Brexit, Trump and the New Localism

Bruce Katz & Jeremy Nowak, Centre for Cities · April 5, 2018


With major distractions in national governments both in the US and UK, it is up to cities to deal with real and practical challenges.

The populist upheavals underway in the United States, the United Kingdom and Europe have given a new urgency to city power. With national governments either actively hostile or frustratingly distracted, cities have become the level of society that must deal with real challenges in pragmatic and innovative rather than ideological and simplistic ways. With Brexit and presidential executive orders upsetting norms of trade, migration and climate action, cities have become a parallel system of global engagement.

In our recent book, The New Localism: How Cities Can Thrive in the Age of Populism, we argue that city power is a mix of both devolution and evolution. On one hand, city governments gain powers when they are formally delegated from higher levels of government. At the same time, city networks of institutions and leaders evolve over time, from informal collaboratives formed to tackle a common challenge to formal entities endowed with public, private and civic capital and the ability to invest and move markets.

The focus for the past decade in the United Kingdom has been on the devolution of governmental power, and that must continue and accelerate. The UK remains an extraordinarily centralized system, with momentum on innumerable challenges anachronistically dependent on the actions of national ministers and national agencies.

The election of city mayors and metro mayors – and the flexibility enabled by City Deals — has been an important step forward.  But true fiscal devolutionneeds to accompany the direct election of mayors if the potential of these posts is to be realized. If ‘mayors are to rule the world’, to use the late Ben Barber’s indelible phrase, then cities need to have a broad array of revenue raising capabilities – from basic taxes to ballot-box referenda to value capture mechanisms like tax increment financing and public asset corporations.

Yet the devolution of formal government powers is not sufficient to enhance urban resilience and performance. New Localism celebrates the rise of cities as organic multi-sectoral networks, not as the mere representation of local government and elected officials. What is needed, therefore, is the evolution of new governance arrangements to complement and supplement the expanded powers of local government.

Three steps are most critical.

First, key leaders at the local level – mayors for certain but also heads of major companies, universities, non-profits and philanthropies – must learn how to recognize and deploy soft as well as hard power. The power of mayors and other key stakeholders, rarely discussed, is the ability to convene networks of leaders and design, finance and deliver collective responses to difficult challenges.

Our book tells the story of the Cradle to Career Initiative in Louisville, Kentucky. There, Mayor Greg Fischer has pulled together the disparate organizations that focus on kindergarten readiness, elementary and secondary education, college completion and workforce-oriented skills training. The result is an integrated, outcome-oriented effort to intervene at each stage of the life cycle of children and young adults with quality investments and services. This is community organizing at the highest level and it enables disparate actors in multiple sectors to have common visions, tangible actions and sustained commitment.

Second, cities must organize private and civic wealth for transformative investments.  In Indianapolis, the Central Indiana Corporate Partnership has raised hundreds of millions of private and civic resources for investment in companies and research institutes in the life sciences field, a competitive advantage of the metropolis and region. In St. Louis, the Cortex Innovation Community has used institutional capital from Washington University and other anchor institutions to build a globally recognized innovation district.  These institutional models work because they deploy corporate, philanthropic and university resources through professionally managed entities that have clear missions and work in close cooperation with the public sector.  These institutional models also bring the full wealth of a city to life, enabling risk and impact capital to be pooled from multiple sources.

Finally, cities must take unified action to realize their collective market power. It is common in most mature countries for cities to pool political power and advocate for policy reforms and initiatives at the national level. New Localism requires cities to go further and aggregate their economic power to create market instruments and drive market decisions.

In Sweden, for example, Kommuninvest is a consortium of municipalities that creates financial instruments to serve the disparate needs of individual cities. As the Financial Times reported, “The philosophy behind Kommuninvest is simple – big is better, because size provides the necessary muscle to compete in the capital markets. Sweden’s local authorities can raise money more cheaply by joining forces under the Kommuninvest umbrella than on their own.”

Over the years, Kommuninvest has innovated on multiple products. Multiple municipalities are able to issue joint bonds, enabling them to raise substantially more capital than they could individually. In recent years, the company has helped to pioneer green financial instruments.

The company also invests heavily in knowledge transfer and represents municipalities and regional councils on issues of financing and debt management.

The import of these disparate examples for U.K. cities is clear. Pushing Whitehall to devolve more powers, while critical, is not the only game in town. Cities have organic market and civic power and can take multiple actions to leverage these powers, raise capital and have discernable impact on real challenges and real people.

The Age of Populism is not only raising the importance of cities as market makers, problem solvers and democratic bulwarks but changing and expanding the very definition of city power itself.

Bruce Katz will be speaking at City Horizons in The Shard on Monday 9 April. The event is fully booked, but audio and video will be recorded and available on our website soon after.

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