The Uses of Diversity. David Ellerman
to the community not just “boots and shoes” but the second product of “well-trained competent” people (Pigou 1960, 205–06).
That has certainly been the experience of today’s best example of cooperative development, the Mondragon group of cooperatives in the Basque region of Spain.21 The companies known collectively as “Mondragon Cooperative Corporation” produce a rather full variety of high-valued added consumer products, intermediate goods, and capital goods including the first robots and computer numerically controlled (CNC) machinery designed and built in Spain. Since the firms are all cooperatives, it was all done with no foreign ownership. The group started with a single company in the mid-1950s producing a kerosene heater. Then it systematically implemented the economic principle of plenitude by filling out the backward linkages, producing the machines to make the heaters and then the machines to make those machines. Through multiproduct diversification, it started producing other consumer durables (stoves, refrigerators, and washing machines) and all the things to produce those things. Each bottleneck called forth new energies to solve problems, for example a bank to help finance new enterprises, an applied technological research institute to systematically learn new technologies and turn them into new products, a consulting company to help new firms start (a “factory factory”), an insurance company for members, and a polytechnic university.
Since the firms were cooperatives and, as a group, had the express goal of developing good jobs in the Basque country, the positive externality of fostering spin-offs and breakaways was “socialized” or internalized within the group (see Ellerman 1984). The original company did not have the option of “owning” a spin-off or preventing the spin-off if the mother company could not capture all the benefits. The new company would also be a cooperative that would have to “rest on its own bottom” or “walk on its own two feet”—within the group.22 Thus the headquarters of the whole group encouraged groups within existing firms to coalesce around ideas to produce adjacent products in a spin-off. The potential managers and workers might be from a village or small region without much industrial development so by doing the spin-off near their homes they satisfied both economic and social goals. In a similar context, Jacobs noted that such “division would be a normal, untraumatic accompaniment of economic development itself, and of the increasing complexity of economic and social life” (Jacobs 1984, 215). Since the spin-off process was carried out in an organized and socially approved way, precautions could be taken so that it did not disrupt the original mother firm. It became part of how the group evolved.
Concluding Remarks
Our overall goal here is to call attention to Jane Jacobs’s work not only as a writer about cities but as a writer about economies and development where cities have the central role as the main sites of development. Her emphasis on diversification is particularly relevant to today’s debates about globalization. She is almost a one-person antithesis to orthodox economics which is professionally enamored with the logic of specialization, increased division of labor, and the theory that each country (or city region) should specialize in its comparative advantage.
According to comparative advantage theory, the North (industrialized countries) clearly has the comparative advantage in modern science, technology, and industrial production. The South (developing countries) should not indulge in the wasteful duplication of producing on its own (initially) crummy imitations of the industrial products produced so well in the North. The South should specialize in their comparative advantage, which is natural resources, agricultural products (which the North should buy more from the South to lock in that sterile pattern), and unskilled labor. Indeed, the South can in part function as a “bedroom community” for unskilled labor that becomes “transnational”—migrating back and forth to the North to take the jobs that northerners don’t want.23 Insofar as industrial products need to be produced in the South, this should be done by factories owned and operated by the multinational companies from the North which already have the comparative advantage in that sort of thing (which will tend to crowd out the development of that local capacity in a familiar colonial fashion). But it is “win-win” since the factories will use the cheaper local labor, one of the South’s specialties. By thus urging the North and the South to each exploit their own comparative advantage, the development institutions that operate according to the “science” of economics—such as the World Bank (see Ellerman 2005) and the IMF—promote the goal of worldwide efficiency.24
But Jane Jacobs, being without the blessing of an intellectual formation in economics, spent a lifetime studying economies rather than economics, and she has arrived at a rather different viewpoint. Her perspective is productivist (or capabilities based) rather than consumptionist. Rather than starting with an artificial static conception of the economy and then perhaps later discovering that some cherished notions (e.g., static efficiency) might even cut against evolutionary dynamics,25 she begins with a description of actual economies that is dynamic and evolutionary. In her ecological vision of economic life, she is a “diversitarian” in contrast to the “uniformitarian” tendencies of high modernism (e.g., Jacobs’s bête noire in matters of “city planning,” Le Corbusier) and often expressed in the idea “Why not do everything in the One Best Way?”26
Lenin’s design for the construction of the revolution was in many ways comparable to Le Corbusier’s design for the construction of the modern city. Both were complex endeavors that had to be entrusted to the professionalism and scientific insight of a trained cadre with full power to see the plan through. And just as Le Corbusier and Lenin shared a broadly comparable high modernism, so Jane Jacobs’s perspective was shared by Rosa Luxemburg and Aleksandra Kollontay, who opposed Lenin’s politics. Jacobs doubted both the possibility and the desirability of the centrally planned city, and Luxemburg and Kollontay doubted the possibility and desirability of a revolution planned from above by the vanguard party. (Scott 1998, 147)
On the negative side, the Jacobs’ Ladder theory provides a critique of the South’s science fiction imports from the North that serve mainly to titillate the local elites and to forestall the slower development of those industrial capabilities in the South. Domestically, the Jacobs’ Ladder theory shows the very minimal development impact (“sterility”) of the one-way traffic of products and investments (“political factories”) imported into poor regions, company towns, military bases, and other “mono-crop” enclaves that cannot “answer the challenge” by replacing and reexporting the imports in a self-sustaining process.
Finally, at the micro-level of the firm, her analysis of old work spawning new work revives an older theme of Pigou that each firm embodies a positive externality in the firm’s “second product”—its organizational capacity to train people in technological and business capabilities. In the conventional firm where power comes from above, this potential for new job and enterprise creation goes largely untapped. What “king” ever voluntarily gave up his grip on part of the “kingdom” in the interests of diversified niche-filling development? The legal form of production serves as a constraint or fetter on economic development. There are two policy implications. One is that there may be policies that would help conventional firms to internalize the positive externality and thus to be less of a fetter on development (e.g., the examples of 3M and the Thermo Group). The other implication is that if firms are organized more with power coming from below, then the organizations will be more able to spawn new and diverse economic life. Rather than just specialize and expand old life with its attendant diseconomies of scale and scope, economic life would then better approximate the biological principle of plenitude that works to increase the mass and complexity of life primarily by spawning new life.
NOTES
1. In a book-length celebration of her ideas (Allen 1997), the appropriate chapter is labeled “Economies.”
2. In retrospect, one might call attention to her last and unfortunately prophetic book, Dark Age Ahead (2004).
3. See Ellerman (2003) for Jacobs’s treatment of migration issues.
4. See Sen (1999) for a recent capabilities-based notion of development and see List 1885 for an older productivist viewpoint.
5. “In economic life the amoebas do not always divide into more amoebas. Sometimes the people who manage to split off new organizations