. . . Jane Jacobs

. . .

The Nature of Economies by Jane Jacobs

Jacobs likens economy to ecology, optimistically, at short small book-length, and in dialog form. It's an appealing little package whose appeals carry some problems.

But what meat's there is sweet, the tastiest morsel being her attempt at reformulating economic health.
... to be continued ...

. . .

The Nature of Economies by Jane Jacobs, cont.

Jacobs first sketches the free-trade economist's notion of the export multiplier: the vitality of an economy can be estimated by weighing its exports (including such "exports" as tourism) against its imports, since the money brought in by excess exports and the added work that goes into supporting a population of excess exporters will be more than enough to keep the locals busy fat and sassy bees.

In the real world this formula has played out variably well, often distinctly unwell. Which, as Jacobs points out, makes it less of a formula than a hypothesis in need of amendment, and she reasonably suggests that we also take into account what's happening within the economy.

A community enjoyed by non-economists will likely include a secure diversity of local businesses and a reasonable distribution of local resources. In Jacobs's formulation, this localized recombinatrics is "import stretching" (where "imports" include geographical advantages and human skills), and it's not strictly correlated with increased summed export. She compares a prosperous economy to the biomass and diversity of a lush ecosystem. If you treat a rain forest as a black box, you may not find a startling amount of import or export going on, but it still thrives, and what it's largely thriving on is itself. The energy (water, sunlight, minerals) that enters the system is swapped around in a multitude of ways over a multitude of lives before leaving the system.

Expansion depends on capturing and using transient energy. The more different means a system possesses for recapturing, using, and passing around energy before its discharge from the system, the larger are the cumulative consequences of the energy it receives.
This is a richly suggestive analogy which matches common perception as well as the Greenwich Village utopia of Jacobs's earlier books. Factory farms, company towns, and single-industry cities may show fine import-export ratios, but there are no theres there because the black boxes are too efficient. Although economists may insist that you can never be too rich or too thin, a cholera victim isn't a picture of health; yeah, there's the awesome beauty of Death Valley and the Antarctic wastes, but if that's all there is everywhere it gets old in a hurry.

So far, so very good. "Economists would do better to abandon export-multiplier ratios and turn their attention to import-stretching ratios."

But at those naughty economists is where Jacobs stops, and it's not nearly far enough. Let's agree that the number of businesses matters more than the gross size of a few businesses, and the distribution of profits matters more than the gross sum of a few profits. Having so agreed, need we worry about any foes other than myopic economists and the committees misled by them?

I think we do, because it's not just academics who emphasize import / export ratios. Not everyone wants to live in a thriving rain-forest ecology (in my own bedroom, I maintain stringent restrictions on biodiversity), and not everyone wants to live in a thriving economy. Many a dictator and plutocrat prefers their current arrangement, and Google finds a high proportion of "multiplier effect" citations among the rosy forecasts of third-world governments.

Jacobs is right that efficiency isn't always what's needed for the health of the citizenry at large, and right that businesses don't always become more efficient with expansion. However, expansion always does concentrate more capital into a fewer number of hands. And so, efficient or not, healthy or not, supported by Harvard Business School grads or not, there will always be pressure for larger and more centralized businesses because people with power want more power and they're in a good position to get it. Free trade economics is less a science or a technology than an assuager of conscience; earlier analysts posited a similar magical correspondence between the health of the king and the health of the kingdom.

And when the chickens come home to roost, one can always slaughter the chickens and move elsewhere. Imperialism from ancient Egypt and Greece through Fascist populists and American corporations has been a matter of conquering other territory with the power seized from one's own: think globally, leech locally. The unseen hand that coordinates the health of an economy with the profitability of its wealthiest business owners -- like the unseen hand that protects the balance of nature -- can easily be held in check long enough for personal capital to be made and permanent waste to be laid. (I once asked Juliet Clark what happened to the self-sufficiency of rain-forested New Zealand, and she shrugged: "When every economy is forced to be a global economy....")

Is there any counterbalance? Well, if humans are part of biology, and money and trade are therefore part of biology, then government and politics must also be part of biology -- and laws (including protectionist laws) might be our only pseudo-biological defense against pseudo-biological catastrophe. Government isn't going away any more than trade is. When libertarians say that government needs to stay out of business, they simply turn government over to those with no such compunctions: monopolists and profiteers.

Very few of us complacent argumentative coffee-swillers can compare to Jane Jacobs: at least two North American cities might have fallen apart without her work. But when she tells their hard-fought and forever-tenuous victories as a story of the little people taking on big government rather than as a story of a government's policy being changed by its own citizens, she doesn't improve our chances to keep her winnings.


Copyright to contributed work and quoted correspondence remains with the original authors.
Public domain work remains in the public domain.
All other material: Copyright 2015 Ray Davis.