Astral Codex Ten

The Question of Separatism

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The Question of Separatism

Article

The Question of Separatism is a recurring book in the Astral Codex Ten archive, appearing 2 times across 2 issues between May 19, 2023 and May 22, 2023. The archive places it in contexts such as “The Question of Separatism sits awkwardly in Jane Jacobs’s bibliography”; “a detour through the other book, The Question of Separatism”; “The Question of Separatism book cover : from Amazon”. It most often appears alongside Cities and the Wealth of Nations, Quebec, 1980.

Metadata

  • Category: Books
  • Mention count: 2
  • Issue count: 2
  • First seen: May 19, 2023
  • Last seen: May 22, 2023

Appears In

Source Context

Recovered passages from the original issue text. When the raw archive preserved outbound links inside the source passage, they are listed directly under the quote.

The Question Of Separatism
May 19, 2023 · Original source
Mere days after I finished reading it, thinking it was indeed one of the best essays I’d ever read, I checked the same public bookshelf again. And lo! There was a second Jane Jacobs book: The Question of Separatism: Quebec and the Struggle Over Sovereignty. This book is Jacobs’s least read. It was published in 1980, right after the first referendum where Quebecers voted to remain a part of Canada. It is based on lectures that Jacobs (who was an American but had moved to Canada in 1968) gave in Toronto right before the referendum. It’s not hard to guess why the book didn’t have a huge (read: any) impact. First, most people outside Quebec or Canada don’t have any reason to care. Second, the essay — which was written in English — argues in favor of the secession of Quebec, which virtually no one among the English-speaking population of Canada agreed with. The natural reaction from Canada’s intelligentsia was to ignore the book altogether. Meanwhile, few people in Quebec itself read it, since the referendum was over; it wasn’t even translated into French until decades later. As a result, The Question of Separatism sits awkwardly in Jane Jacobs’s bibliography, as if it were “a mistake in an otherwise brilliant career,” like I read somewhere. In a 2005 interview, one year before her death, Jacobs said that no journalist ever asked her about it. But the book was not a mistake. I don’t claim any special insight here: Jane Jacobs herself said so in that same interview. She said that she would have written the same book in 2005, “because that’s the way it is in the world, and it still holds.” Besides, The Question of Separatism is in fact not that much about the specifics of Quebec’s political situation, but rather about interesting generalities: what size means for countries and organizations, and why the fate of nations depends primarily on what happens in their cities. Taken together with Cities and the Wealth of Nations, which Jacobs wrote a few years later to expand on those ideas, we get a coherent and deeply interesting philosophy of economics: one that favors the local scale, cities and small countries, antifragility long before Nassim Taleb coined the term, and avoiding grandstanding theories that always fail to take into account the real complexity of the world. I. A Fake Mystery Cities and the Wealth of Nations opens on an economic mystery. “For a little while in the middle of this century,” writes Jacobs, “it seemed that the wild, intractable, dismal science of economics had yielded up something we all want: instructions for getting or keeping prosperity.” This was the 1940s to 1960s, and economists thought they had it all figured out. It was the golden age of high modernism and scientific technocracy. Everywhere from China to the Soviet Union to the United States and Britain and the nascent European Economic Community, leaders were coming up with elaborate plans, rooted in macroeconomic theories, that were supposed to guarantee future wealth and avoid economic crises. The theories had been developed by many thinkers over the previous two hundred years: Richard Cantillon, Adam Smith, John Stuart Mill, Karl Marx, John Maynard Keynes. Jacobs explains how they each had their own ideas of how the economy worked, disagreeing over things like whether supply or demand was the main driving mechanism, but they all agreed on a fundamental fact: inflation and unemployment have an inverse relationship to each other, like a seesaw. High inflation comes with low unemployment; high unemployment comes with low inflation, or even deflation when prices drop. The Great Depression, a time of deflation, had provided proof of the seesaw. Big government projects, as prescribed by Keynesians, were a way for states to reduce unemployment and bring the seesaw back in a balanced state. Economists developed fancy models, based on historical data, to predict the behavior of the economy. The Phillips curve in particular became popular. It was the golden age of technocracy; it was the triumph of high modernism. From now on wealth was assured, because we weren’t blind anymore: we had the curves. And yet — by the 1970s and 1980s, when Jane Jacobs was writing, the theories all stopped working. There was high inflation and high unemployment. People called it stagflation. Keynesian advisers in various governments were devastated: either their ideas were wrong, or they were applying them wrong. Economists such as Milton Friedman, from a rival school of economists called the monetarists or the Chicago school, came to the rescue — but their remedy, Jacobs believes, only made things worse. Whatever governments did to increase employment made inflation worse; whatever they did to attenuate inflation killed employment. The seesaw from the theories was working in application, even though it didn’t explain reality anymore. Stagflation was not supposed to exist, so stagflation could not be fought. At this point we’re near the end of Chapter 1, the densest part of the book. Jacobs has artfully guided us along economic history and laid out the mystery for us. What’s going on? we wonder. How are we supposed to deal with the two-headed monster of stagflation, if all economists are stumped? Then Jacobs, in a masterstroke, flips the whole thing over. I was impressed enough that I would have inserted a spoiler alert here, if it didn’t feel so silly putting a spoiler alert in an essay on economics. Stagflation is not a strange monster from legend. It is, Jacobs says, just the normal state of everything. Backward economies are in fact constantly