Financing urban creativity

Jane Jacobs

Jane Jacobs in her notable book 'Cities and the Wealth of Nations' (published by Random House,New York, 1984, ISBN 0 394 48047 3) has shown how nations are the economic dependents of their cities, subsiding into poverty as cities lose economic vitality. Here is an adapted extract from her book instancing how the city of Boston, stagnant economically after the war, bounced back.

Ralph Flanders (who later became a US senator from Vermont) reasoned that Boston's trouble was what he called its low birth rate of enterprises. He persuaded a handful of moneyed colleagues to accept his point of view, and in 1946 they formed a small venture capital firm to do what used to be called merchant banking. The object was specifically to invest in small new enterprises, and specifically in Boston. For this purpose they had a capital of almost $4 million, which, owing to inflation in the meantime, would be the equivalent of about $28 million today.

It so happened that the first applicants for capital were three young scientists who had started a tiny high-technology enterprise, using their own and their families' savings. They could not continue without additional investment and were about to close up because investors in Boston and New York would not advance them capital. The new Flanders group, their last hope, agreed to invest in the fledgling business, and then rapidly in several other small innovative technological enterprises that became the next applicants.

'The enterprises they financed - because these were what offered themselves, and their proprietors seemed realistic in their devotion to what they were trying - began to multiply by division. The Boston regional economy was rejuvenated'

The enterprises they financed - because these were what offered themselves, and their proprietors seemed realistic in their devotion to what they were trying - began to multiply by division: employees broke away and started new enterprises of their own, many of which Flanders and his colleagues also financed. Upon this base, upon its many subsequent ramifications and breakaways, and upon the multiplying suppliers of materials, instruments, tools and services that served the new enterprises and thus were supported by them and by one another, the Boston regional economy was stunningly rejuvenated. Today Boston has one of the few vigorously extending and intensifying city regional economies in the United States.

Germane economic correction depends on fostering creativity in whatever forms it happens to appear in a given city at a given time. It is impossible to know in advance what may turn up, except that - especially if it is to prove important - it is apt to be unexpected.

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