise, to put it mildly.” Yet the riposte to every criticism of Cities and the Wealth of Nations is “just you wait.” Every apparently successful nation should be pushed back into a broader historical context. Jacobs would probably take just as dim a view of China today and she would continue to wait patiently for its economy to succumb to what she regarded as inevitable strains. Taylor finds Jacobs to be completely vindicated in taking the long view of Japan’s economy:
How come Jacobs alone spotted the problem as early as 1984 while all other economic commentators were assuming Japan’s economic growth would simply continue? The answer, of course, is that Jacobs had a process that incorporated decline, which she could see beginning in Japan.
Paradoxically, however, Jacobs has shaken off short-sighted historical assumptions with a definition of the city that is essentially ahistorical. Marxist and neo-Marxist social scientists would, of course, remain wary of such an approach. Jacobs expects to discover the same process of import-replacement humming away just as jauntily in ancient Rome as in some futuristic space-city. She is alive to the means by which new technology can assist the process, but when we find her speculating, fifteen years prior to the introduction of the Euro, that “devices such as credit cards” might lead to a “multiplication of currencies,” this offers a startling testimony to the pace and scale of recent human development. For all the breadth of her historical imagination, even Jacobs had been left behind. In both its rapid development and defining characteristics, the modern city has been already transformed far beyond her ken.
Marxists, it should be noted, have better anticipated this transformation. In Marxism and the Metropolis (1978), Larry Sawers describes the “fracturing” of the “relatively homogenous, mercantile city” of the nineteenth and early twentieth centuries. This model declined, according to Sawers, because too many workers were living and organising too near to the means of production. The consequent “factory flight” and the rise of the tertiary sector reduced Western cities to patchworks of incorrigibly diverse and sparring neighbourhoods. Jacobs defines the city as a hodgepodge of interrelated organisations that becomes a whole through the process of import-replacement. Sawers views the city as the site of class division and struggle. Both theorists prove to be equally conservative in placing too much weight on the economic value of proximity.
Sawers’ analysis implies that a concentration of proletarian might within the city will put the blood back into the corpse. New centres of industry and housing will, it seems, by virtue of their sheer proximity, lead to a more democratic and less alienated society. In the twenty-first century, however, we can see that the decline of the modern city signifies a broader haemorrhage of human life from geographical space. The processes that city dwellers would have known previously only through and within the city are now increasingly transferred to the internet and liberated entirely from geography.
Twenty years ago, the overwhelming majority of city dwellers would have bought all of their goods and services within the city. That was, after all, why the city existed. It is today possible to buy everything on the internet, to be employed on the internet, to consume every news report and watch every film on the internet, to chat with every friend on the internet, and to even conduct the total of one’s sexual life on the internet. This may do to society what the microwave had done to peasant cuisine, but much of what the city had once represented has been nonetheless, on its own terms, perfected. Indeed, technology such as Google Glass means that one can now see anything which physically remains of the city through a sort of geographically-negligible, online mist.
As well as similarly defending the importance of city communities, Jacobs assumes that the city will burst into life once skills and ambition are concentrated within a single place. But such a renaissance could only ever result from active political will rather than of its own accord. Imagine, for example, that a corporation’s board meets in Tokyo, its research and development facilities are based in Edinburgh, its plants are in China, and its customers and shareholders are dispersed throughout the developed world. The import-replacing innovation within this organisation occurs in Edinburgh, and this city is profoundly eligible for such a role. Edinburgh provides impressive R&D facilities and highly skilled graduates; the city institutions are steeped in a centuries-old tradition of intellectual inquiry; and the whole city is duly brimming with a righteous sense of its own cultural superiority.
R&D nonetheless remains a resource which is controlled by a power external to the city. Jacobs rightly concedes that “extortionate prices, harmful though they most certainly are, are the least of the disadvantages of monopolies, for monopolies forestall alternative methods, products, services.” What is missing here is any means of containing the monopoly within the city, or of avoiding the ways in which corporate decisions and corporate-sponsored movements of ideas, people, and technology determine the course of research. Unless the state intervenes, the city remains nothing more than a passive setting for the import-replacing process.
Physical proximity can and does assist start-ups. Disillusioned employees in Edinburgh may abandon the original corporation and start up their own start-up. The city council may provide funding and noisy encouragement for such an enterprise. Even so, corporate capitalism remains ultimately intolerant of this devolution of control, and the corporation will be unwilling to relinquish any aspect of the import-replacing process. It will snap up patents and pay off inventors. It will be always cheaper to manufacture a product in a country which is far poorer than the one in which it was researched and developed. The innovators share exactly the same powerlessness as the labourers who manufacture the product. They get the smallest conceivable cut and the corporation’s ability to withdraw at any time often leaves them in a situation of comparable vulnerability to Jacobs’ reviled “supply region.”
None of this disqualifies Jacob’s characterisation of import-replacement as the ultimate economic dynamo. Nor does it prevent us from dreaming of a utopian city which owns and controls the process of import-replacement. But the current distress of Western economies is due more to a sustained corporate failure to invest in new technologies, than it is, as Jacobs insists, to the redistribution of corporate surpluses through “transactions of decline.”
If it is a maxim of the right that government is innately wasteful and inefficient, then R&D is the quintessential task of government. Some paths of inquiry will peter out; others will end up in unexpected places. There may be years of risks and delays, setbacks and surprises. The state only subverts R&D when it departs from a spirit of indiscriminate investment and begins to “pick winners,” the winners usually being large employers with political affiliations.
In 2012, RBS reported that UK corporates had £754 billion worth of cash and liquid assets sitting on their balance sheets. By contrast, the sum of pharmaceutical R&D spending in 2012, or, to put it another way, the bankrolling of a potentially revolutionary industry, was £4.2 billion. Jacobs underestimates corporate capitalism’s monopoly over R&D, and she does not foresee its innate reluctance to deploy the tremendous resources at its disposal. Spikes of innovation such as Silicon Valley superficially affirm the wisdom of Jacobs’ analysis, but the general picture is of declining manufacturing cities that have failed to reinvent themselves as centres of innovation because such a resurgence was never in the short-term interests of capital accumulation.
When faced with this intransigence, one may conclude that only a nation’s pockets and power can counter the malign corporate torpor. Scottish productivity will be boosted only, it seems, by aggressive government investment, rather than by making alterations to the state’s size or location. What surely matters is that one of the many governmental tiers (local, city, devolved, national, or European) assumes some responsibility. The nation-state may be supremely qualified for this because its size achieves the best equilibrium between democracy and power. A “super-state” such as the European Union can potentially raise stupendous revenues from an electorate which is so vast that it cannot exert any practicable democratic influence. A village commune, on the other hand, might be exquisitely democratic in all its actions, whilst lacking the resources to install air conditioning. On this scale, a city is usually somewhat less than adequate.