in a state of stagflation. The prices in a poor country like Portugal or India (her two examples) feel low for an American or Canadian, but they’re high for most Portuguese or Indian people. At the same time, Portugal and India provide too few jobs to their residents. Inflation and unemployment are both perennially high, and none of that feels surprising whatsoever. Stagflation, in short, is just good ol’ poverty. All these fancy economists, from Cantillon in 1700s France to Keynes and Friedman in the 20th century Anglosphere, were thinking and writing about unusual places: rich countries that were undergoing fast economic development. They were making the classic mistake of treating poverty as a mystery and wealth as a given, when in fact poverty is the normal order of things and wealth, when it does occur, is what warrants an explanation. The result is that we don’t really know how to fix the economy of poor countries, nor do we know how to deal with decline in rich countries, whether we call it stagflation or something else. Jacobs derives from this a pretty damning view of macroeconomics. It is to her a science that has failed again and again, each time engulfing the equivalent of billions of dollars in wasted wealth. “We must,” she writes at the close of Chapter 1, “find more realistic and fruitful lines of observation and thought than we have tried to use so far. It is bootless to choose among existing schools of thought. We are on our own.” Fortunately, she has some ideas. II. Nations and the Wealth of Cities The original sin of macroeconomics, Jacobs believe, is to treat sovereign countries, or nations, as the main unit of economic analysis. This error, she claims, goes back to mercantilism, one of the first formal economic policies. Oversimplified, mercantilism states that wealth is synonymous with the amount of gold and silver in a nation’s treasury. This makes nations the main unit of economic analysis by definition. It’s a tautology — and one that was somehow embedded so deep in economic thinking that even the non-mercantilist Adam Smith would eventually choose, for his masterpiece of economic theory, the title An Inquiry into the Nature and Causes of the Wealth of Nations. Today, even though mercantilism has long been obsolete, we perpetuate the same tautology whenever we talk of the Gross Domestic Product or look at the very nice charts from Our World in Data, which for the most part allow only one level of resolution: sovereign countries. Of course, nations are an economically important concept because of that one property: they are sovereign, and therefore they write laws and implement policies that affect the economy. These policies can be productively compared. But that’s about it — for everything else, nations aren’t the right way to think about wealth. One reason is simply that they’re very different from one another: “it affronts common sense,” Jacobs writes, “to think of units as disparate as, say, Singapore and the United States, or Ecuador and the Soviet Union, or the Netherlands and Canada, as economic common denominators.” I would add that countries are arbitrary and changing: when the Soviet Union was replaced by 15 sovereign countries, the economic reality didn’t suddenly reshape itself to match the new borders. Lastly, nations contain, under the hood, many sub-economies that are also highly different from one another. None of that is secret or forbidden knowledge. Everyone has always been aware that New York City, or Milan, are economically very different from rural Mississippi or Sicily. But I find that it’s far easier to think in terms of “the United States” or “Italy,” especially when you’re not from there. Nations are an abstraction of real-life complexity, and are accordingly very tempting to use. Also, they’re often the entities that collect statistics, which is another difficult-to-resist temptation for anyone who likes quantitative data. Cities as Radiators of Economic Forces If nations aren’t the best unit to analyze the economy, what is? This is a Jane Jacobs book, so the answer is obviously going to be cities. Jacobs doesn’t actually give a clear argument why. Maybe that was in her previous book, The Economy of Cities. So far as I can see, her reasoning is, ironically, a bit tautological: “all developing economic life depends on city economies; it depends on them by definition because, wherever economic life is developing, the very process itself creates cities and has probably always done so.” But so far as I can see, this reasoning is correct. Cities concentrate people, and therefore economic life, and therefore economic power. The driving force for all this is a phenomenon that, from what I gather, was discovered by Jacobs when she wrote The Economy of Cities: import replacement. Consider, say, Boston back when it was a tiny settlement, not yet a city, in colonial times. At first, Boston didn’t produce much, especially not much that would be of interest to its main trading partner, London. It exported some natural resources: timber, fish. Whatever else the Bostonians needed, they needed to import it from other cities, again mostly London. (Remember to think of imports and exports in terms of cities, not nations.) For instance, at first, all metal tools in Boston came from European cities, and were paid for by the revenue from selling the timber and fish. Then, one day, some Bostonians decided to build an ironworks and make metal tools themselves. (Pictured: a reconstruction of the Saugus Iron Works, established 1646.) This wasn’t of any interest to London or other European cities. The Bostonians weren’t nearly as good or efficient at making metal tools as Londonians were. So Boston couldn’t export the metal tools back to Europe — but it could use them internally, and also export them to other American cities that were about as poor as Boston was, or poorer. Internally, this meant the spark of a manufacturing economy in Boston, as easily obtained metal parts made it easier for other Bostonians to replace other imports from European cities, and eventually develop a symbiotic network of industries. It also meant that the revenue from fish and timber could be used to import new things, including new innovations from European cities (which would later become opportunities for more import replacement). And because there were customers for Boston-made metal goods in New York and Philadelphia, and eventually Cincinnati and Chicago and Pittsburgh as these cities came into existence, it meant additional revenue for Boston