DEFENCE OF A FREE SOCIETY…
Decline of Cities, decline of Liberties. The Enemy Within.
Serfs understand that reference ter aims and means requires having the wealth ter adapt ter what ever black swans come yer way. And acquiring that wealth in the first place, well, that don’t come via top-down planning but by human innovation and trial and error responses ter particular circumstances, kinda’ like in nay-chur.
Have ter say I’m a bit of a fan of Jane Jacob’s two books on cities and wealth creation, ‘The Economy of Cities,’ and ‘Cities and the Wealth of Nations.’ See my 21st and 23rd Editions of Serf Under_ ground Journal, regarding her theory and case studies of wealth production in cities. And the following:
Fergit Adam Smith’s macro assumptions that nations are the basis unit of analysis fer economic life, argues Jacobs, economic life develops by grace of import- replacing and chain reactions that take place in cities and nearby regions that are artifacts of opportunist cities:
‘The economic expansion, derived from import-replacing, consists specifically of these five forms of growth: abruptly enlarged city markets for new and different import; … abruptly increased numbers and kinds of jobs in the import-replacing city; increased transplants of city work into non-urban locations as older enterprises are crowded out; new uses for technology, particularly to increase rural production and productivity; and growth of capital.’ (Cities & Wealth of Nations. pp 42,43.)
Jane Jacobs explores this process of city-generated production from the time after the disintegration of the Roman Empire in the West, when Europe descended into the period of economic stagnation known as the Dark Ages. A bright future for Europe was probably touch and go, argues Jacobs, a new city requires one or more initial cities to begin its initial trading.
Luckily for Europe, there was a settlement in the marshes at the head of the Adriatic which discovered a market for salt and later timber with nearby Constantinople:
‘But Venice, the pioneer city of the European economy, did not remain a mere supply depot. By diversifying its own production, starting on the basis of salt and timber production, it proceeded to develop and thereby, to provide a Venetian city market for depot settlements of the north and west – which then built up city production of their own, each in its turn.’ (Cities & Wealth of Nations, p133.)
Hooray fer Venice, Venetian glass, lenses, telescopes!
Say, do as the Venetians do.
And some of them did. Even fragile little London, exporting salt fish, then using cheap British leather to imitate objects of much finer Cordovan Leather and selling them to nearby regions.
The development process in Europe was later duplicated in the northern parts of the United States during colonial times, and more rapidly after American Independence. Boston, which started by exporting timber, and Philadelphia, which exported grain, ‘were the first cities to start wriggling like Venice.’ Ibid p 145.)
In the 1870’s, when Japan began developing its modern economy using trade in silk as a springboard, Tokyo also behaved like Venice:
‘Instead of remaining content with what its silk exports could buy from more highly advanced economies, it copied such imports as it could and exported them to other Japanese cities, which in turn did not remain content with that trade, but replaced many of Tokyo’s new exports to them with their own production and cast up new exports to sell to Tokyo themselves.’ (p 148.)
To the south, Hong Kong:
‘Hong Kong, only two generations ago,’ says Jacobs,’ was an economically backward colonial depot city … It has played the role of Venice on the pacific rim, exporting its producers’ goods and services to Singapore.’ (p 147.)
Efficiency and industry transplants found wanting.
‘Only in stagnant economies does work stay docilely within given categories. And wherever it is forced to stay within prearranged categories – whether by zoning, by economic planning , or by guilds, associations or unions – the process of adding new work to old can occur little at all.’ (The Economy of Cities.’ P 61.)
For example, the electronic hand was not developed by the prosthetics industry but by technicians serving the Soviet Space Program. Development of masking tape and many innovative adhesive tape varieties were developed by a small sand mining, crushing and sales company.
Jane Jacobs compares the histories of two cities of the Industrial Revolution, Manchester and Birmingham. Manchester, poster city for the Industrial Revolution, pouring its economic energy into efficient repetition of the same work, Birmingham a muddle of all sorts of hardware and tool work. When other import replacing cities challenged Manchester’s export dominance Manchester had no other industries to fall back on. Whereas Birmingham continued adapting to challenges. Jacobs argues a similar problem in the US for Detroit, an innovative success story in the 1920’s , failing to develop new goods and services, it’s status as a company town discouraging breakaway enterprises by its work force.
Regarding development by loans, grants and subsidies, some short term ‘relief’ but in the end you are just bleeding productive economies for no long term benefit to stagnant economies.
Jacobs presents a detailed account of the Shah of Iran’s attempt to buy development via US Company, Textron, using oil money to build a helicopter Industry in Isfahan. Costs sky rocketed, the government borrowed money from overseas, fell behind with payments and work stopped. Just before the Shah was deposed the Iranian Government cancelled the Textron contact.
Development benefits of city-based currencies.
