What is an economy? Is it something to do with money and bond markets? Is it that abstract national machine that just hopefully gives you a job somehow? Is it something impossibly complex, something that condescending experts struggle to dumb down on the nightly news?
Here, we take a different view, one that you’ll hopefully find to be as accessible as it is heretical. Here, the economy is not just about money and jobs. It is the collection of our productive relationships with the natural world. Everything we eat, drink, work on, play with, or transform has its origin in natural resources. Here, the economy is the web of relationships through which we sustain ourselves in nature, and hopefully, when it’s working well, the economy is how we play a part in sustaining the rest of nature too.
Here, the economy might be complex, but it needn’t be complicated. Here, we're going to try to bring economic theory back into contact with its real-world base. As we do, we'll be able to study it in the same way that the early scientists marvelled at nature: we will make sense of it by finding patterns. Here, with some luck, economics might start to feel poetic.
Let’s hear it from Jane Jacobs, the urban theorist who will guide us through this next step of our exploration: “lots of things that seem impossible to comprehend become more understandable if we identify the basic pattern and watch what it produces through repetition."
We can study economics in this way because an economy, as Jacobs proudly and counter-intuitively insists, is a natural system. It is every bit as natural, she attests, as how a spider spins its web. We are animals, and economy is just a word for how we relate in daily life with our physical world.
If it seems hard to believe, that might be because, as Jacobs tells us, it's been a long time since economists have presented their field of study in this way. She praises Adam Smith, the very first economist, as an astute observer of human patterns. But she laments that “[t]he theorists after Smith retreated into their own heads instead of engaging ever more deeply with the real world.” As a result, economic principles have grown abstract, hard to relate to, and out of touch with the way that everything else alive works.
That's kind of a problem. Because, as we've seen in the last two posts in this series, there are ultimate rules and limits in the natural world. We aren't exempt from them. If economies are natural systems, as Jacobs insists they are, then our economies are subject to those rules, too. That means that when an economy contravenes those rules, it sets itself up for failure. It also means that when it follows them, it sets itself up to flourish.
In a brilliant book, entitled The Nature of Economies, Jane Jacobs lays out her understanding of how our modern Western economies depart from nature’s logic, to their detriment and to ours. And she explains how we might get back: by observing the economy of a forest, or how a forest thinks.
Here, we'll learn from her approach. We'll take three principles of conventional economics. We'll see how Jacobs traces them through ecological systems. And we'll watch her compare them to the way our own modern economies express them instead. By the end, with luck, we'll have a starting sense of what it would look like to have a whole other kind of economy, one more in line with the rest of life. In fact, if we're successful, it ought to feel quite natural.
An economy, principally, makes things. It turns one thing into another, and then passes them back and forth among us. A farmer turns soil and seeds and water -- three natural resources -- into wheat. He sells some of that wheat to a baker, who combines it with salt and water, and turns it into bread. And so on. Production is the basis of economic development. We develop one thing we are given, into something else we need.
When we watch a whole bunch of these interactions unfolding together, Jane tells us, a natural pattern is seen: generalities differentiate into particulars. A tree trunk divides into branches. Each of those branches divide into smaller branches, and each of those into smaller branches still. Human lungs work this way. Blood vessels and veins run this way. Once created, each particular then becomes a new generality, and differentiates itself into new particulars in turn. It’s a basic fractal pattern, and you can see it everywhere.
Every development also mixes and merges with other separate but parallel developments. The growth of tree branches is fed by the production of UV light in the sun, and by the production of carbon dioxide in animals' lungs, and so on. Jacobs calls these parallel tracks co-developments. Each of us is dependent for daily life upon an enormous web of co-developments. This web, Jacobs says, is a habitat. A living, breathing, evolving, overlapping web. This is how nature produces.
In economies, you can observe the principle of differentiation at work as well. Iron is mined from the earth, and filtered to become solid iron ore. That iron ore is developed into steel. Steel is melted down and re-formed into car panels and kitchen sinks. Co-developments produce rear view mirrors, cushions, and tail lights, and a car is produced. It is, Jacobs tells us, “an open-ended process, generating complexity and diversity.”
Except for one catch. In our economies, it isn’t all that open-ended. Almost invariably, after three or four transformations, it stops. What new generality does a car become? Sometimes the steel is salvaged. The mirror, the seats, and the tail light are likely destined for landfill. But nature doesn’t have any landfills. There are no dead ends. Each differentiation, without fail, becomes a new generality. What our culture calls garbage and pollution are simply those things that cannot be recycled back into the system in a practical way. From nature’s view, that’s uneconomic. Our landfills are monuments to the dysfunction of our economies -- at least by comparison with the efficiency of everything else alive.