that it could reinvest into developing its production further. For Jacobs, virtually all city development can be seen through the lens of import replacement (which, to be clear, has approximately nothing to do with policies of import substitution industrialization; import replacement is not a policy, but a naturally arising free market phenomenon). Her book contains many other examples than Boston, such as Venice, which started off in the early Middle Ages as a small town that sold salt to Constantinople, but then diversified its production to become one of the wealthiest cities of its time; or Taipei and Kaohsiung, two cities in Taiwan that kickstarted their development not long before the 1980s, by forcing expropriated landlords to invest into local import-replacing businesses. One is reminded of Scott’s review of How Asia Works. Import replacement, then, is what makes cities economically powerful. And this power is so great that it causes ripples in distant places. In fact it is the main reason that anything happens at all in non-city areas. Jacobs gives the example of Bardou, a small village in southern France. Bardou looks like this: To the extent that Bardou ever had an economic life, that life was almost entirely driven by distant cities. In ancient times, the area was populated because of iron mines nearby. The mines were exploited to serve the needs of people in the distant cities of Lugdunum (Lyon), Nemausus (Nîmes), or even Rome. As Jacobs notes, we could say that the mines served “the Roman Empire,” but that would be another example of using the abstraction of sovereign countries when we should instead be specific. It was Lugdunum, Nemausus and Rome that wanted the iron — not some random rural area of the empire, and certainly not the part of the empire in which Bardou was located. Eventually the mines and the region were abandoned. More than 1,000 years later, peasants moved into the area and built the modern village. For centuries they lived a wretchedly poor life of subsistence farming. No cities exerted any influence on it, and indeed nothing happened. Then, in the 19th century, the people of Bardou learned that they could improve their situation by moving to distant cities such as Paris, and most of them did. Again, the force wasn’t being exerted by “France”; Bardou was already part of France. The force was specifically being exerted by Paris and other cities with jobs for poor peasants. By the 1960s, only one old man was left. That’s when two foreign visitors, a German and an American, happened upon the village, decided to buy most of it, revitalized it, and turned it into a tourist spot (and even, for a brief time, into a set for a movie company). Today Bardou is a popular place for travelers — who are mostly city people, and spend money that was mostly earned in cities. The Bardou story contains examples of several of the forces that import-replacing cities radiate, according to Jacobs. These forces are central to her thinking. There are five of them: Markets. Cities house a lot of people who need a lot of goods and services, and are therefore strong markets to sell goods and services to. This was the force that acted on the Bardou area when it was a Roman mining region, and again today when it functions as a tourist spot for city vacationers.
Inline links: https://substackcdn.com/image/fetch/$s_!BjyZ!,f_auto,q_auto:good,fl_progressive:steep/https%3A%2F%2Fsubstack-post-media.s3.amazonaws.com%2Fpublic%2Fimages%2Fe0bfbafa-7e10-4d83-abe4-34251c126728_332x499.png, Phillips curve, https://substackcdn.com/image/fetch/$s_!9wEn!,f_auto,q_auto:good,fl_progressive:steep/https%3A%2F%2Fsubstack-post-media.s3.amazonaws.com%2Fpublic%2Fimages%2F850ce64a-4367-4a7a-a9ec-e8eb1af3ed08_399x292.png, Our World in Data, https://substackcdn.com/image/fetch/$s_!zS15!,f_auto,q_auto:good,fl_progressive:steep/https%3A%2F%2Fsubstack-post-media.s3.amazonaws.com%2Fpublic%2Fimages%2F7d533e64-f407-4b05-aea5-5b5a9dbdc7bc_1600x1130.png, import replacement, https://substackcdn.com/image/fetch/$s_!5j2T!,f_auto,q_auto:good,fl_progressive:steep/https%3A%2F%2Fsubstack-post-media.s3.amazonaws.com%2Fpublic%2Fimages%2F7f2675d9-ce56-4ac5-9b78-a16720269dea_1600x1159.png, import substitution industrialization, Scott’s review of, Bardou, https://substackcdn.com/image/fetch/$s_!RfMs!,f_auto,q_auto:good,fl_progressive:steep/https%3A%2F%2Fsubstack-post-media.s3.amazonaws.com%2Fpublic%2Fimages%2Fc119b085-f7b3-4e09-a586-9f4fc4c2ea21_1200x1600.png
This book is Jacobs’s least read. It was published in 1980, right after the first referendum where Quebecers voted to remain a part of Canada. It is based on lectures that Jacobs (who was an American but had moved to Canada in 1968) gave in Toronto right before the referendum. It’s not hard to guess why the book didn’t have a huge (read: any) impact. First, most people outside Quebec or Canada don’t have any reason to care. Second, the essay — which was written in English — argues in favor of the secession of Quebec, which virtually no one among the English-speaking population of Canada agreed with. The natural reaction from Canada’s intelligentsia was to ignore the book altogether. Meanwhile, few people in Quebec itself read it, since the referendum was over; it wasn’t even translated into French until decades later. As a result, The Question of Separatism sits awkwardly in Jane Jacobs’s bibliography, as if it were “a mistake in an otherwise brilliant career,” like I read somewhere. In a 2005 interview, one year before her death, Jacobs said that no journalist ever asked her about it. But the book was not a mistake. I don’t claim any special insight here: Jane Jacobs herself said so in that same interview. She said that she would have written the same book in 2005, “because that’s the way it is in the world, and it still holds.” Besides, The Question of Separatism is in fact not that much about the specifics of Quebec’s political situation, but rather about interesting generalities: what size means for countries and organizations, and why the fate of nations depends primarily on what happens in their cities. Taken together with Cities and the Wealth of Nations, which Jacobs wrote a few years later to expand on those ideas, we get a coherent and deeply interesting philosophy of economics: one that favors the local scale, cities and small countries, antifragility long before Nassim Taleb coined the term, and avoiding grandstanding theories that always fail to take into account the real complexity of the world. I. A Fake Mystery Cities and the Wealth