One of my favorite ironies of our World is that London, the current Global Capital of Capitalism, the "IT" City of our times, has a Socialist Mayor. This is something the media at least in the US ignores. If London was lead by a conservative free marketeer the media would be saying that the Mayor's politics was the reason for the City's success, but because the Mayor is socialist, he is never mentioned in explaining the amazing ascendence of London in the last decade to its traditional role of world capital.
Essays » A city of capital
London is diverse, dynamic and rich. It is also unequal, expensive and congested—and getting fuller every year. Can London's socialist mayor preside over a hyper-capitalist city-state while keeping it a decent place to live for most citizens?
Simon Parker is head of public services research at Demos. David Goodhart is editor of Prospect
At the top of the Greater London Authority's headlamp-like headquarters on the south bank of the Thames, Ken Livingstone's office takes in a panorama from the edge of the City of London, over Tower Bridge and down the river towards Canary Wharf. A hubristic man might feel he was in London's cockpit, surrounded by the levers of power.
Actually, the GLA has rather few levers compared to comparable big city authorities. And it is just such minimal governance, both here in City Hall and Westminster, that is said to be one reason for London's renaissance. The management consultants McKinsey recently said that Britain's relaxed approach to immigration and regulation was making London the best place for financial business in the world. In the next few years, the city could regain its historical role as the world's financial capital, pushing a traumatised, post-9/11 New York into second place.
Since becoming mayor seven years ago, Livingstone has watched from his cockpit as the glass towers of high finance—including the iconic gherkin— have sprung up across the river. And whoever is sitting in the mayor's office in ten years' time will be watching a new line of skyscrapers wind across east London's Lea valley and down towards Canary Wharf. The 2012 Olympic games will have spurred regeneration in the east, including a new era of high-density housing for the 800,000 extra people who will be living in the capital by then (taking its population from today's 7.5m to 8.3m). The streets around the GLA building will have few cars on them—the congestion charge will have expanded its reach and cost, taking in most of inner London—and private gardens and cars will increasingly be the preserve of the rich. London's 32 boroughs may have been reinvented as five gigantic wedges, dedicated to shuttling people into and out of the centre.
London's dynamism is not without costs and victims—including, arguably, most of the rest of Britain. And to many people, especially those on moderate incomes, life in the capital often feels like being trapped in a spiral of growth. But London's status as a global city—a city of a different order to Paris, Berlin or Rome—is no longer just a passing fad. Since the 1960s, American news magazines have had a taste for periodic "swinging London" features, giving the city a brief glow of self-importance. The latest round of London "boosterism" has, by contrast, come not from a magazine but from a hard-headed report on financial services.
The London of 2007 is almost unrecognisable from the one that Ken Livingstone was ejected from in 1986 when the old Greater London Council was abolished by Margaret Thatcher. Back then, he was in charge of a city in decline. Industry had left and the population was falling. Cities, more generally, were unloved. Futurologists predicted a world of home-working and "edge city" expansion.
In fact, the abolition of the GLC coincided with the end of London's decline. It was not clear at the time, but the Thatcher government was putting in place the foundations of a new London. It was turning the British economy into one of the most open and deregulated in the world, speeding the switch from manufacturing to services. Enthusiasm for deregulation spread to the City of London, where "big bang," also in 1986, laid the foundations for rapid expansion. Financial and business services, along with tourism, arts and civil aviation, were to be Britain's future—and all of them centred on London.
Global economic developments reinforced London's position, both within Britain and internationally. The increased mobility of capital and labour made it more difficult for governments to direct economic activity away from the metropolis. Moreover, London had significant advantages. It was the capital of a country with relatively good government, moderate taxation and a strong legal system. Its time zone overlapped with both the far east (in the morning) and New York and Toronto (in the afternoon). English was spoken. The City of London corporation acted as a well-connected cheerleader for its local industries. The result is that London now leads the world in several financial sectors, including foreign exchange, derivatives, insurance and international equities. It directly employs around 300,000 people in financial services, who earn an average of £90,000 a year.