Argues Jacobs, there’s a built in design advantage possessed by Italian cities of the Renaissance and by modern Singapore and Hong Kong, oddities today, in having the advantage of their own currencies instead of one-size-fits-all national currencies that as feed-back mechanism best serves the dominant export city:
‘The city with that edge probably gets cheaper foreign imports, and probably gets an automatic tariff and export subsidy (with respect to foreign trade only) just when it needs such help.’ ( p 172.) …
‘Individual city currencies indeed serve as elegant feedback controls because they trigger specifically appropriate corrections to specific responding mechanisms.’ ( p 168.)
‘with falling exports a city needs a declining currency working like an automatic tariff and automatic export subsidy – but only for as long as they are necessary. Once its exports are doing well it needs a rising currency to earn the maximum variety and quantity of imports it can.’ (p168.) [The grist a city needs for its vital process of import-replacing.]
Jane Jacobs points to the decline of city after city in America, Cleveland, Indianapolis, Seattle, Detroit, that she attributes to the structural flaw of poor feedback mechanisms by national currencies. Writing before the advent of European Economic Union she states:
‘’We must be grateful that world government and a world currency is only a dream … as far as I can see, there are no remedies at a city’s or nation’s command whatever, short of separation in the pattern of Singapore, for correcting the flaw. ‘( W of N p180.)
Problems of The European Union.
‘A machine from Hell,’ writes Andrew Stuttaford, in Quadrant Magazine, (July – August, 2015,) describing what the Euro has wrought to European nations’ economies. And if she were writing today, what would Jane Jacobs say about the transference of powers, some small, some large, from the nation state to an unaccountable supranational authority based on a fantasy that the nation state is not only dangerous but archaic?
Procrustean Logic and the EU.
The view that ‘one size fits all’ was the brain child of technocrats in Brussels who believed that fluctuating economies were untidy expressions of market mechanisms that needed to be fixed by government experts . The management tools these technocrats devised to achieve their goals were the top down control of exchange rates and creating a shared currency. Although the votes for shared currency were not there, the machinery of integration ground on. The experts had a plan. With targets:
‘Only those countries that had ‘converged’ could sign up for the single currency. Convergence would be proved by the ‘tests’ – the ‘Maestricht Criteria’ – demonstrating that these countries’ economies were so sufficiently in sync that they could share a currency without the safety net that political (or at least fiscal) union would have provided. These tests included low inflation, exchange rate stability, and (in principle) public debt and deficit ratios that would not alarm frugal Germans too much.’ (Stuttaford p 39.)
Hey, grandiose delusion, maintaining that a collection of very different economies converge on the basis of a series of snapshots. Germany is Greece?
But look, – answer the technocrats, – in the Maestricht we’ve set out strict criteria; no Eurozone member or the EU will be responsible for the debts of any other. The European Central Bank and the now subordinate national central banks are barred from financing any country’s budget deficit. No bail-outs to feckless nations. All good to go.
The illusion that convergence was real paved the way for a financially convenient delusion;
‘Interest rates across the currency union moved down to German levels … in the early 1990’s ten-year government bonds carried a coupon at least fifteen percentage points above their German equivalent. Ten years later the spread was close to zero. Germany was Greece.’
These low interest rates should have been used by the Eurozone’s weaker countries to reduce excessive borrowing and help develop their economies achieve international competitiveness. Instead they spent like there was no tomorrow, consumption booms in Greece and Portugal, asset bubbles in Ireland and Spain.
Hubris followed by Nemesis.
The European crisis was on. Greek Prime Minister Papandreo confessed that his country’s budget deficit was more than double the already bad enough 6% of GDP projected by his predecessors. Greek interest rates splurged. EU technocrats recognized that if Greece tumbled, there were plenty more dominoes to fall. Let the bail-outs begin. After Greece, a Portugal bail-out, then a second Greek bail-out followed by a partial Spanish bail-out and a Cypriot banking collapse complete with bail-out. And it appears that the European Central Bank was alsostretching its authority to allow local central banks to ‘print’ new Euros… Says Christine Lagarde in 2010, ‘We violated all the rules because we wanted to close ranks and really rescue the Eurozone.’ ( A.S.p 41.)
Says Andrew Stuttaford:
‘Regardless of what the continent’s repeatedly snubbed voters might actually want, the EU’s ruling class will push integration forward. As ever the process will be step by step. Beyond the bailout funds and the ECB’s manoeuvrings, various debt mutualisation schemes have been floated… But the pace will be slow enough to ensure that the pain in much of the Eurozone’s periphery will persist, sometimes acute, sometimes merely chronic. One size will not fit all. The vampire currencywill linger on, draining democracy and prosperity as it does so, but no one will put a stake through it.’ (p p 42, 43.)
Well dear reader(s) here endeth me tri-partite post on the debauch of free society, on- going argument from me first SU_g Edition on the open society and its enemies, authoritarian attempts ter impose homogeneity on us serfs. It – jest – don’t – werk.
Thank you and good-night. Beth – the – serf.