Saturday, December 20, 2003

Reading: The Economy of Cities

Jane Jacobs' "classic" economics text from 1969, The Economy of Cities, occasionally enters the classically dry mode of academic prose, but overall was an interesting and valuable read.

About halfway through the book, a key understanding hit me.

Most 'international development' projects ("structural adjustment", the work of the World Bank, et.al.) focus on conversion of local work/production into export production (e.g., turning farmer's fields from subsistence production to "cash crops").

Jacobs' central thesis identifies that economies grow ("develop") through the adding of work to existing work. Her thesis is much more than that - a whole book's worth - but this point is critical.

If that point holds, then it's no surprise that all these work conversion projects fail to help anyone's economy. The thinking of the international development planners reminds me of the strategy of the "underwear gnomes" on South Park:
"Step 1: Steal underwear.
[pause]
Step 3: Profit!"
They never acknowledge the need for a "step 2" - ignoring that there probably is no way for there to be a step 2.

The 'international development planners' are thinking that "well, our economies make big money from exports, so if we convert other economies to exports they will profit!" But the reason our economies have profitable exports is because of the way we got to those exports - and all of our other economic activity. Jacobs emphasizes throughout her work that the economic vitality of communities stems directly from the diversity of of economic activities in that community.

Basically, the practice of converting an economy to focus on one export industry (or a few) is a very effective way of stalling that economy and reducing independence.

Jacobs' thesis highlights the importance of the division of work - adding new work to existing work - as the key to successful economic growth. The elimination of existing work so that it can be replaced with "export" work is doomed to economic failure, if Jacobs is right (and I think that the bulk of her ideas are pretty close to the mark).

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