of Nations opens on an economic mystery. “For a little while in the middle of this century,” writes Jacobs, “it seemed that the wild, intractable, dismal science of economics had yielded up something we all want: instructions for getting or keeping prosperity.” This was the 1940s to 1960s, and economists thought they had it all figured out. It was the golden age of high modernism and scientific technocracy. Everywhere from China to the Soviet Union to the United States and Britain and the nascent European Economic Community, leaders were coming up with elaborate plans, rooted in macroeconomic theories, that were supposed to guarantee future wealth and avoid economic crises. The theories had been developed by many thinkers over the previous two hundred years: Richard Cantillon, Adam Smith, John Stuart Mill, Karl Marx, John Maynard Keynes. Jacobs explains how they each had their own ideas of how the economy worked, disagreeing over things like whether supply or demand was the main driving mechanism, but they all agreed on a fundamental fact: inflation and unemployment have an inverse relationship to each other, like a seesaw. High inflation comes with low unemployment; high unemployment comes with low inflation, or even deflation when prices drop. The Great Depression, a time of deflation, had provided proof of the seesaw. Big government projects, as prescribed by Keynesians, were a way for states to reduce unemployment and bring the seesaw back in a balanced state. Economists developed fancy models, based on historical data, to predict the behavior of the economy. The Phillips curve in particular became popular. It was the golden age of technocracy; it was the triumph of high modernism. From now on wealth was assured, because we weren’t blind anymore: we had the curves. And yet — by the 1970s and 1980s, when Jane Jacobs was writing, the theories all stopped working. There was high inflation and high unemployment. People called it stagflation. Keynesian advisers in various governments were devastated: either their ideas were wrong, or they were applying them wrong. Economists such as Milton Friedman, from a rival school of economists called the monetarists or the Chicago school, came to the rescue — but their remedy, Jacobs believes, only made things worse. Whatever governments did to increase employment made inflation worse; whatever they did to attenuate inflation killed employment. The seesaw from the theories was working in application, even though it didn’t explain reality anymore. Stagflation was not supposed to exist, so stagflation could not be fought. At this point we’re near the end of Chapter 1, the densest part of the book. Jacobs has artfully guided us along economic history and laid out the mystery for us. What’s going on? we wonder. How are we supposed to deal with the two-headed monster of stagflation, if all economists are stumped? Then Jacobs, in a masterstroke, flips the whole thing over. I was impressed enough that I would have inserted a spoiler alert here, if it didn’t feel so silly putting a spoiler alert in an essay on economics. Stagflation is not a strange monster from legend. It is, Jacobs says, just the normal state of everything. Backward economies are in fact constantly in a state of stagflation. The prices in a poor country like Portugal or India (her two examples) feel low for an American or Canadian, but they’re high for most Portuguese or Indian people. At the same time, Portugal and India provide too few jobs to their residents. Inflation and unemployment are both perennially high, and none of that feels surprising whatsoever. Stagflation, in short, is just good ol’ poverty. All these fancy economists, from Cantillon in 1700s France to Keynes and Friedman in the 20th century Anglosphere, were thinking and writing about unusual places: rich countries that were undergoing fast economic development. They were making the classic mistake of treating poverty as a mystery and wealth as a given, when in fact poverty is the normal order of things and wealth, when it does occur, is what warrants an explanation. The result is that we don’t really know how to fix the economy of poor countries, nor do we know how to deal with decline in rich countries, whether we call it stagflation or something else. Jacobs derives from this a pretty damning view of macroeconomics. It is to her a science that has failed again and again, each time engulfing the equivalent of billions of dollars in wasted wealth. “We must,” she writes at the close of Chapter 1, “find more realistic and fruitful lines of observation and thought than we have tried to use so far. It is bootless to choose among existing schools of thought. We are on our own.” Fortunately, she has some ideas. II. Nations and the Wealth of Cities The original sin of macroeconomics, Jacobs believe, is to treat sovereign countries, or nations, as the main unit of economic analysis. This error, she claims, goes back to mercantilism, one of the first formal economic policies. Oversimplified, mercantilism states that wealth is synonymous with the amount of gold and silver in a nation’s treasury. This makes nations the main unit of economic analysis by definition. It’s a tautology — and one that was somehow embedded so deep in economic thinking that even the non-mercantilist Adam Smith would eventually choose, for his masterpiece of economic theory, the title An Inquiry into the Nature and Causes of the Wealth of Nations. Today, even though mercantilism has long been obsolete, we perpetuate the same tautology whenever we talk of the Gross Domestic Product or look at the very nice charts from Our World in Data, which for the most part allow only one level of resolution: sovereign countries. Of course, nations are an economically important concept because of that one property: they are sovereign, and therefore they write laws and implement policies that affect the economy. These policies can be productively compared. But that’s about it — for everything else, nations aren’t the right way to think about wealth. One reason is simply that they’re very different from one another: “it affronts common sense,” Jacobs writes, “to think of units as disparate as, say, Singapore and the United States, or Ecuador and the Soviet Union, or the Netherlands and Canada, as economic common denominators.” I would add that countries are arbitrary and changing: when the Soviet Union was replaced by 15 sovereign countries, the economic reality didn’t suddenly reshape itself to match the new borders. Lastly, nations