Review of Jane Jacobs' "Cities and the Wealth of Nations"

Combing through my files, I found a book review I wrote for the Libertarian Party News in the spring of 1985 and reprinted a few years back in my old Vermont Commons blog (secessionist site now renamed/rebranded to VermontIndependent.org/).  The LP News editor at the time was Karl Hess and our views were very sympatico.  (I later wrote the introduction to a Loompanic’s republication of his book “Community Technology.”)

It is amazing to me how similar my ideas at the time are to those today.  It also shows the virtue of patience: today a majority of the world’s people – and even a large plurality of Americans – are ready to listen to ideas about radical political decentralization and secession.

So below is a version slightly edited to reflect the passing of the years and to appeal to a wider audience than just libertarians. After reading it I hope you’ll agree Jane Jacobs (1916-2006)  is yet another heroine of the decentralist and secessionist movements.

Cities and the Wealth of Nations: Principles of Economic Life by Jane Jacobs, Random House, 1985.

Jane Jacobs activist and writer.

In the twenty-five years after community activist Jane Jacobs’ book The Death and Life of Great America Cities first took on big government and private developers, accusing them of ruining cities and their neighborhoods, it sold more than 250,000 copies.  In those years most city planners and architects swung over to her position, and she earned an international reputation as an urban expert. In her Cities and the Wealth of Nations, Jacobs took on economists from Adam Smith to Milton Friedman, as well as the institution of the nation state, arguing for truly free markets and the “expedient multiplication of sovereignties” – i.e., the secession of cities from nation states. (Definitions of what is a “city” may differ, but I would say that today generally it is any urban area of at least 50,000 people.)

Jacobs’ book was praised by many urbanists and panned by many economists. It divided the “liberal” press, with New York Magazine, The Nation and The New Republic denouncing Jacobs’ new “conservative” and even “dangerous” direction, while The Atlantic , Mother Jones and The New Yorker printed favorable reviews. The Los Angeles Times awarded the book its 1984 Book Prize for Current Events. Even the business press was divided: Barron’s mocked it while Forbes respectfully interviewed its author.

Jane Jacobs was not an economist , but like many free market economists she rejected mathematical economic models in favor of analytical reasoning, direct observation and empirical evidence. Similarly, she rejected the macroeconomic assumption that “national economies are useful and salient entitles for understanding how economic life works” and economists’ assertions that government intervention can ensure healthy economies. Rather, she regarded cities, hotbeds of entrepreneurial activity, and as the relevant economies which should be studied. She asserted that nations are just grab bags of cities and their regions brought together by ‘bloody military force”. The true purpose of national economic and military policies is to keep these unnatural national entities from falling apart. However, Jacobs held that these policies only insure the steady decline of both nation states and their captive cities worldwide, resulting in economic stagnation on a global scale.

Jacobs supplied many examples of how vital cities upgrade their economies as entrepreneurs keep shifting to produce goods formerly imported from more advanced cities, a process she calls “import replacing”. These cities also improve the economies of their surrounding regions, providing jobs for their inhabitants, markets for their raw materials and manufactures, and eventually physically expanding into those regions.

Jacobs believes that less economically advanced cities within nations and in the Third World only can develop by building on local talents and resources and by trading with other “backward” cities.  Trading with more advanced ones whose products are superior only discourages local production. Through this kind of trade smaller cities can “bootstrap” themselves into more advanced economies by stressing self-sufficiency over disadvantageous international divisions of labor.

Unfortunately, rather than using this approach to develop backward regions within nations or in the Third World, most nations have taken to what Jacobs calls “transactions of decline”.   These transactions are subsidies for poorer regions funded by taxing more successful cities and regions thereby draining their investment capital. The three prime transactions of decline she identifies are: 1) military production to both maintain empire and prop up backward regions; 2) welfare in the form of direct payments to individuals, as well as rural and urban development boondoggles; and 3) trade with backward nations emphasizing generous loans (which may or may not be paid back) and even direct grants of financial aid and aid-in-kind. Jacobs strongly opposed such “transactions.”

Jacobs also contended that cities need their own currency as a feedback mechanism whose value would fall with the relative decline in the value of the cities’ products. This would discourage expensive imports and encourage local entrepreneurs to begin producing formerly imported products locally. Such dynamics could start the city on a new cycle of expansion. Jacobs believed a single national currency stifles this feedback mechanism and is the primary reason cities cannot stop their decline once it begins. The main beneficiary of a centralized currency system tends to be the largest city, especially if it engages in substantial import-export trade and is also the national capital. Thus we see many nations with one monstrous city like Tokyo, Mexico, Paris, Cairo or Bombay, and many smaller stagnant or declining cities.

Hard money advocates might reject Jacobs’ criticism of a single national currency because they believe that a gold standard would act, in effect, as a single national or even worldwide currency. However, Jacobs believes that even with a metal standard, the value of the currencies of different sovereign cities would vary according to the values of the goods they. Not being a consistent free marketeer, it does not occur to Jacobs that there might be several competing currencies even within a single city.

Jacobs definitively recommends the breakup of large nation states through secession of its cities and regions. However, she lamented that “virtually all national governments, it seems fair to say, and most citizens would sooner decline and decay unified, true to the sacrifices by which their unity was won, than prosper and develop in division”.  That may be far less true today.
Jacobs hoped that the world would cast up new “pattern states” made up of pioneers willing to try the secessionist experiment. In fact she was optimistic that someone would do so “if it really is within human capacities to divide large sovereignties before they have reached a dead end of disarray.”  I am sure she would be very encouraged by the views of Vermonters sympathetic to secession.