There’s an even deeper inefficiency in our culture's dead-end economics than the fact of pollution. (Deeper, that is, than the obvious fact that given enough time we will literally suffocate in our own garbage.) Let's recall how each process of development relies upon and blends with parallel co-developments, each of which in turn comes from an enormously complex, distinct line of development of its own stretching back through time. Multiply this by millions. This is what development in an ecosystem looks like. Our single-use, disposable products, by contrast, constrain the creative process. When something is thrown into a landfill, its line of development ends. The enormous genetic or mechanical differentiation that produced it is lost to the system forever.
When nothing is lost from the system, though, the resulting complexity and diversity are staggering. Open-ended development permits the maximum possible number of relationships and interactions -- the most complex and diverse possible economy. A diverse economy, like a diverse ecosystem, is resilient. It is capable of weathering shocks. A diverse and integrated system is creative, responsive, and strong.
When many things are produced, and the total size of the system expands, we can say that it has grown. We talk about growth in our economies constantly. But the conversation sits atop a fundamental problem: as we rush to keep growing, we are using up our basic inputs for growth -- our natural resources -- far faster than they can replenish themselves. And yet growth is a fundamental feature of life on Earth. Are there other ways we could do it?
Any economic or ecological system, Jacobs writes, is a kind of energy conduit. It takes in a certain amount of energy at the beginning, transforms it into new things, and then sends energy out the other end. A lot of growth can happen from relatively few resources if, inside the conduit, those resources are efficiently used.
In our usual economic theory, she tells us, we try to grow by increasing our outputs from the system. We want to sell exports in large quantities all around the world. We celebrate large-scale industries, like food processors, or car manufacturers, or tech giants. When we try to grow through increasing our exports, we're focusing on transforming inputs and sending them out the other end of the system as quickly as possible. It's a short trip through the energy conduit.
Natural systems work in the opposite way. Jacobs gives us the example of the tropical rainforest, home to some of the most explosive growth on Earth. You might expect that the rainforest grows as it does because it's blessed with abundant inputs -- lots of rain, rich soils. That's the way we'd see it in our usual economic thinking -- a short, straight path from input to output. But Jacobs tells us that the rainforest works entirely differently.
The rainforest, in fact, gets so much rain that its soils are made terribly poor. All the rain leaches minerals from the soil, making it hard and dry. If a patch is cleared for agriculture, crop yields dwindle after just a couple of years. What rainforests do, Jacobs says, is extend their use of inputs for as long as possible before they leave the system. They build a very long conduit.
Following rainstorms, they generate short bursts of growth. As emerging plants proceed through their life cycles, they drop dying leaves onto the forest floor. Those leaves start to decay, laying down a longer-term, slow-release source of nutrients for larger trees. After the next big rainfall, the enriched soil can support an even bigger burst of growth. As the cycle continues, the ground cover thickens. Small bugs and mushrooms make their homes among the fallen leaves, attracting animals, whose manure adds to the compost pile. Soil bacteria thrive on the decaying matter, and they create more soil nutrients in their wake. As the ground cover grows and grows, it stretches out the value of the starting stock of nutrients in the soil.
The rainforest grows so well not because it is blessed with abundant inputs, but because it makes efficient use of the inputs it has. Every bit of soil nutrition is gathered up and distributed multiple times through the network before it has a chance to leach out through the ground. Instead of short, direct conduits from input to output, it builds long ones, stretched out over many overlapping processes of co-development. Most of the value is contained in the conduit itself. Cut down the rainforest, and you've got very little left. The rainforest places its focus on retaining inputs, and it grows both explosively and sustainably.
Could we do the same in our economies? If we're drawn to those large-scale exporters because they provide a lot of jobs, could we create jobs by increasing the number of connections inside each of our systems instead? Could we build a long conduit? Could we pass the same resources back and forth to one another, each adding a little bit as we go?
Indeed, we could. In standard economics, it's called adding value, and it's highly prized. But we don't prioritize it. It always just seems easier to pull more inputs out of the ground and funnel them through a short conduit than it does to build a real local web of activity. If that's so, it's just because we don't place any inherent or formal value on our natural resources. We treat them as though they were unlimited. But they aren't, and we're shooting them through short conduits at a foolish rate. Meanwhile, those dense, local webs we're neglecting are what make an economy resilient, creative, and more equitable and fair.
