We should not treat sovereign countries as the fundamental unit of economic analysis. Rather, cities should be thought of as the fundamental unit of economic development. They concentrate markets, jobs, technology, production (transplants), and capital. Even distant, outlying territories have their economic reality shaped by the demand of cities, and many successful (import-replacing) cities project economically advanced “city regions” around surrounding rural area. Regions that get entirely cut off from cities become impoverished, failed communities.
Nations muddy the ability of currency to produce a clear signal of a city’s economic status. A weak currency spurs internal production, which leads to a strong currency, which spurs imports, which again reduces a currency’s value, which encourages the city to produce those goods internally: a virtuous cycle. But on the level of a nation, it becomes unclear if a region needs to shift to imports or exports, because too many other things influence the currency’s value.
The issue of national currencies is at the root of every large countries’ economic troubles, and why large nations and empires centralize into single mega cities (Tokyo, Ancient Rome, Paris, Toronto). But this leaves other regions in the lurch and spurs transactions of decline (military, welfare, trade between very wealthy and very poor cities).
Therefore, secessions are good in basically every case. One could envision a world where peaceful secessions are seen as a normal consequence of economic development and occur regularly.
Taking the example of Quebec: without a strong import-replacing city (Montreal), the region is doomed to stagnation. The best way to turn Montreal into such a city was for Quebec to declare independence.
Potential questions
What are your on-the-face-of-it agreements/disagreements with the ideas presented?
Does the added complexity of a highly fragmented world make this a non-starter even in theory?
Could “nation-like” structures or superstructures (like the EU or UN) still exist in this world and provide most of the benefits of centralization with less of the associated costs?
Would a world like this be significantly worse at handling large-scale coordination problems like Global Warming?
Has Quebec’s stagnation come to pass? Would separating be economically beneficial in the long term, regardless of other concerns? What about Montreal separatism?
This theory correctly predicted Japan’s decline, will it correctly predict China’s? Does it explain the success of a state like Singapore (and to a lesser extent, Hong Kong)?
Does this theory provide a satisfying explanation of why charitable transfers of capital to poor regions fail to encourage long-term development?
Come on out to the ACX (Astral Codex Ten) Montreal Meetup! This week, we're talking about Etienne Fortier-Dubois’ book review of Cities and the Wealth of Nations by Jane Jacobs.
You can find a summary for this reading as well as potential questions (all written by Massimo) for the meetup at the end of this post.
Venue: Ye Olde Orchard Pub & Grill, 20 Prince Arthur St W.
Date & Time: Saturday, February 3rd, 2024, 1:00-5:00 PM.
Please RSVP. It is not mandatory, but it helps with planning the event and encourages others to come.
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Condensed summary of the reading
Potential questions