The arrival of the Blair government in 1997 did nothing to undermine London's vigour. In fact, it made various changes that further helped London. One of these was the creation of the GLA and the office of mayor of London, which allowed Ken Livingstone, the nasal-voiced south Londoner, the "cheeky chappie" of British politics, to re-emerge in 2000 as socialist boss of a hyper-capitalist city-state. For the previous 15 years, London's governance had advanced via a messy patchwork of quangos and agreements between the London boroughs. The GLA was to provide a more strategic view.
Another helpful change after 1997 was a relaxation of Britain's immigration rules, marking the start of a period of sharp growth in net immigration to the capital. Each year from 1997 to 2006 saw a net inflow of 100,000 foreigners to London, to which must be added the population's natural growth (more births than deaths) of 50,000 to 75,000 a year. These increases are partly offset by an annual outflow of around 80,000 to the rest of Britain—take immigration out of the picture and, according to some estimates, the capital's population would have fallen by around 600,000 between 1993 and 2000. The net effect of this population "churn" is that London's population is now around 35 per cent foreign-born, a figure moving rapidly towards 50 per cent.
The proportion of the London population born overseas is now on the point of passing New York and is even coming close to the level New York experienced during the period of massive immigration in the mid-19th century. Given the existing diversity of London's ethnic make-up—just under 30 per cent of the population were non-white at the turn of the century—the scale and type of post-1997 immigration has given London perhaps the most exotic population composition of anywhere on the planet. Toronto, though a smaller city, is similarly diverse. New York is not far behind. But nowhere else in Europe or Asia can match the sheer numbers and ethnic complexity of modern London.
New Labour's final contribution to London's global attractiveness has been the harder-to-measure matter of the pursuit of a tolerant and "live and let live" political culture. David Cameron's efforts to modernise the Conservative party attest to the relatively relaxed society Britain has become. For the world's nomads, rich and poor, London is an easy place to settle and find anonymous acceptance (while Britain's "non-domiciled" tax rule allows many rich people to avoid tax on income earned overseas). Indeed, the capital has been a magnet for 1m incomers—at all income levels—during the past decade.
Rich London's swagger has rarely been more confident, and its auction rooms, estate agencies, Michelin-starred restaurants and institutions of high culture are thriving. There are 108,000 people in London earning over £100,000 a year, which as a proportion of its population is more than twice the national figure, and there are 38,000 who earn more than £200,000—over a third of the national total. (If those working in the City of London were removed from the national earnings figures, Britain's income differentials would look far more like the more egalitarian continental European countries.) Even average annual earnings in London are far higher than the rest of the country: £37,323 compared with £24,301 for Britain as a whole.
Go back to the GLC's 1985 economic strategy, and you find a document from another age. It has sections on the furniture industry and how unemployment will be solved by workers' co-operatives in the Docklands. By the time Livingstone re-emerged as London's leader in 2000, London had spent more than a decade pursuing a model of growth based on openness to the global economy. The Docklands were now covered with financial institutions. And London's economic growth has been underpinned by a simple swap: over the past 30 years, 600,000 manufacturing jobs have been lost and 600,000 financial and business services jobs have been created. The latter sector accounts for 65 per cent of London's job growth since the 1970s, and in the future it will be closer to 80 per cent.
Over the next 20 years, London needs to build homes, infrastructure and transport systems to accommodate another 1.1m people. And the city's growth must be more intensive than in the past. Politicians of all parties want to protect as much green land as possible around the capital and green lobby groups say there should be no sprawl beyond existing cities and towns. London is now having to bulge eastwards into the so-called Thames Gateway in an attempt to accommodate "brownfield" growth. The gateway, a region that takes in nine east London boroughs and stretches along the coasts of Kent and Essex as far as Sittingbourne and Southend, is earmarked for 120,000 new homes by 2016.
Raising London's population density may not be as hard as it looks, because, despite its crowded tubes and roads, London is sparsely populated. The typical number of dwellings per hectare is 1,700 in Kowloon, 500 in Barcelona and 300 in Paris. In inner London, even recent developments have averaged only 78. If London had the population density of Haussmann's Paris, it would house not 7.5m people but 35m.
