Scotland Independence, English Cities and the State of American Federalism

As Scotland prepares to vote on independence this week, it is easy to dismiss the upheaval “across the pond” as irrelevant to American political institutions and arrangements. Despite our nation’s deep partisan divide and the occasional wild secession talk of demagogic politicians in Texas and elsewhere, an American state leaving the union is not even a remote possibility. Yet the Scottish vote—and, more importantly, the broader devolution debate underway in Britain—does have timely lessons for the United States.

First, some background: The underlying issue in Britain is about power and how it is distributed across multiple layers of government and society. Britain is one of the most famously centralized nations in the world. Whitehall, the seat of national government in London, collects almost all of the tax revenue in the country and then enforces a heady mix of tax, spending and regulatory programs and policies. Government agencies tinker and meddle on issues that are routinely left to states, provinces or cities in other countries.

The extent of central control is such that Ken Livingstone, former MP and London’s first mayor, once famously characterized Britain’s political culture as the equivalent of “East Germany at the height of the Cold War, with a required election every four or five years that is more or less democratic.”

Bob Kiley, an American who ran the London Transport system during the mid-1990s, disagreed. “North Korea is a better example,” he said.

In the past fifteen years, Whitehall’s iron grip on power has slowly begun to loosen. Since the late 1990s, powers have been partially devolved to Scotland and Wales. London now has a directly elected mayor (as do other large cities like Bristol and Liverpool) with powers over transportation, economic development and planning. More recently, “metro deals” have been struck between central government and major British city regions like Greater Manchester, enabling greater flexibility and sparking collaboration across jurisdictional lines.

The demand for more devolution to major cities now dominates British politics. Two widely respected political figures—Lord Michael Heseltine, a former Tory deputy prime minister and Lord Andrew Adonis, a former Labour minister for transportation—have issued major treatises on the topic in the past few years. The City Growth Commission created by the Royal Society of Arts a year ago (and chaired by former Goldman Sachs economist Jim O’Neill) is poised to issue a major report this fall. Well-respected think tanks like the Centre for Cities, Centre for London, Policy Network and IPPR North are now weighing in with sensible reform proposals and concrete initiatives.

All these efforts embrace Lord Heseltine’s devolutionist credo, “Local leaders are best placed to understand the opportunities and obstacles to growth in their own communities.” More broadly, these efforts recognize the outsized role that major cities and their metropolitan areas play in the British economy and position devolution as a vehicle for advancing core national objectives like restructuring the economy, creating jobs and enhancing social mobility. As Lord Adonis has written, “We have got to see prosperity shared more widely, and it can only be shared more widely if we have strong powerful economic and political institutions at the local level able to deal with these fundamental problems of skills and infrastructure.”

Does the British devolution debate apply to the United States? The starting points are obviously different in important ways. As a federal republic, power is already shared between the federal government and the states. And the level of fiscal and other powers enjoyed by cities and metropolitan areas far outweighs those that exist in Britain and most other nations.

Dig a little deeper, however, and it is clear that American federalism is in a deep state of crisis and in serious need of repair.

Our cities and metropolitan areas—and the networks of public, private and civic institutions and leaders who co-govern them and co-finance growth—are increasingly grappling on their own with super-sized challenges that range from population growth and demographic transformation to urgent economic, social and environmental demands. By conservative estimates, they will need to invest trillions of dollars in the next decade in key areas like infrastructure, housing and education to stay competitive in the global economy. With Washington mired in partisan rancor and many states adrift or hostile, responsibility is falling to cities and metro areas to get the job done. This trend will only accelerate as federal and state governments face new fiscal constraints due to the aging of our society and related pension and health costs.

Like Britain, the United States needs a “decentralization decade” (a term coined by an IPPR North report) to unleash the latent potential for investment in cities and metropolitan areas and power the nation forward. Three things are critical.

First, the federal government and states should lead where they must and make the kinds of nation strengthening investments that cities and metropolitan areas are simply not equipped to make. Investments in the safety net to ensure that disadvantaged individuals, old and young alike, have the wherewithal to live lives of dignity and promise. Investments in basic science and applied research and development to recapture America’s historic lead in innovation. Investments in infrastructure to further link metropolitan economies and knit the nation together, maximizing the prosperity of our common market. The funding to make these kinds of smart and strategic investments is available but only if our higher levels of government “cut to invest” and re-allocate hundreds of billions of dollars a year away from consumption-oriented activity (e.g., the federal mortgage interest deduction, wasteful state economic development subsidies) and towards productive, innovative activities.

Second, the federal government and states should give local and metropolitan actors better tools and greater flexibility to make decisions that meet their unique challenges, particularly in the face of budget cuts. Boston and San Francisco, for example, should be allowed to find new ways to finance public and affordable housing or determine their own priorities for federal skills or infrastructure funding rather than adhere to rigid rules and prescriptions made in Washington. New York City shouldn’t have to beg the New York State legislature to enact congestion pricing or raise local revenues to fund pre-K education—a feudal “may I?” system that is the rule rather than the exception in state after state. More powers, in short, should be nested and vested at the local and metropolitan level and new forms of innovative financing mechanisms should be tested to attract a robust mix of public, private and civic capital.

Finally, the federal government and the states should encourage collaboration between cities and their suburbs rather than rewarding competition between them. As the turmoil in Ferguson, Mo. reminded us, a multitude of small, balkanized municipal governments dot the governing landscape of most metropolitan areas, making problem solving difficult on the vast array of issues that naturally cross borders. We need a burst of experimentation to better align the geography of governance with the way our natural and economic ecosystems actually work. Perhaps the federal government and states could negotiate their own “metro deals” with cities and their suburbs on issues like housing, infrastructure, skills training, environment and economic development. Perhaps states and urban counties could create new public/private institutions to design and implement economic development strategies that drive productive and innovative growth and lessen competition between “little box” governments.

The United States, in short, needs to think again about federalism, and remake it in a way that accounts for the economic power, networked structure and irreducible diversity of America’s cities and metros. If the 20^th century rewarded the hierarchical, bureaucratic nation-state, the 21^st century demands federated republics that not only rebalance power between different levels of government but across different sectors of society. As in Scotland and Britain, this will require higher levels of government to trust the nation and its limitless potential for pragmatic, affirmative innovation and give up power to advance national prosperity and innovation.