City Diversity, Development & Growth

“City diversity itself permits and stimulates more diversity.” ~pg. 190

Jacobs brings up a fundamental quality of cities that is little studied.  It is really about a positive feedback cycle.  When a city is working, its economic diversity feeds and nurtures more diversity, which does the same to even more diversity, and so on.  Manufacturers create markets for other manufacturers as suppliers as well as opportunities for service providers.  Economics is not a zero-sum game… at least not economics that is working.

This quality of cities plays a large role in economic development.  This is the process of generating new work and markets.  We think of economic development as something that only goes on in third-world countries (and, seeing as most of the third-world countries of several decades ago are still third-world countries today, not much of it is going on there).  But development is a prerequisite to growth, so in truth, first-world countries often have the most lively economic development on the planet.

I don’t think most policymakers realize this and the importance of economic development.  Economic development, although intimately related, is a completely different animal than economic growth, and the rules of how to bring it to life are completely different, too.  If you want development, you foster an atmosphere of trial and error, and you don’t worry about efficiency.  Efficiency is the enemy of development, but it is the key attribute of growth.  You can’t have development with efficiency, and you can’t have growth without it!  Secondly, development occurs in small, nimble organizations that can change course on a dime.  Growth can only occur in a tightly run, inflexible machine with a single-minded focus.

So, what happens when the bulk of a country’s domestic economic policies are geared toward fostering growth?  At some point, conditions become toxic to development, which seems to work for a while if growth is occurring.  Everyone wants growth.  But at some point, the growth cycle runs its course, the market changes, and the growth agents of yesterday suddenly become obsolete.  If little development was occurring along with the former growth, where will growth come from next?

Perhaps one of the reasons cities have had a tenuous history of respect in the U.S. is that we are a people obsessed with growth, and we know intuitively by seeing where and how our biggest companies operate that growth often occurs outside of our cities.  Cities are not an economy’s natural engines of growth, although they can do it when the conditions are right.  Cities are, however, natural engines of development (in fact, development to any significant extent doesn’t occur anywhere else), and you can’t have long-term growth without development.  The growth industries of today began as development industries, and most of them began in the labs of our cities.