Politics

Localism is over: politicians must think big

July 29, 2011
The nation state has failed us in recent crises, but localism is no answer. We need leadership from international institutions
The nation state has failed us in recent crises, but localism is no answer. We need leadership from international institutions


The News International imbroglio has been the biggest scandal to hit these islands since the collapse of the British banking sector in 2008. Common to the two crises has been the role of government: on both occasions seemingly absent without leave and captive to the influence of institutions that it should have been regulating. Government in the UK, and in many other western states, has had a rough time of it since the boom years ended. From the threat of contagion in the eurozone to the debt-ceiling crisis in America, nation states are grappling with global forces that are beyond their individual control.

The typical reaction in such times is to turn inward, to nationalism, protectionism and parochialism. All three of these can be discerned in the Blue Labour movement, in its belief that the inequality and inequity of the global financial boom and bust can best be tempered through a retreat to old municipal values and localism. It is tempting to seek refuge by trying to turn back the civic and economic clock, but as David Runciman has recently argued, this is not the right policy for the current climate. Instead of looking for solutions locally, we should recognise that the problems afflicting ordinary citizens today are global in their development and require global solutions.

It is time to step away from parochialism. One of the great ironies about the Murdoch affair is the dichotomy between Murdoch the man (who reneged his Australian citizenship, immigrating to America to become a citizen) and the Murdoch papers (anti-immigration and deeply nationalistic). If the man had the courage of his convictions, his papers would recognise the overwhelming non-negotiable of the early 21st century; namely, the decline in economic and political influence of the western nation state and the corresponding imperative for greater regional governance.

At the beginning of the 20th century, western nation states came to acknowledge the injurious nature of vast inequalities and concentrations of wealth. In the UK, the years before the first world war saw the New Liberals engage central government’s power for the first time to pass the People’s Budget of 1909 (psychologically, if not statistically the real beginning of income redistribution), old age pensions and national insurance. There was a recognition that the state had to act in the interests of society to counterbalance the risks that come with volatile free markets. More or less up to the 1970s, nation states remained in a position to achieve this end.

Over the past 30 years, nation states across the developed world have lost their ability to perform this critical role. Some of this loss of power has been willing, in the UK through the abolition of exchange controls, the Big Bang of 1986 and the reduction in the headline rates of income taxation. Technological change and globalisation have also played a critical role. The Washington Consensus did change the world in the decades after the end of the Cold War, and it would be churlish to deny that the benefits of these changes to both the citizens of the UK and many others the world over. But as the events of the last five years have shown, when a global economic storm sets in, nation states have lost their ability to act as windbreaker to their public.

The global economy is a reality today that simply cannot be shied away from. Though they hail from opposite sides of the political spectrum, both the American Tea Partiers and the adherents of Blue Labour are misguided in their belief that localism can be the solution to problems and forces that are clearly global.

Inspiration can be derived from the past but it must be directed to our current challenges. In particular it is instructive to consider the way that the New Liberals broke with tradition to address the problems of income inequality and social immobility, problems that we again find ourselves facing today. But the real lesson to be drawn is that New Liberals harnessed the power of national institutions to tackle national problems. Their solutions were commensurate with the scale of the issues being addressed. We must find a similar response to the crises that we now face.

In the midst of a global storm let us consider the opportunities that effective regional government might offer. Let us draw upon the values that are shared with our immediate neighbours and recognise the importance of having a significant global voice—something, as Runciman argued, a European president with effective power could offer. In what is an increasingly polarised world, between a global elite whose incomes have continued to expand despite the recession and the rest who have seen their disposable incomes and real wages freeze and slowly decline, opinion shapers must consider alternative means by which to protect societies against the harsher edges of the market. Greater integration at a European level can, for example, mean coordination on wider economic policy, curtailing our ridiculous race to be at the top of the pile for deregulation and the bottom for effective taxation.

The squeezed middle will not be protected by a return to guilds and councils, but by effective national management of the forces that will continue to shape our world. National leaders should learn from the New Liberals and strike out, change a habit, and find an institutional response that is proportionate to the challenges at hand.