contain, under the hood, many sub-economies that are also highly different from one another. None of that is secret or forbidden knowledge. Everyone has always been aware that New York City, or Milan, are economically very different from rural Mississippi or Sicily. But I find that it’s far easier to think in terms of “the United States” or “Italy,” especially when you’re not from there. Nations are an abstraction of real-life complexity, and are accordingly very tempting to use. Also, they’re often the entities that collect statistics, which is another difficult-to-resist temptation for anyone who likes quantitative data. Cities as Radiators of Economic Forces If nations aren’t the best unit to analyze the economy, what is? This is a Jane Jacobs book, so the answer is obviously going to be cities. Jacobs doesn’t actually give a clear argument why. Maybe that was in her previous book, The Economy of Cities. So far as I can see, her reasoning is, ironically, a bit tautological: “all developing economic life depends on city economies; it depends on them by definition because, wherever economic life is developing, the very process itself creates cities and has probably always done so.” But so far as I can see, this reasoning is correct. Cities concentrate people, and therefore economic life, and therefore economic power. The driving force for all this is a phenomenon that, from what I gather, was discovered by Jacobs when she wrote The Economy of Cities: import replacement. Consider, say, Boston back when it was a tiny settlement, not yet a city, in colonial times. At first, Boston didn’t produce much, especially not much that would be of interest to its main trading partner, London. It exported some natural resources: timber, fish. Whatever else the Bostonians needed, they needed to import it from other cities, again mostly London. (Remember to think of imports and exports in terms of cities, not nations.) For instance, at first, all metal tools in Boston came from European cities, and were paid for by the revenue from selling the timber and fish. Then, one day, some Bostonians decided to build an ironworks and make metal tools themselves. (Pictured: a reconstruction of the Saugus Iron Works, established 1646.) This wasn’t of any interest to London or other European cities. The Bostonians weren’t nearly as good or efficient at making metal tools as Londonians were. So Boston couldn’t export the metal tools back to Europe — but it could use them internally, and also export them to other American cities that were about as poor as Boston was, or poorer. Internally, this meant the spark of a manufacturing economy in Boston, as easily obtained metal parts made it easier for other Bostonians to replace other imports from European cities, and eventually develop a symbiotic network of industries. It also meant that the revenue from fish and timber could be used to import new things, including new innovations from European cities (which would later become opportunities for more import replacement). And because there were customers for Boston-made metal goods in New York and Philadelphia, and eventually Cincinnati and Chicago and Pittsburgh as these cities came into existence, it meant additional revenue for Boston that it could reinvest into developing its production further. For Jacobs, virtually all city development can be seen through the lens of import replacement (which, to be clear, has approximately nothing to do with policies of import substitution industrialization; import replacement is not a policy, but a naturally arising free market phenomenon). Her book contains many other examples than Boston, such as Venice, which started off in the early Middle Ages as a small town that sold salt to Constantinople, but then diversified its production to become one of the wealthiest cities of its time; or Taipei and Kaohsiung, two cities in Taiwan that kickstarted their development not long before the 1980s, by forcing expropriated landlords to invest into local import-replacing businesses. One is reminded of Scott’s review of How Asia Works. Import replacement, then, is what makes cities economically powerful. And this power is so great that it causes ripples in distant places. In fact it is the main reason that anything happens at all in non-city areas. Jacobs gives the example of Bardou, a small village in southern France. Bardou looks like this: To the extent that Bardou ever had an economic life, that life was almost entirely driven by distant cities. In ancient times, the area was populated because of iron mines nearby. The mines were exploited to serve the needs of people in the distant cities of Lugdunum (Lyon), Nemausus (Nîmes), or even Rome. As Jacobs notes, we could say that the mines served “the Roman Empire,” but that would be another example of using the abstraction of sovereign countries when we should instead be specific. It was Lugdunum, Nemausus and Rome that wanted the iron — not some random rural area of the empire, and certainly not the part of the empire in which Bardou was located. Eventually the mines and the region were abandoned. More than 1,000 years later, peasants moved into the area and built the modern village. For centuries they lived a wretchedly poor life of subsistence farming. No cities exerted any influence on it, and indeed nothing happened. Then, in the 19th century, the people of Bardou learned that they could improve their situation by moving to distant cities such as Paris, and most of them did. Again, the force wasn’t being exerted by “France”; Bardou was already part of France. The force was specifically being exerted by Paris and other cities with jobs for poor peasants. By the 1960s, only one old man was left. That’s when two foreign visitors, a German and an American, happened upon the village, decided to buy most of it, revitalized it, and turned it into a tourist spot (and even, for a brief time, into a set for a movie company). Today Bardou is a popular place for travelers — who are mostly city people, and spend money that was mostly earned in cities. The Bardou story contains examples of several of the forces that import-replacing cities radiate, according to Jacobs. These forces are central to her thinking. There are five of them: Markets. Cities house a lot of people who need a lot of goods and services, and are therefore strong markets to sell goods and services to. This was the force that acted on the Bardou area when it was a Roman mining region, and again today when it functions as a tourist spot for city vacationers.
