The five economic development forces that emanate from cities to the regions between cities are increased markets, more jobs, more technology, more people and more capital. The region where all five reach in a relatively balanced proportion is called the city’s own region. This region functions as the growth space of a city. As import-replacement happens many old and new ventures are crowed out and need space to thrive. This region provides space for the new untested ventures as well as the old and less cost-effective industries and business. It also allows space for new housing, places for people at the beginning of their careers or after the end of their careers, when income is less than peak. As the urban boundary expands so does the city’s own region and vice versa.
Beyond the city’s own region lie at least 5 types of regions that correspond to an unbalanced input of one of the 5 city economic development forces. “[W]hen those same [5 city development] forces reach into distant regions, as they always do…. the net of complete economic ties with which a city binds its own hinterland unravels at the border of a city region. The various strands—[1] markets, [2] jobs, [3] technology, [4] transplants and [5] capital—separate from the mesh and take off by themselves, each in its own idiosyncratic directions. In this fashion, cities shape stunted and bizarre economies in distant regions…. [the first region,] Supply regions are often poor, and thus the stultification of their economies is often attributed to their poverty, but a rich supply region is as stunted and stultified as a poor one. The shortcomings of these regions go deeper than poverty. Indeed, sooner or later the shortcomings compel poverty.” History is full of examples of boom, bust, and economically dead or dying settlements and countries. Economic death comes eventually when import-replacement is not carried out. Jacobs gives the example of Uruguay as a supply region: for many generations it was a very rich country specializing in animal husbandry, specifically the production of wool, meat, and leather. “Today Uruguay has what is called a Third World economy, but even when it was prospering, Uruguay had a Third World economy insofar as that term conveys backwardness, lack of development. Uruguay had merely been rich, and the difference between a rich backward economy and a poor backward economy is not all that great. Rich or poor, supply regions are inherently overspecialized and wildly unbalanced economies, hence unresilient and fragile, helpless when they lose their fragments of distant markets. The disasters that befell Uruguay are the nightmares that trouble the rulers of currently rich oil supply regions, and with good reason.”
Several reasons why some supply regions never start the import-replacement task of economic development and thus stay backward are: 1) they are often very concerned with efficiency due to competition with similar regions worldwide. Efficiency of productions and/or operations is good for the enterprise, but crowds out new untested economic development investment. 2) it is always easier to buy necessities with the income rather than invest in import-replacement. 3) the enterprises from a distant city that set up in a new location know exactly what they want and are not usually interested in anything but getting the resource they want so they won’t spend to diversify so far from home. 4) With most resources there is a standard product whose specifications are set in a far away market and thus diversity of product is not conducive to survival for such settlements. This general sentiment seems to grip the whole region when there is no import-replacement. Additionally, there are many hazards that supply regions face. And their likelihood seems to go up the longer the supply region exists. 1) resource depletion. 2) the development of substitute goods. New goods and services replacing old is economic development and will be the fate of every good and service currently existing. 3) economic competition. New sources or new techniques can make a formally prosperous supply region become unprofitable. 4) political arrangements that limit free competition such as the EU deciding to preference European sources of raw materials. 5) increased complexity of imports means that the income from standard commodity exports buys less imports and thus there is a creeping povertization of the region over time. Finally 6), there is an intellectual elite who promote supply regions as progressive due to a belief that growth in specialization and the division of labour is always good. They are partly right, in the short term and for the growth of the economy (defined as more of the same output) these two are good. But they are counterproductive for economic development (defined as something novel or new).
A second type of region Jacobs names an abandoned region. “In the case of regions that people abandon, the disproportionate force is… the pull of distant city jobs. This force can depopulate a region, but it cannot do anything to transform the region’s economy.” People who leave, often as migrant workers, send back remittances to their families or come back in off seasons with their savings. They thus generate an income inflow, but they do not contribute to economic development. Abandon regions can be rich in income inflow but are stagnant and fragile unless they engage in import-replacement. Unfortunately, this very rarely ever happens because the best and most industrious workers, the ones most ambitious and likely to innovate leave. Abandoned regions are proof that increases in income are not evidence of economic development. In some cases, returning workers with their new skillsets and experience have tried to set up similar factories in their hometowns in abandoned regions which have overwhelmingly proven to be failures. Having the right skillset and experience is also not enough for economic development. “A factory in Napizaro [an abandoned region] could not pay a living wage if, indeed, it could be started at all. The skills and experience the men have acquired in Los Angeles are usable only in the context of a city economy with its symbiotic nests of suppliers and its markets, not in this economically barren region. One and the same lack—a vigorous city right in the region—forces men to find work far away and also makes it impossible for them to start an industrial plant of their own, at home.”
A third type of region Jacobs names a clearance region. They are the result of technological improvements in working the land. The highland clearings were a result of a new breed of sheep that could thrive in the Scottish highlands. A similar clearing took place in the US south starting in the 1920s when mechanization made millions of farmworkers, obsolete while simultaneously making productivity in land yields explode. The great depression did not reduce food production, but the increased food production did increase unemployment. The second world war reemployed a large chunk of the idle workforce. “Nevertheless, the clearances not only continued but accelerated, especially between 1945 and 1960.” The only difference between a rich and a poor clearance region is that the rich one can mitigate the social damage through welfare. “The hard truth is that there is no decent way of overcoming rural poverty where people have no access to productive city jobs.”
Abandon regions and clearance regions are opposites: in abandoned regions those who leave are better off; in clearance regions those who can stay are better off. “[T]o improve everyone’s lot—that of those who leave and that of those who stay—the two kinds of events, abandonments and clearances, ought to happen in the same places at the same times. Exactly this does happen in city regions…”
A fourth type of region Jacobs calls a transplant region; a place were branch industries go; an industrialized supply region. The typical bromide to all problems of economic development is the need to attract industry. Jacobs ask us to consider what kind of industry can pack up and leave one location and move to another: one that is relatively self-sufficient; one that does not need any specialized local goods or services; one that is acting in its own interest making regions compete with concessions. Transplant industries bring income in the form of jobs and nothing more; they do not support local development defined as import-replacement nor do they integrate themselves by forging ties with local production or local consumption. Just as abandoned regions send remittances home transplant industries give locals remittances in the form of wages. Real economic development is a deepening and expanding symbiosis with a city’s firms. Transplants are life support, not development.
Inappropriate and disproportionate capital investment in rural areas tends to produce white elephant projects. “Cities generate capital as a by-product of successes with new goods and services and replacements of former imports.” A portion of this capital is collected by governments for redistribution to depressed regions. While equalization payments are helpful for equalization, and they may sometimes be helpful for development when invested in public goods like roads, it is a mistake to think they are always helpful. A city’s growing demand for rural products must be greater or equal to the rural regions’ improved capacity otherwise unemployment and marginalization happen and the project is a white elephant unable to reach its potential. When investments in rural production exceed the solvent market of cities, the excess is wasted. “[L]oans, grants, and subsidies sent into regions lacking vigorous cities can shape inert, unbalanced or permanently dependent regions, but are useless for creating self-generating economies…”