Cities and the Wealth of Nations; J. Chamberlain

Later, it put its money into railroads. But its citizens lost their drive as the local third and fourth generation rich limited their energies to coupon clipping. As the Boston economy stag nated, it lost its exports (shoes and textiles) and ceased to import. The popular explanation was that cheaper labor and lower taxation in Georgia and elsewhere in the American South had made New England an economic back water for good. This explanation seemed entirely too defeat ist to Ralph Flanders, who later became aU. S. Senator from Vermont. In 1946 Flanders and a few of his moneyed friends formed a venture capital company to make four million dollars available to small Boston enterprises. The Flanders group had no preconceived ideas of what they were doing. They were quite sur prised when the first applicants for capital were three young scientists who, using their rela tives' savings, had started a high technology enterprise. The presence of universities such as Harvard, M.1. T., and Tufts guaranteed a willing personnel for the proliferation of high tech companies that followed, with the new en terprises moving out of Boston proper to take advantage of cheap rental space along the now fabled Route 128.

The Flanders group touched hands with the world of John Hancock. Looking back on Boston history, Jacobs says the creative city will begin by importing goods for processing and resale. But it will not stop there. To meet competition it will begin to duplicate the im ported produces for itself. It will reach out to its own hinterland for manpower and for markets. State lines will mean little to it-the Boston region spills over into southern New Hampshire and into Maine. What Jane Jacobs has a hard time explaining is why some city regions tum out to be Bostons and some do not. Tokyo, in Japan, has been a Pacific rim Boston, providing jobs for the sons 200 THE FREEMAN. MAY 1987 , III ••• - •• I' IJ.: . . . . :'" "'" ~~,.. . of farmers from the surrounding countryside and selling products made from imported raw materials to the world. Scotland's Edinburgh, on the other hand, has done little to rejuvenate itself. The displaced highlanders who came into the city when their lands were cleared for raising sheep had to find housing in slum quarters. Many of them died from tuberculosis.

The more energetic among them moved on to London or migrated to Ulster in northern Ire land or Nova Scotia in Canada. Some joined the British army, serving notably in the con quest of India. Query: would the story of Edinburgh have been different if there had been a Scottish Ralph Flanders? Jacobs leaves us with the task of trying to puzzle out what it takes to set a Flanders in mo tion. Obviously a city setting is needed. But it can't be just any city. The Lockheed Company built a factory in Marietta, Georgia. But it couldn't have started out in a Georgia town that lacked mechanics and toolmakers. Allen Loughhead, the founder of the company, de signed his first plane in Los Angeles in the late Twenties. He had to scramble for hundreds of things to make the plane-tools, wiring, wheel parts, bearings, aluminum sheets, printing ser vices. Not everything was available locally, but there were people who could provide the needed items when specifications were set be fore them. Imports came first, then the local duplication of imports. Finally, when the com pany had become relatively self-sufficient, it could afford to build a plant' in Georgia.

Jane Jacobs' investigation of city-region pat terns makes her doubt the use of providing re gions with capital when they are far away from solvent city markets. She is particularly de pressed by the example of the Volta Dam in Ghana. Volta, as one of the world's great hy droelectric projects, was supposed to supply adjacent factories with power. But Ghana had no Ralph Flanderses or Allen Loughheads. The people displaced by the dam were forced to farm soil so poor that they could not feed their families. There are, says Jacobs, quoting a UN food and agricultural specialist, some 40 dams around the world that are useless. Jacobs has nothing good to say about the supposed science of macro-economics, which she defines as "the branch of learning entrusted with the theory and practice of fostering na tional and international economies." It is, she says, a shambles. The effort to act on macro economic recommendations has tied up incom prehensibly huge resources in the World Bank, the International Monetary Fund, and the UN.

What has resulted has been a tremendous waste and a real wreckage of hopes. The reality of stagflation, she says, has made nonsense of two centuries of elaborate theoretical thought. Jacobs concluded that economic life de velops by innovating. It expands by the process of import-replacing. It follows that the politicos should stop taking money out of the pockets of prospective innovators, who should be left to their microeconomic concerns in their various cities. The innovator can always use capital, but a little of it will go a long way. A good idea will generate its own support, much as produc tion under Say's Law generates its own pur chasing power. Jane Jacobs ends her book with a crack at capital cities that are no more than that. Where they seem to boom, it is "in service to transac tions of decline. " "Behind its busyness at ruling, " she says, "a capital city of a nation or an empire, vivacious to the last, at length re veals itself as being a surprisingly inert, back ward, and pitiable place. So it was with Lisbon, Madrid, Istanbul. So it is gradually be coming, one suspects, with London, Paris, Stockholm . . ."

Since her last chapter is titled "Drift," Jane Jacobs ends with pessimism. "Even creative cities such as Boston," she says, "must de pend on trade-offs from transactions of decline, at least in part. Boston ... now depends partly on trade-offs from military production." What we need is "many, many cities in a trading net work" not dependent on the military, and that is something we just don't have anymore. 0 THEFREE IDEAS ON LIBERTY 204 The Face of a Bureaucrat Joe Hochderffer A hospital administrator comes face to face with a hometown bureaucrat. 206 Privatizing Japan's Railroads Donald J. Senese The privatization of Japanese railways could point the way to further political and economic advances. 210 Planning Threatens Freedom C. Brandon Crocker Economic controls are people controls. 212 Socialism Succeeds by Failing Allan Levite Socialism continues to attract followers despite its economic inefficiency.