Inline links: Phillips curve, https://substackcdn.com/image/fetch/$s_!9wEn!,f_auto,q_auto:good,fl_progressive:steep/https%3A%2F%2Fsubstack-post-media.s3.amazonaws.com%2Fpublic%2Fimages%2F850ce64a-4367-4a7a-a9ec-e8eb1af3ed08_399x292.png, Our World in Data, https://substackcdn.com/image/fetch/$s_!zS15!,f_auto,q_auto:good,fl_progressive:steep/https%3A%2F%2Fsubstack-post-media.s3.amazonaws.com%2Fpublic%2Fimages%2F7d533e64-f407-4b05-aea5-5b5a9dbdc7bc_1600x1130.png, import replacement, https://substackcdn.com/image/fetch/$s_!5j2T!,f_auto,q_auto:good,fl_progressive:steep/https%3A%2F%2Fsubstack-post-media.s3.amazonaws.com%2Fpublic%2Fimages%2F7f2675d9-ce56-4ac5-9b78-a16720269dea_1600x1159.png, import substitution industrialization, Scott’s review of, Bardou, https://substackcdn.com/image/fetch/$s_!RfMs!,f_auto,q_auto:good,fl_progressive:steep/https%3A%2F%2Fsubstack-post-media.s3.amazonaws.com%2Fpublic%2Fimages%2Fc119b085-f7b3-4e09-a586-9f4fc4c2ea21_1200x1600.png
There is a nice modern road in that screenshot, but between its 18th-century founding and the 1920s, there wasn’t even a path that a horse-drawn wagon could use, and so Higgins was extremely isolated. It barely sold anything to anyone outside, and accordingly imported very little. The people lived from subsistence farming. Their lives were so difficult, so focused on sheer survival, that they gradually forgot many of the skills and techniques that their British ancestors had, like candle making, weaving from a loom, and even masonry. When Jacobs’ aunt arrived as a Presbyterian missionary in 1922, and suggested that they build a church out of stone, the people of Higgins confidently stated that this was impossible: mortar just wasn’t strong enough. “These people came of a parent culture that had not only reared stone parish churches from time immemorial, but great cathedrals,” Jacobs writes, and yet eventually they forgot that stone buildings were a possibility at all. Such is the fate of regions that get cut off from cities. Jacobs calls them bypassed places. Sometimes these places are entire countries, such as Ethiopia, once the seat of an empire, but which as of the 1980s had barely any links to cities except its own backward ones. Unsurprisingly, Ethiopia has high prices (for Ethiopians) and too few jobs. That will always be so, unless one of its cities can start the process of import replacement. III. Should Everything Be a City-State? That was roughly the first half of the book. After that, Jane Jacobs discusses various consequences of her theory, including why decline happens and how we can, in theory, prevent it. We’ll get there — but first, it’s time for a detour through the other book, The Question of Separatism, which provides a great case study of Jacobs’s ideas. After an introductory chapter in which Jacobs acknowledges that separatism always makes everyone emotional, and warns that she’s going to study it in a dispassionate manner anyway, she starts by describing the issues in Quebec and Canada through a specific lens. You can probably guess which lens. That’s right — cities. To her, the question of Quebec separatism is primarily the question of how the two main cities in Canada, Toronto and Montreal, have coexisted and will coexist in the future. At this point you need at least a basic understanding of Canadian history. Here’s a quick primer, focusing on those two cities. Canadian History Speedrun (Jane’s Version) Canada, a word that used to refer to the large valley around the St. Lawrence river and the Great Lakes, was originally a colony of the Kingdom of France. Then the Kingdom of Great Britain conquered it in 1760. For various reasons, most of the French settlers stayed in Canada rather than emigrating to France or being deported, so at first, a small British elite ruled over a mostly French-speaking and Catholic colony. However, immigration from the British Isles, as well as from the newly seceded United States (loyalists who wanted to live in a monarchy rather than a republic for some reason) eventually tipped the linguistic and cultural balance. The population sorted itself such that the lower part of the valley (what is now Quebec) remained French, while the upper part (what is now Ontario) became English. The exception to this trend was the city of Montreal. Although located in Quebec, it became an English-speaking city and the hub for the British merchant elite. For at least a hundred years, it was the main city in Canada across almost all metrics: population, wealth, manufacturing, political influence. In the middle of the 20th century, Montreal grew enormously and became French-speaking again, owing to immigration from rural Quebec. It became the center of Quebecois culture and, with its increasingly educated population, the breeding ground for new ideas, including separatism. At the same time, the main city in Ontario, Toronto, was growing even faster. Immigrants from all over Canada and other countries poured into it (including Jane Jacobs herself). Sometime around 1970, it became bigger and wealthier than Montreal, and replaced it as the main economic hub. Many people attribute this to the rise of Quebec separatists, which supposedly scared the Anglo elite of Montreal into moving all the banks and companies to Toronto, and, to be sure, some of that happened — but of course, Jacobs prefers explanations that rely on city economics. One of the reasons for Toronto's economic and demographic growth is that it became the nexus of what Jacobs calls a conurbation, and would have called a city region if we were in the other book. In case you craved another concrete example of a city region, here’s a map of Ontario with two ways to define Toronto’s so-called “Golden Horseshoe” (Toronto itself is just the tiny strip in the middle of the red area, next to the lake): Meanwhile, Montreal never generated a conurbation or significant city region. This is Jacobs’s main hypothesis for why it was overtaken by Toronto, though she doesn’t give a lot of detail on why it happened. In any case, the result was that Montreal lost its status as the economic capital of the country. It became a regional city. The problem is that regional cities tend to do poorly. The nature of nations is to centralize everything in one place (we’ll come back to this). That’s why Paris has a large and rich city region, but Lyon and Marseille don’t. That’s why London looms so large in the UK’s economy while Glasgow or Manchester now contribute very little. There’s nothing wrong per se with being an economically stagnant regional city. Such cities can be fine places. When they’re the center of a supply region, like Calgary and Edmonton in oil-rich Alberta, they can even be wealthy. The complication for Montreal, though, is that its previous status as the main