But the 800,000 new residents expected over the next decade will require about 450,000 new homes. About a quarter are due to be built in the eastern gateway, and most of the rest will be closer to the centre. Livingstone, who has only just taken control of London's housing strategy, has set demanding housebuilding targets for the boroughs, aiming at a total of 31,000 new houses a year across the capital. Between 1997 and 2016, the boroughs of Lambeth and Southwark are expected to absorb around 29,000 homes each, while Tower Hamlets alone will take 41,280—only 15,000 fewer than the whole of south London. It is envisaged that these new homes—most of them connected to transport hubs—will be built at Parisian levels of density: between 240 and 435 dwellings per hectare in central London (and 55 to 275 in outer London), which means that almost all will be part of medium-rise flat complexes without gardens.
Moving all these extra people around is another mighty task. The London underground is the oldest system in the world, a relic from one of the city's earlier golden ages. Livingstone is locked into a controversial 30-year public private partnership to improve existing lines, with about half of the £30bn coming from central government. The aim is to reduce delays and improve capacity, but in the short term the situation will worsen as lines are closed for overhaul. Private companies are set performance targets and allowed to find their own way to meet them, ensuring that Livingstone's Transport for London has little direct control over what happens. The only big new development is likely to be an extended East London line, connecting Highbury and Croydon, and eventually looping from Surrey Quays to Clapham as part of a new orbital rail system for inner London.
The biggest developments will be overground. Livingstone has already increased the bus fleet by over 20 per cent. New tramlines are planned to link the west with the centre, with extensions to link with the Docklands Light Railway. But the most controversial development is the Crossrail overground rail connection, which will link the city from east to west. This has been talked about for more than 15 years, but it is still not clear whether it will happen or who will pay for it. Livingstone is now saying that if Labour does not agree to provide central government funding, he will not help them win vital London seats at the next general election.
When Livingstone returned as London's leader in 2000, he had changed as much as the city. He still calls himself a socialist, but—as our interview makes clear—he recognises that the reality of liberal globalisation, along with his own limited powers, have transformed the terms of debate over London. Currently, the main powers of the mayor and GLA are in rejecting large planning applications and the ability to determine fares and investment for the main forms of public transport. In addition, they have powers over regeneration, culture and the environment, as well as budgetary control over the police, fire brigade, transport and the London Development Agency. (The mayor only raises about £800m a year from council tax for his own use, less than 10 per cent of the near £10bn spent by the GLA on services in London.) The mayor is also London's chief strategist and lobbyist.
Livingstone would like to be able to intervene to redistribute wealth and to impose a financial transactions tax. But realising that this is not possible, he instead has a pragmatic programme of minor reforms. The new Ken has also turned striking somersaults. The man who went to court in the 1980s to defend his right to subsidise tube fares is now charging some of the highest fares in the developed world. The new Ken is also friendlier with property developers than might be expected. Indeed, he relies on them to meet many of his social goals. If you want to build a new office complex, you will have to throw in some social housing, or a library. Over the next few years, experienced development companies will inch their way through the capital's labyrinthine planning system to deliver big new projects at Paddington, King's Cross and Elephant & Castle.
Livingstone's two terms as mayor since 2000 have been characterised less by radical policies—with the exception of the congestion charge—than with trying to help London manage its status as a global city. As he says: "It's a question of working with the most progressive forces in capitalism and government… to make it a generally happier city to live in."
This echoes New Labour's axiom that "what matters is what works," and it has led Livingstone into some surprising alliances. He recently attended Davos—the annual gathering of global capitalism—and discovered that he had a fair amount in common with the liberal plutocrats. His enemies, by contrast, are the forces of reactionary middle England. As Livingstone recently wrote: "The issue is whether, in their different ways, the left and Davos will destroy Daily Mailism before Daily Mailism destroys the prosperity of Britain." For London's mayor, globalisation brings the bonus of increasing ethnic diversity—something he has celebrated since his days as a Lambeth councillor in London's black heartland. He made great play of the city's ethnic mix in bidding for the 2012 Olympics, with a sentimental film showing London's children of many different races.
