Invest In Something Modern, Maybe?

The Economy of Cities, chapter 7: Thoughts Jane Jacobs Has About Capital.

Did I say that Chapter 6 was the least relevant to today? This one might beat it. Because this is about how capital moves and assists (or doesn’t) in city economies and their growth. And while it highlights the operations of American Research and Development, now known as the first modern venture capital firm, it did not predict the massive shift toward VC-fueled creation of new work that characterizes the modern small business ecosystem.

And because it doesn’t touch on that, it doesn’t address in any way the main problems of the small business ecosystem today, which are all about the failure and shrinkage of the  humdrum and repetitive. Small businesses that aren’t intending to become big businesses have a hard time, so American small business numbers have been dropping despite the growth of venture capital. I don’t see how any ideas here can be extended to address that problem, either.

Instead, it talks about the problems of government and institutional investment, and how they want only sure things with solid returns, exactly the wrong emphasis if you want to encourage economic diversity and proliferate new work. They also are usually very bad at finding speculative investments that are likely to succeed. Notably, in the wake of the 2008 crisis, part of the Obama stimulus package tried to do exactly that, mimicking Silicon Valley’s model, and… he got yelled at because some of them failed. Yeah, I think there are reasons why big organizations are risk-averse.

She also asserts that anywhere a city is generating capital and exporting it, that city is systematically neglecting local opportunities. The examples of anti-black and anti-immigrant (Irish) prejudice are illustrative, but not particularly suggestive of a broader pattern. As in some earlier pieces of the work, there is a strong sense of Jacobs’s politics leaking through into her theory in a way that suggests that these things are self-evident. I find it to be a pretty strong claim, so I’m not satisfied with this treatment. From an economic standpoint it’s obvious that racism/sexism/general prejudice are dumb and counterproductive, but that’s the converse of the claim she’s making.

Anyway, it’s a short and lackluster chapter.

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