Canadian metropolis made it grow too large for this purpose. Yet, at the same time, Montreal plays an outsized cultural role for French-speaking Canadians — one that Toronto doesn’t even come close to fulfilling. So, Jacobs sees only decline for Montreal. And she thinks this means decline for Quebecois culture generally. Without a strong import-replacing city, Quebec will become a patchwork of supply regions, regions that workers abandon, or transplant economies, like the poverty-stricken Atlantic provinces in eastern Canada already are. Either the Quebecois resign themselves to this fate, she says, or they fight it — and the only true way to fight it is to declare independence. As of the 1980 referendum, she thinks they should go for independence. Generalized Separatism Quebecers did not go for independence, neither then in 1980 nor in 1995 when they voted on the question again. If they had, it would probably have been an example of a peaceful secession. Jacobs points out that there haven’t been many of those, if you exclude the decolonization of overseas imperial possessions (like Canada from Britain). Non-peaceful secessions have been common, but in those cases the destructiveness of war tends to overshadow everything else, economically speaking. In fact that might be the main reason most of us intuitively dislike separatism: we associate it with conflict. But peaceful non-colonial secessions do happen. Since 1980 there have been several more cases, like Czechia and Slovakia. When Jacobs wrote her book, though, the only good example she could think of was the independence of Norway from Sweden in 1905. She tells a great account of the process, noting that the outcome wasn’t predetermined: Sweden didn’t want to lose its western province, and did what it could to contain Norwegian nationalist sentiment. But Norwegian nationalist sentiment won — and importantly, both Norway and Sweden seemingly benefitted. Neither of them was particularly rich in the 19th century, and Norway was in fact dirt poor, which is why so many Norwegians escaped by emigrating to North America. Yet after the dissolution of their union, the two countries developed quickly, and both are now among the wealthiest countries in the world. They certainly didn’t disintegrate. (Of course, in Norway the wealth is due in large part to the oil that they discovered in the late 1960s. But they were pretty advanced by that point already — advanced enough that they could use the oil to develop their own industry, rather than get rich quick by exporting it raw, which is what keeps many countries trapped as supply regions.) When people argue against separatism, they often tout the benefits of being large. A Canada that would be split in two would mean smaller markets, and a weaker political counterweight to the United States. (Not to be mean to Canadian readers, but this argument seems delusional to me — I don’t think Americans currently see Canada as a political counterweight of any significance.) It would certainly be less prestigious. Large size, Jacobs says, is associated with power, and we admire power. We love slogans like “unity makes strength.” But after the medium-sized country of Sweden-Norway became the two smaller countries of Sweden and Norway, they both did well. Small size is less powerful, but it has its own advantages, such as nimbleness and ability to fail non-catastrophically. Small size also allows more diversity in cultural and economic matters, and here Jacobs waxes philosophical, pointing out that favoring diversity over uniformity is a recent, post-Enlightenment idea that has not yet been fully embraced in politics. We can see analogs everywhere. Europe, split into numerous small countries from the Middle Ages onward, became far more advanced than China, which has been unified more often than not. The city-states of ancient Greece and Renaissance Italy are seen as golden ages of Western civilization, even if they weren’t part of larger political units and therefore constantly went to war with one another. In business, large companies are impressive and powerful, but people always complain that Google or Microsoft have become stagnant and that the best place to work is tiny startups of about 2 cofounders and 4 employees. In biology, humans are more successful than numerous larger animals, and in terms of raw numbers, small animals like rats or insects are the most successful of all. Jacobs’s point isn’t that smaller is always better. Her point is that the converse statement, “bigger is always better,” is false — despite how intuitive it feels for political entities. Just like we don’t view a small nation like Switzerland or Singapore as a failure of unity, we (and in particular, Canadians) shouldn’t see the secession of a place like Quebec, if it’s done peacefully and democratically, as a failure either. Still, some people in online reviews of the book complain that this argument is a bit thin, especially considering that it serves as the foundation for the later chapters (which are more directly about late 1970s Quebec politics). Sure, small is beautiful, but large states are great for stability, peace, markets, whatever. If the potential benefits of small national size are Jacobs’s strongest argument, then we can breathe a sigh of relief and go back to agreeing that separatism is bad. Pointing out the widespread bias in favor of unified political entities does seem valuable to me, but okay, fair enough. Does Jacobs have deeper reasons why separatism might be a good idea in general? Yes, and for this we go back to the second half of Cities and the Wealth of Nations. Why Nations and Empires Fail Our breathing rate is regulated through a feedback mechanism. Too much carbon dioxide in the blood, or too little oxygen, and the brain stem commands the diaphragm to accelerate breathing. Once the levels are back to normal, the brain stem receives this feedback and slows breathing down again. Now, Jacobs asks, imagine an impossible creature: ten people, all doing their own thing, but whose breathing is somehow regulated by a single brain stem. The feedback the brain stem receives is a consolidated average of everyone’s carbon dioxide and oxygen levels, and the breathing rate the stem decides on is applied to all ten people, regardless of whether they’re sleeping or playing tennis. This, to put it mildly, wouldn’t work. This creature is an analogy, representing a nation. The ten people are its individual cities, and the breathing rate is the cities’ economies. If it sounds like a stupid analogy, that’s because it is: “I have had to propose a preposterous situation,” writes Jacobs, “because systems as structurally flawed as this don’t exist in nature; they wouldn’t last.” Nor do they exist in machines we design; they