So what might it look like if a town grew like a forest? Imagine a fertile plot of land somewhere in Southern Ontario. In our conventional thinking, the best way to use that piece of land would be to plop an export plant down on top of it. Import a bunch of materials, and make one product in large quantities. Turn the inputs into outputs, and send them on their way. If it does well, it could attract a few thousand jobs. Through those workers' salaries, we could support a few hundred others in home construction, haircuts, restaurants, and more. That's one option.
If we thought like a forest, we'd start out by asking how many different uses we could draw from this single plot of land instead. We'd be looking for the maximum number of interactions and co-developments, to keep the value that's present in that land cycling through the system as long as possible before it leaves. For starters, we could grow food on it -- but not just one single crop of wheat to cut and put on a train to somewhere else. That's short-conduit thinking. We could start out growing corn and beans and squash, all together in a single row. They work in tandem to feed each other, making maximum use of soil nutrients and water. The corn and beans could supply a Mexican restaurant in town. The squash could be saved for the winter, to help the farmers' market run year-round. Another row could be used to grow flowers, supporting a local florist's shop, and feeding in to wedding and funeral services.
Another part of the field could go to cattle grazing. That would generate a new input of manure for enhancing the outputs of rest of the field. Dairy cows could produce milk, providing work for a local cheesemaker, and supplying a pizza shop. The whey, a by-product of cheesemaking, could be sold off to a pig farmer down the way to supplement the diet of her pigs. Still another part of the field could be used for windmills, generating repair work for a local mechanic. If enough other people did the same, a small regional plant could go up to supply spare parts for the windmills, or even build them from scratch. The web can keep growing, thickening, and developing from there. If other local people start to take the same approach, the potential for co-development grows exponentially.
Both the car plant and the mixed-use farm generate a large number of jobs from the same plot of land. But one of them -- the car plant -- does so through a short conduit, rapidly cycling materials through. The other -- the mixed-use farm -- accomplishes it by multiplying the number of uses for each material, generating a complex, diversified local web.
Would it work, we must ask, for a modern high-tech city too? Absolutely. Cities are shining examples of dense, local webs of co-development. A single busy restaurant might contract the services of a local accountant, lawyer, interior designer, and marketing specialist, on top of their own staff and suppliers. When governments try to encourage further growth in cities, oftentimes they try to entice a large multinational corporation, like a technology firm or a pharmaceutical company, to set up a local office or plant. Instead, they could choose to support the growth and development of what already exists in the system.
To attract a large exporter, governments might spend revenue on subsidies and tax breaks. To encourage interconnections instead, that revenue could be spent on local infrastructure: building transit to help citizens quickly reach each other, providing affordable child care to facilitate working life for parents, or supporting public parks and the arts to help everyone feel energized and refreshed. Just like in the rural example, it's a choice between investing in one large set of outputs, or priming the whole ecosystem to make maximum use of the inputs that it already has.
With a focus on attracting exporters, a city or town might have the potential to grow richer in less time. But with the diversified, input-stretching approach, the city or town's economy will be more reliable, durable, sustainable, and creative. Forests opt for stability and for balance. And they think for the long term. They'll always choose the second way. Given the choice, I think most people would too.
All organisms need to re-fuel themselves in order to survive. When you eat, you generate at least enough energy to acquire your next meal. This is self-refueling. In a business, you need to make enough money selling a product to purchase the materials for the next one. And in a whole economy, money is made to import goods by exporting goods to other places. In order to stay in balance, it tries to earn enough through exports to be able to purchase all the imports it needs.
As we’ve seen, in our conventional economies, we tend to focus on the export side of the equation. There's a certain logic to it. But when it comes to self-refueling, by forest standards, that's a pretty risky approach. Because if the big exporter moves away, the city runs out of fuel.
A city that leans heavily on big export industries isn't behaving like a self-refueling organism, Jacobs tells us. It's behaving like a machine, waiting to be powered by something outside itself. "Somebody has to refill its tank for it," Jacobs writes, "and if nobody does, the machine stands still.” When the big U.S. auto-makers declined, Detroit fell into trouble. It couldn't refuel itself when the big exporters moved away. We see this pattern, painfully, over and over again.
