Page 24 RAIN November/December 1984 Cities and the Wealth of Nations, by Jane Jacobs, 1984, 257 pp., $17.95 from: Random House 201 East 50th Street New York, NY 10022 At a conference I attended last May called "Creating a New Economy," I heard a lot of talk-from people whose opinions I respect on such mattersabout Jane Jacobs' new book, Cities and the Wealth of Nations, an excerpt of which. was published in the March issue of The Atlantic t:!f.onthly (see RAIN X:S, page 17). It was an i111portant book, I was fold. After the recommendations I had received, I didn't waste much time snatching it from the review shelf once it arrived at Rain. Now that I've fir'lished it I would agree, it is an important book, though not a particularly hopeful one. Jacobs' main thesis is that clear understanding of economic processes is obscured by focusing on national economies. In reality, Jacobs asserts, national economies ar~ mere~y collections of very different regional economies, which in turn are shaped primarily by cities. "Cities are unique in their abilities to shape and reshape the economies of other settlements, including those far removed from them geographically." Innovation and import-replacement, the two economic processes most crucial to development, are rooted in city economies. Cities with vigorous practices of import-replacement create prosperous regional economies; regional economies without impor.t-replacing cities become distorted and stagnant. Jacobs'·approach to what makes economies thrive or fail is unique; in effect, she offers us a new pair of glasses that allow us to see old problems in a new way. But early on I became suspect of these new glasses-they seemed to come equipped with their own set of blinkers as well. As I read Jacobs' discussion of various economic problems from her perspective, I thought of many other considerations that.she didn't address. For instance, in hei: discussion of th'e technological displacement of jobs, I kept thinking: But what about redistributing the ownership of the productivt; technologies? What about redistributing the amount of work left among the same number of people through reduction of the work week? She never raises these questions. Neither / does she concern herself with the questions of what is worth producing in the first place or how much should be produced; she seems to promote economic expansion as a Good Thing in itself. But \ , -------- ----------·---------- ACCESS: ECONOMICS do we really need a proliferation of computerized eyelash curlers and electric dog..ipolishers? - Another thing that disturbed me is the way Jacobs backs tip her assertions. Although she uses examples from all parts of the world and from 111any periods of history, her examples merely illustrate, rather than prove, her.assertionsreaders must assume that each illustration is typical, rather than a special case. Her argument would be more convincing if it were backed up by empirical statistics, or if she provided a more solid theoretical description of the dynamics of the processes she describes. Even though her argument did not leave me totally convinced, it did offer a fresh and provocative perspective, and as I continued through the book I became ~ess concerned with its shortcomings and more impressed with its insights. Jacobs identifies five major forces that arise from healthy import-replacing£ity economies: increased city markets, increased jobs, new uses of technology, transplants of city work into nonurban locations, and growth of city capital. In healthy city regions, all of these forces are present and in balance. However, regions far removed from import-replacing cities usually are affected by only one or two of these forces; the result is an imbalanced and.fragile economy. Jacobs describes in detail the deleterious effects of each of these forces, when acting by itself, on different kinds of regions. I found her discussion of "transplant regions" most interesting. In times of high unemployment, such as we are. currently experiencing, many city officials are trying to lure industries to relocate in their areas, thinking that if these industries helped to create prosperity in their original locations, they would do the same when transplanted to a new location. Not so, says Jacobs. When a new industry is emerging, it stimula·tes the local economy by creating a demand for tools, materials, parts, skills, and so forth; the additional economic activitv benefits the econ.omy of the original " location. But by the time an industry has matured and is in a position to relocate, it will have become relatively self-sufficient in meeting its needs and ~ill consequently stimulate little additional eeonomic activitv in its nevv location. These transplante'd industries bring little to their new locations except the jobs they provide directly; however, even these ate tenuous, s(nce an industry that has relocated once is liable to relocate again when cheaper labor or other incentives are offered by other regions. For this reason, innovative and home-grown industries are much more beneficial to a region's econorriy than are transplanted indus- · tries. Jacobs' discussion of the faulty feedback brought to cities by a national currency was also interesting. Supposedly, a nation's currency acts as a self-corrective mechanism for its economy. When a nation imports more than it exports, the value of its currency automatically declines. This makes its exports cheaper for cus.tomer nations, so export sales should increase; meanwhile, imports have become more expensive, which should increase domestic sales. Theoretically, this appears as an elegant feedback mechanism for national economies. However, since Jacobs believes that national economies are artificial units, she·argues that the feedback brought by national currencies is inappropriate for real ~conomic activity. National currrncies . .. are pote11t fct!dback but i111potellt at triggering appropriate responses. To piclllrt! how such a thillg ca11 be, i111agillt! a group of people who art! all prpp,crly equipped with diaphrag111s and lungs but who share 011/y ont! single brai!lstem breathing ce11tcr. In this goofy arra11gt!mcnt, the breathing ce11tcr would recc.ive · co11solidatt!d ft!edback on the carbondioxidc level of tht! who/I! group without discriminating amollg the individuals producillg it. Evaybody's diaphragm would be triggat!d to contract at tht! sa111c ti111e. But suppose so111c of thost! pcoplt! wat! slt!t!pi11g, while others were playing tc1111is . ... So111'c would have to halt what tl1cy wcrt! doing and subside into a Iowa co1111110n dcno111illator of activity . . .. In such an arrangc111c11t, fet!dback co11tr(1/ would bl! working perfectly 011 its ozL'n terms but the · results would be devastating because of a flmL' designed right into the system .. .. Nations arc flawed i11 this way because thei; arc not discrt!tc cco110111ic units, altluiugh i11tc/lt!clually we prt!lcnd tht!t/ arc and co111pilt! statistics abo11t'tht!11i.based(m that goofy premise. Natio11s includt!, a111ong other things i11 their cco110111ic grab bags, differing city ccono111ics that need different corrections at giPcn times, and yet all share a rnrre11cy that gicH'S all of tlrc111 tire sa111c inforn1atio11 at a gicNn time. The co11solidatcd infor111atio11 is bad specific infor111atim1 for thc111 evt!11 i11 respect to their.foreign trade, and it is 110 i11fqn11ation at all zL'itlr respect to their trade zuith one 1111othcr. Jacobs asserts that the onlv remedy for this problem is to break up i-lations i1ito
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