Definitely Not the Jungle

The Economy of Cities, chapter 6: How new export work was created in 1968.

This is maybe the least relevant chapter of the book to the modern economy, because the internet (mainly Amazon and Google) have made it almost totally obsolete. It’s divided into two parts: how and why export work gets started in cities de novo, and how and why intraport work  expands into export work.

New Export Work

The discussion about why a new business might start up in a city is extremely dated. There were perfectly good reasons at the time; cities contain many useful goods, like various parts you can use for prototyping and supplies of them in bulk when you want to start production, and many useful services like traveling salesmen who will find you markets, people who will print catalogs for you, and temps to help when your work takes off.

Other than the temps, those are all services available easily and cheaply on the internet; if I was starting up an artisanal widget distribution company in Bethlehem, New Hampshire, I could still get my catalog and website created by a contractor in Topeka whose manager is in Boston and whose software suite is hosted on a server in Mountain View and principally maintained by a programmer in Dubai. You can sell them on Amazon or Etsy! You can find customers through Google Adwords! Why bother being in a city for this?

(Well, I prefer to live in a city, as do many others, and if you think you’ll want more staff soon you might want to start it somewhere that appeals. But that’s not even everyone.)

She provides a list of technical parts, purchased from various suppliers in New York City by a physicist of her acquaintance over the course of a month-long contract project. Then, it looked like this:

From an electronics supply store: one voltage reference diode, five precision  resistors of three different sizes, ten alligator clips, one ordinary resistor, a published collection of electronic industrial circuits, a quantity of insulated copper wire, a dry cell, a small potentiometer,

From a store selling surplus electronics equipment: two precision resistors of still other sizes and a double-pole, double-throw switch,

From a laboratory supplier: a quantity of aluminum sulphate, a specimen jar for crystal growing, glass rod, glass capillary tubing, vacuum grease, epoxy glue,

From a surplus tool store: a screw-threading die,

From a hardware store: two drill bits, a quantity of braided steel wire, silicone sealing cement, screw eyes, two dry cells,

From another hardware store: brass bolts and turn-buckles,

From an industrial hardware store: a drill bit, a hacksaw blade, two fine-threaded large steel bolts and a stainless-steel machinist’s rule,

From a plastics supply house: plexiglass sheets of two different thicknesses,

From the factory of a small manufacturer of specialty wire: a two-foot length of extra-fine stainless-steel wire,

From a machine shop: a soft-iron cone, made to order,

And from outside the city, apparently at great expense in time and effort:

From a scientific supply house: two first-surface mirrors and a special lens,

From an aircraft supply house: rubber O rings of three different sizes

Today? It’s a matter of whether I can get these all on Amazon and how many I need to get from McMaster-Carr instead. In either case, I can have all of these, with the possible exception of the soft-iron cone, delivered to my door within 48 hours if I’m willing to pay for rush shipping. If you have a 3D model of what you want, the cone could be 3D printed and shipped to you in about a week.

So a lot of this is thoroughly outdated. Other parts are not, though. For example, Jacobs observes that the mere fact of local work growing, when the market is big enough, results in extremely thorough specialization. The bigger the market, the better every useful enterprise can subdivide and become uniquely suited to its specific niche.

We see today with the ‘gig economy’ that services are specializing more than previously imaginable; remote food ordering and delivery is spun out into Eat24 and the various competitors, point-to-point driving is spun out into Uber, previously universal chores become TaskRabbit, etc. This is viable only because there are large city populations that can supply work of these kinds pretty much constantly.

Expanding Work to Exports

There are two ways intraports can lead to exports presented; either intraport work can be used as a base to diversify into other work which is exported, or the same goods being sold locally could begin to be sold elsewhere. In the former case, it could be inspired as a logical extension (like the invention of the bra) or just happen to use some of the same expertise or organization; in the latter, it might be a deliberate action by the business or just be customers coming from further afield and buying from them. In either case local intraport work is needed.

Together, these specify three ways of creating export work in a large, diverse city. Jacobs is keen to point out that all depend on existing local work and therefore export growth must necessarily grow from a thriving local economy. This seems true, but doesn’t entirely make the case that it must grow from import replacement, which she seemed to imply earlier. It does suggest by itself that export growth will be sluggish when not preceded by import replacement bursts, which seems to describe reality well.

Sterile Growth

She introduces the caveat that while all import replacement leads to growth,  some is not lastingly useful. As an example, the period of San Francisco’s growth that created Oakland was almost all existing companies bringing branch plants to SF or Oakland, and this was sterile. It created no new local work besides that which had been imported, and because it was all things which were provided to the global economy from elsewhere, it did not provide the capacity for expanding exports in the future and enabled no future bursts of import replacement.

This explains some of the problems with Oakland’s economic history, but seems tailored to fit the evidence a bit. Also, it raises questions in my mind about what, exactly, makes up a ‘city region’. Clearly San Francisco has a city region, but if it does not stretch to Oakland, where does it stretch? Is the Peninsula ‘rural’? Is there a fuzzy dividing line between where SF’s region ends and San Jose’s begins? Near Boston, which is surrounded by a succession of independent cities, are there dozens of very small city regions, or does Boston’s region stretch to New Hampshire, as mentioned earlier in the book? How is this different from Oakland and San Francisco? I am confused. [EDIT: It was pointed out to me that commuting was rarer at this time, and for around half of Oakland’s history up to 1968 the Bay Bridge didn’t exist. (It was completed in 1936.) This goes about halfway to explaining why Oakland should be considered separate; perhaps the next import replacement incident in San Francisco unified them into a single city region, and none had yet happened. I am less confused but still confused. ]

 

Projecting To Today

For the most part, these descriptions aren’t terribly relevant. These days, other than legal boundaries at the state/country level, there’s rarely a reason to move anywhere for proximity to suppliers. Anyone who matters ships nationally and probably globally, and most new work in the modern economy is more dependent on availability of skilled workers than any specific resources.

You will still want to be physically near people you’ll consult with regularly, and near a pool of skilled workers you can hire later on. But desirable locations in the information economy are determined by where people want to be, and people are portable. If you can attract workers to your location, for many purposes it is better to be outside a city. Cities do have a larger existing population of people, and Paul Graham’s article about the ambitions valued by various cities could have been written as a 50-years-on follow-up about why cities are important.

So at a very high level, this isn’t obsolete. But in terms of the specifics? Pretty much all of it is. These will not be insights I’m sharing at a cocktail party any time soon.

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