Jacobs takes us back to the forest model to imagine another way. Not only do forests make maximum use of their inputs, and recycle them when they're through, but the inputs that they do rely on are very simple, very few, and very dependably available. How? They make much of what they need themselves. Each plant is like a little chemical laboratory, re-organizing and synthesizing inputs to produce what else it needs. Varied species’ functions overlap to enrich the resource base for all. If you want to be less dependent on large-scale export, Jacobs tells us, you focus on the other end of the equation: you reduce your dependence on imports. You make more of what you need for yourself. And as you grow your own local ecosystem, you end up generating exports anyway from within. This is how an economy can fuel itself.
Jacobs shows us how this works through a lovely story of the early economy of San Francisco. The city began as a gold rush town. Merchants popped up to sell provisions to prospectors. As the economy matured and diversified, merchants started importing luxury goods from the cities of the East. One grocer, named Cutting, started bringing in jams and preserves from a Boston warehouse. He realized he could reap a bigger profit if he made the jams and preserves himself instead. So he went out to some of the farms on the outskirts of town and persuaded a handful of cattle ranchers to plant peach, pear, cherry, plum and apricot trees. Today, of course, the area is a hugely successful fruit-producing region. But that’s a co-development story for another day.
Cutting’s preserve-making initiative was a hit. Other merchants started to follow his lead. Some started canning beans and peas, which before then had been imported from the East as well. The little industry grew, and as it did, the balance of San Francisco's imports shifted. Fewer jams were brought in, but a lot more sugar and empty glass jars. And so someone started up a glass jar-making factory in town. A few others started bringing in sheets of tin to make cans. By the 1930s, canned and dried fruits and vegetables were the second-largest industry in the city, and tin cans and other tin goods were the fifth-largest. Other import replacements took place simultaneously in other industries -- co-developments -- and eventually demand grew large enough to justify a local glass-making factory and a tin-rolling mill.
Substituting local production for imports, San Francisco powered much of its own growth from a sleepy gold-rush town into a major metropolis. In time, it could export its home-grown products to other places, earning more money for imports. And because those exporters had grown up from within, enmeshed in co-developments with other local producers, they were rooted in a dense, interconnected web of local production. That web could function as a unit to provide San Franciscans with much of their own needs.. If one of the exporters went suddenly out of business, the economy as a whole would stand a good chance at adapting, recovering, and correcting, as would the individuals within it. As in a forest, the diversity, creativity, and resilience of the system would be its strength.
In our conventional economics, this sort of local approach is sometimes scoffed at. The rule has long been to let each area specialize in making one sort of thing, so that each thing is made most efficiently. It's called economies of scale: the higher the scale, the more economical. But viewed through the lens of self-refueling, the conventional approach is suspect. Depending on trade for much of your employment or to fulfill your basic needs sets your economy upon a shaky branch. A thoroughly globalized economy, whatever its theoretical appeal, is deeply at odds with the pattern in nature.
Against economies of scale, Jacobs argues for economies of location. Learning from forests, she says, economies should seek the maximum number of productive relationships at every single geographic node. Some trade is perfectly fine, but the more an economic system depends on export and trade for its basic health, the more it sacrifices its own resilience, and its own creativity.
There is one way in which a human economic system differs from a forest ecology, a way in which they can't be made quite equivalent. Unlike every other life form, humans have a choice. We can choose to participate in the forms of production and exchange that have been honed through evolution, or we can choose to contradict them.
An economy, like a forest, is a self-organizing system, except for the humans who populate it. We organize one another. We organize together. We organize our systems in the ways that we choose. And so we need to make a choice. We can choose to organize our economies so that they co-operate with the wisdom of living systems. We can choose to preserve what Jacobs calls “the double nature of fitness for survival:” the freedom to act as an individual, and the sacred responsibility of preserving the health of the habitat for everyone else.
The limits such a choice would impose upon us are not so restrictive. A million forms of life are possible within them. And diversity may reign. Beautiful, insightful forms of living are cropping up all around the edges of our conventional economy, and in my own opinion, many of them promise much happier, much richer lives than we have now. Not to mention the added perk of continued human survival. We’ll start to explore some of them in future posts on this thread, partly just to share these great ideas, and partly, of course, to tease out how they exemplify and express newly emerging philosophies of human life.
All we need to do is ensure that we begin to live once again in symbiosis with the rest of the living world. When we do, the actions of any one of us will contribute positively to the whole. It may sound utopian. But look around. See the patterns. The whole world lives this way, except for some of us. For everyone else, it is basic, commonplace, and obvious. It is how we travelled most of the way through time to where we are. We need only remember what we once knew, and build forward from there.