The 1970s leftism lives on most strongly in Livingstone's version of multiculturalism, and in his support for controversial foreign figures like the radical Muslim cleric Yusuf al-Qaradawi and Venezeula's president Hugo Chávez. Livingstone has cut a bizarre deal with Chávez to swap Venezuelan oil for London's governmental knowhow. And he continues to surround himself with an unchanged group of advisers who were once leading members of the Trotskyist group Socialist Action—economist John Ross, chief of staff Simon Fletcher and public affairs director Redmond O'Neill.
Maybe this is what 21st-century municipal socialism looks like. Livingstone uses his limited powers to squeeze as much money as he can out of the capitalist carnival going on around him, and redirects it to making London a little less divided by race and class. New developments bring extra social housing. High fares allow him to invest in travel infrastructure and provide free bus travel to under-16s and pensioners. Forcing extra money out of the government here and there helps him to fund his own projects—such as hiring more police officers. This is a trick he has pulled off most impressively with the Olympics, which involves huge amounts of central government money (£6bn and counting, plus £2.2bn from the lottery) being spent on the east end. Combined with the partial transfer of authority over skills policy to the GLA, the Olympics is an opportunity for regeneration, job creation and even, possibly, the establishment of a lasting infrastructure for skills training.
How effective is today's London governance? Livingstone's GLA is one of the few parts of the public sector that does not operate under a panoply of targets set in Whitehall. Most of the service delivery is done by quangos and the 32 boroughs. Judgements on the mayor's performance therefore have to be popular and political, rather than technocratic. On this score, Livingstone does not do too badly—the number of Londoners satisfied with his performance has since 2001 mostly hovered between 35-40 per cent.
Most of Livingstone's attention is directed upwards, and most of his clashes are with central government—over investment levels, the tube PPP, Crossrail and many other issues. But the mayor also has to manage his relationship with London's boroughs. Authorities ranging from downtown Westminster to leafy Bromley believe there is a limit to the intensity of development that London can bear. Local residents often oppose major new developments, and the boroughs generally reflect this bottom-up pressure. However, Livingstone has just been given new planning powers that will make it possible for him to give approval to such developments regardless of borough opposition. The stage is set for several big disagreements between the needs of the metropolis (as represented by the mayor) and those of the neighbourhood (championed by the boroughs). Livingstone's support for tall office buildings is similarly controversial in many town halls.
Livingstone still relishes a bust-up, even though it is harder for him to play the radical outsider versus the establishment. But he remains a rather prickly and unclubbable politician. The mayor's job is well suited to a loner-leader like Livingstone, and he has exercised his individual mandate to the full in pushing through the congestion charge, his boldest innovation. Livingstone's authority ultimately comes from the 58 per cent and 55 per cent of first and second preference votes cast for him in the 2000 and 2004 mayoral elections respectively. It allowed him to push the charge through where other English cities have proved too afraid of a voter backlash. Livingstone's high bus and tube fares are more controversial. Some say they have helped to reinforce the capital's three-class transport system, with the poor on the buses, the middle classes able to afford one of the most expensive underground systems in the world, and only the rich able to spend the £8 a day necessary to take a car (or taxi) into central London. Livingstone's most recent survey of London opinion highlights growing concern over high fares, but such grumbling is unlikely to be enough to deny him a third term next year, and even a fourth thereafter (he has said he wants to be mayor during the Olympics). London has voted heavily to the left in recent decades, and Livingstone has solid support among parts of the ethnic minority population. Many Londoners seem to like his mix of radical rhetoric and pragmatism.
As London adapts to its new status as the global city, there remain doubts about the quality of life it is able to offer the majority of its citizens. London's growth is already creating stark inequalities. The new jobs being created tend to be at the very top and bottom of the pay scale. Despite all the wealth generated in the city, London has some of the highest levels of poverty in the country, as well as the highest unemployment rate, at over 7 per cent. From 2002 to 2005, 52 per cent of children in inner London were living below the poverty line. As Livingstone himself says, "It's worse being poor here than anywhere else." The cost of housing, as well as transport, is very high for those on low incomes. The average house price in London is almost £300,000 (almost 50 per cent higher than the British average), and, if you are not an emergency case, the wait for public rental housing can be as long as three years. The expected sharp increase in population can only exacerbate those problems. More schools and offices need employees who can afford to live nearby, or who can commute to them. And for all London's claim to attract the most skilled workforce in Britain, people living in the Thames Gateway have the same skills and class profile as those in the Black Country.
