Trading places...

London is now home to a super-rich City elite whose presence not only skews the local economy but fuels national and international inequalities. Time, says Doreen Massey, for a new politics of responsible global capitalism

Even as a northerner, I am ready to confess that I love living in London. Its energy, its creativity, the feeling of being at the hub of things. Its somewhat stroppy, radical nature, and the sense that this city, certainly under its current mayor, Ken Livingstone, is a progressive place. The people it draws in, who make it the most multicultural city on the planet. You step out in the morning into a truly world city. And every city, these days, strives to be a world city.

But this is also a city that presides over a country with levels of inequality that are historically high. The yawning gap between rich and poor that was the product of the Thatcher years has not been reduced. All Gordon Brown's efforts as Chancellor to help the poorest in society - if the aim is to reduce inequality - came to nought. It is clear that we shall have to address, not only the poor, but what Peter Mandelson famously called the filthy rich. He said new Labour was extremely relaxed about them, but it is they who pull the statistics towards inequality. And it is London that has been the fulcrum for the rise and rise of these newly rich.

That rise was the product of the shift away from the social-democratic, Keynesian settlement of class compromise and the welfare state that dominated the UK for much of the 20th century, and towards the deregulation, financialisation and commercialisation of everything. It was an epochal shift not only in the economy and social structure, but also in the "tone" of society - not just an ideology of individual competition but an atmosphere that says it is OK to be greedy.

And London was at the heart of this shift. In the 1980s, there was a battle over the future of London. Free-market Thatcherites confronted a radical Greater London Council that was trying to find a way out to the Left. The Thatcherites won. It was, in effect, a victory for the financial sector - the City of London - and for the burgeoning infrastructure of a neoliberal economy that surrounds it. That victory was crucial to the national shift. And it represented a victory of an economy based in a small part of London over the country as a whole.

There is, of course, a moral case for addressing deep levels of inequality. But there are other reasons, too. London is the most unequal city in the country, and the South-east region that surrounds it is the most unequal region. This inequality stems, above all, from the location here of "the top 10 per cent of male earners" - and their presence reverberates through the city.

Most obviously, it pushes up housing costs. Even in lowly Kilburn, where I live, estate agents' leaflets tell of massive bonuses in the City and urge us "Put your house on the market now!" But while those who take this advice might benefit, the rise in house prices both exacerbates the poverty of the already poor (and non-home-owning) within the city and makes it hugely difficult for the city to reproduce itself socially. Teachers, police, nurses may be reclassified as "key workers" and special mortgages devised so that they can live in the city they serve, but cleaners, hospitality workers and security guards in the private sector somehow have to get by. The recent establishment of a London "Living Wage", the outcome of negotiations between local groups and the council, is one attempt to address this problem.

There are effects, too, on the city's economy as the sectors from which these riches are drawn crowd out other potential forms of employment and growth, which cannot compete for land and labour. One of London's greatest economic strengths has been its diversity, yet many small industries now find it impossible to survive as, to give one example, institutions buy up land and prices rise in the area around the City.

Meanwhile, the UK's north-south divide continues to widen. Powerful voices in London, both in the private sector and in Government, warn: "Do nothing to upset the golden goose!" "London" (by which they mean only these particular sectors of London) "is the motor of the national economy. Without it we are all doomed." But this golden goose starves other regions of professional labour, its soaraway growth heightens national inequality and the regional inequality further diminishes our democracy. Yet the national Government tells us that nothing must be done to harm the capital city. (It is a mirror, in a geographical frame, of its evasion of the issue of the filthy rich.) Voices from London even want to claim money back from the rest of the country, on grounds of the poverty in the city, when it is the nature of growth in London that is at the heart of the problem. The inequality within London, and the regional north-south divide, should not be seen as competing claims for national attention or resources - they are a product of the same forces, of the victory of this kind of economy and society.

And there are other questions as I step out in the morning into this world city. For it is a world city not only in its multicultural nature but also as one of the crucial hearths of the invention, organisation and propagation of neoliberal globalisation. From here run out, around the world, trade routes, investments and disinvestments, organisers of the privatisation of utilities and propagators of unalloyed market relations.

It is a real contradiction that a city whose mayor constantly makes the case for the international redistribution of wealth and power has at its centre one of the world's biggest concentrations of global corporate might. At the heart of this city that strives in so many ways to be progressive sits one of the sources of the gross, and increasing, inequality the world over.

This raises new questions: of the local production of the global (the recognition that the local place is not always simply the "victim" of globalisation but may also be active in producing it), of our relationship to place in a globalised world, of our political responsibility for the wider effects of the place that we may call home. It raises a question that could (and should) be asked of any city: what does this place stand for? How might Londoners respond to the fact that their hospitals are staffed by nurses from places far poorer than this (that the reproduction of one of the richest cities in the world is subsidised by the global South and Eastern Europe)? How should they respond to the evident clash between the strongly emerging politics of climate change in their city and the fact that it prospers from being a centre for the industries of oil and gas? How, in other words, can we take responsibility for place?

One of the most obvious dilemmas we face as citizens of places - as "placed" people, if you like - in a globalised world is that we live in a world that is also one of flows, networks and interconnections. We cannot be or do without depending on or affecting others, often very far away. Yet almost all of our formal, and certainly our electoral, politics is organised territorially. We also tend to see the spatial distribution of political responsibilities as a nested hierarchy of scales in which national and supranational bodies get to do the global things and local authorities and groups do local things.

It is time we abandoned that Russian-doll imagination of politics. "The local place" should have its own foreign politics, acknowledging and taking responsibility for the wider, global relations on which it depends and through which it produces effects. We need to develop a politics of place beyond place.

There are signs of this in London. There are campaigns around the city's role in oil and gas. The mayor supports governments and other forces around the world that stand opposed to the Washington Consensus and its form of globalisation, with its obeisance to market forces alone and its lack of attention to social questions and inequality.

There could be more: a politics that follows out around the world the place's global links, and asks about the effects there. A politics of co-operation between places, instead of competition. In each place, the relevant geographies and politics will be different. In London, the particularities of place might point to a tax justice campaign, to debates about privatisation or to tracking the routes of its multiculturalism back out around the world. It is about a local politics that is the opposite of localist, about reimagining place from the inside out. What is clear from London is that what happens there has effects far beyond the city itself.

Doreen Massey is professor of geography, faculty of social sciences, the Open University. Her book World City is published by Polity, £50.00 and £14.99.