The conventional prescription for poor and backward nations or regions is “industrial development.” This seems a logical remedy for their plight since any economy that lacks industry must either go without manufactured goods or else, to an absurd degree, import almost everything its people require, paying with one or a few kinds of cash crops or resource exports. Such colonial-type economies, by definition, are not economically well rounded, cannot produce amply and diversely for their own people and producers as well as for others the way rich and more advanced economies do. They lack much range of opportunity, have no practical foundation for economic self-development, and are disastrously at the mercy of distant and often capricious markets for the few things they do produce. To wriggle out of their fix, it is true that they need industry.
In practice, however, the conventional prescription is reduced to two conventional strategies, used singly or in combination: attempts are made to attract transplanted factories from elsewhere; and ambitious programs are launched to build up major industrial facilities usually, except in the case of rich oil producers, financed by credits or grants. At first thought both strategies seem admirably to the point. What could be more straightforward? Unfortunately, in practice, they work miserably. Just such industrial programs and projects, for example, are largely responsible for the vast, unpayable debts with which Brazil and Mexico (and their foreign bankers) now struggle. They have helped to produce outright economic debacles in Uruguay, Turkey, Iran, Cuba, Ghana, and Tanzania, to mention a few varied examples. Countries or regions that have enjoyed far better than average success at attracting branch plants or other industrial transplants, like Ireland, Puerto Rico, the Canadian Maritime Provinces, or southern Italy, have been disappointed nevertheless. They expected the acquisitions to catalyze continued development, growth, and prosperity, and these haven’t materialized. We live in a distraught time of failed and failing industrial development schemes.
I am going to argue here that the cause of these failures goes deeper than poor planning, recessions, the price of oil, political miscalculations, corruption, greed, and so on. At their root is a terrible intellectual failure, for the prescribed strategies themselves are foredoomed to produce disappointment, futility, and debacles. The germane prescription is more roundabout. What backward, stunted economies lack is productive cities that can replace their imports—and enough such cities. This is the lack that makes such economies stunted in the first place. Overcoming it is the only effective cure for what ails them. This is so because productive cities, containing proliferations of diverse, symbiotic producers, are the only types of settlements capable of replacing wide ranges of their imports with local production in a practical, economical fashion. Hence cities are the only kinds of settlements that can generate the industry resulting from this vital economic process, and the further industry built upon it. The world abounds in evidence, both positive and negative, of these realities; if we only look, it tells us why the conventional …
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An Exchange on TVA November 8, 1984