Established ways of living in the city are being destroyed by the restructuring of the economy and the arrival of newcomers. Many long-standing Londoners are unable to take advantage of the city's opportunities, and resent outsiders who are. The most obvious symptom of social stress is the rise in support for extremist politics in London—challenging Livingstone's rosy vision of a happily multicultural and unsegregated city. There are already members of the UK Independence party (UKIP) on the GLA's London assembly, the elected council that in theory holds Livingstone accountable, and a British National party (BNP) assembly member cannot be far behind. The tensions are highest in the increasingly Muslim east end—the very area due to host Livingstone's Olympic celebration of diversity in 2012—where the games could be sandwiched between boroughs controlled by the BNP and George Galloway's Respect group.
The problems are particularly acute in the borough of Barking & Dagenham, which has in the space of a few years lost a Ford assembly plant that had employed generations and gained a host of new ethnic groups, attracted by low house prices. The result was a striking result for the BNP in last year's local elections—they won 12 seats to become the council's official opposition. The BNP has not yet reached the mid-1970s levels of support for the National Front, but a survey at the 2005 general election found that the capital had among the highest levels of potential support for the BNP of any part of the country, with 23 per cent of respondents saying they might vote for the party.
Closer to the centre of London, a group of Respect councillors have become the main opposition party on Tower Hamlets council, operating in the shadow of the financial institutions of the City. The group is made up entirely of Muslims, and they hold some remarkable views. Respect's leader in the borough, Abjol Miah, describes his faith as: "The biggest political threat. Not just to the current administration—but to the whole system."
The forces of extremism, of right and left, have grown very significantly in strength and stridency on Livingstone's watch. He believes that he has a special understanding of, and rapport with, radical Islam, just as he believes he understood Irish republicanism in the 1980s before the rest of the British establishment. But whether that is true or not, it is unlikely to prevent more terror attacks in London by Muslim and other extremists—the most visible evidence of the darker side of London's dynamism.
To the rest of Britain, London can seem an arrogant bully, devouring a growing share of the economy and evolving into a place that is wholly different from the rest of the country. This argument usually conflates two Londons: a political London that runs an over-centralised England, and an economic London, the global hub that sucks in knowledge-economy jobs and the skilled labour needed to do them. As Livingstone points out, it is unfair to blame Londoners for being home to the capital which he would be happy to see the back of. And despite regional resentment of the capital's success, the political leaders of northern cities know that London provides the tax income to fund Scandinavian levels of public spending elsewhere—public spending in London represents just 36.5 per cent of its "gross value added" compared to more than 60 per cent in Wales and the northeast. Londoners make up 12.5 per cent of Britain's population, but contribute 19 per cent of its taxes: the capital pays out roughly £12bn to the regions every year.
Yet as one study of data from the 2001 census puts it: "The country is being split in half. To the south is the metropolis of Greater London, to the north and west is the 'archipelago of the provinces'—city islands that appear to be slowly sinking demographically, socially and economically." The government has attempted to correct some of this imbalance. But while some regional cities, such as Manchester, have blossomed under Labour, they remain an archipelago of fragmented urban centres. This has bred a difficult regional dynamic within British politics—resentful provincial cities dislike their dependence on London and try to prevent their tax money being spent on more projects in the capital, even when those projects could benefit the country as a whole. Crossrail is a prime example, with Westminster reluctant to spend national money on a project for the capital, forcing the mayor to try to find the money from his own resources and private business.
Ronald Dworkin once described New York as a "carnival on the edge of frenzy." Modern London occasionally totters close to an edge of this kind—and a string of new terror attacks could swiftly undermine its current status. Even without such a bleak prospect, it is hard to judge what the changes of recent years will, in the longer term, do to the city. How will the overcrowding and social tensions coexist with its wealth and creativity? London has survived Britain's century-long decline to carve out a role for itself as a semi-independent city-state. But will the price of becoming the global city prove too high for those who actually live here?