wouldn’t work. But “nations, from this point of view, don’t work either, yet do exist.” The feedback mechanism that fails to work properly in a nation is currency. A currency always fluctuates according to the exports and imports of the area where it circulates. Let me use the Republic of Venice and its ducat as a toy example, because the coins look nice: Whenever Venice produces something (like salt) and sells it abroad, foreigners need ducats to buy the exports, so the demand for ducats increases. When Venice buys something from abroad, it needs to use foreign currencies, so the demand for ducats decreases. Add up everything that Venice exports and imports, and you get either a trade surplus (more exports than imports) or a trade deficit (more imports than exports), which determines the value of the ducat relative to other currencies. In both cases, a negative feedback loop restores balance over time, just like our brain stem does with carbon dioxide levels. A trade surplus, and therefore a strong ducat, means that when foreigners want Venetian salt, it’s expensive. So Venice’s exports decrease, while imports increase, since Venetians can use their valuable ducats to buy stuff cheaply from abroad. Conversely, a trade deficit makes exports a bargain for foreigners and imports expensive for Venetians. This feedback loop is great. It’s exactly what a city needs to trigger the crucial import replacement process. When exports decrease and a trade deficit begins (maybe because Constantinople found a cheaper source of salt somewhere else), the weak ducat means that Venice is less able to afford the resources and manufactured goods it used to import. The people of Venice don’t want to have less of those goods, though, so they figure out ways to produce some themselves — that is, they do import replacement. Later they will be able to export the output of the newly expanding industries too, strengthening the ducat and continuing the cycle. Currencies, Jacobs explains, function as automatic tariffs (to protect local industry from foreign imports) and automatic export subsidies (to encourage local industry to export). They are “automatic” because of the feedback mechanism. Just like an accelerated breathing rate, they take effect exactly when they are needed — and no longer. … Or so they should, except that import replacement, as we discussed, is a city process. Whereas most currencies are national or supranational. National currencies work well for city-states, like the Republic of Venice or today’s Singapore. But in large nations, which, remember, are not the fundamental unit of economic life, they mess everything up. Take a city like Detroit. When Detroit’s exports (primarily cars) decrease, Detroit gets no feedback about this, because its currency is the United States dollar, and the United States dollar’s value depends on much more than Detroit. It depends on other cities whose foreign exports might be increasing at the moment. And on rural regions that are selling resources like oil abroad. Also, trade between Detroit and other cities that use the United States dollar — i.e., American cities — is structurally unable to provide any feedback whatsoever. So Detroit doesn’t get the signal that it should buy less stuff from other cities and replace the missing imports with local production. Instead, it just declines. Jacobs hypothesizes that this issue of national currencies is at the root of every large country’s economic troubles. It is why nations and empires always centralize everything into one large city, whether that’s Paris, London, Tokyo, or Toronto, or ancient Rome: that city, being the largest, is simply the only one for which national-level currency feedback works fine. The rest of the nation or empire, then, declines. But of course, nations and empires don’t accept this. They care about the economic well-being of their peripheral regions, sometimes out of genuine concern for the people there, sometimes out of fear that they rebel or hold independence referendums. So nations and empires will embark on every possible solution to reverse the decline. All of their solutions will look like good ideas at first, and yet fail at helping the peripheral regions. Worse, these solutions will weaken the cities, thereby destroying the only real wealth of the country and bringing untold hardship for everyone. Eventually the nation or empire will disintegrate, as nations and empires always do, and always will. Jacobs calls these false solutions transactions of decline. She identifies three types, and, content warning, you might not like some of them depending on your political sensibilities. Sustained military production is a transaction of decline. Permanent military bases and garrison towns are a special kind of settlement: they import a lot and export nothing. Superficially, producing weapons and supplies for the military seems like a good deal for some cities — Jacobs gives the example of Seattle, which, before Microsoft and Amazon were a thing, depended mostly on making military aircraft. But because nobody in a military base ever tries to replace those weapons and supplies with their own production, the trade is sterile in terms of economic development. In a sense, the wealth is slowly “drained” from cities. Large empires are especially prone to this: eventually all of their wealth is destined to the military just to keep the empire together.
Inline links: https://substackcdn.com/image/fetch/$s_!Qj1l!,f_auto,q_auto:good,fl_progressive:steep/https%3A%2F%2Fsubstack-post-media.s3.amazonaws.com%2Fpublic%2Fimages%2Ff727cfae-ec34-42c4-b509-9a25f4126f2d_1600x834.png, https://substackcdn.com/image/fetch/$s_!T392!,f_auto,q_auto:good,fl_progressive:steep/https%3A%2F%2Fsubstack-post-media.s3.amazonaws.com%2Fpublic%2Fimages%2Ff9795745-8a40-40c1-8173-5296c13eef3b_1600x1553.png, https://substackcdn.com/image/fetch/$s_!zETj!,f_auto,q_auto:good,fl_progressive:steep/https%3A%2F%2Fsubstack-post-media.s3.amazonaws.com%2Fpublic%2Fimages%2F3e99b106-d34e-4a49-93a8-553a8f57952a_1600x1130.png, https://substackcdn.com/image/fetch/$s_!YeXj!,f_auto,q_auto:good,fl_progressive:steep/https%3A%2F%2Fsubstack-post-media.s3.amazonaws.com%2Fpublic%2Fimages%2F6fe681e6-b571-4f4c-aa90-313f77fc1dbb_750x359.png
Open Thread 277
May 22, 2023 · Original source
2: I published the first Book Review contest finalist, Cities And The Wealth Of Nations / The Question Of Separatism, last week, and I’m happy with both the review and the interesting comments it sparked off. See the threads on import substitution vs. specialization, fixed exchange rates, optimum currency areas, and Quebec.
Inline links: Cities And The Wealth Of Nations / The Question Of Separatism, import substitution, specialization, fixed exchange rates, optimum currency areas, Quebec