Is central national government broken? Hyper-partisanship on many aspects of economic, education, health and aspects of life and society in Australia has the potential to deteriorate into the chaos of populism found in many parts of the world.

There are numerous reasons to press for the devolution of power away from the nation-state and the shifting of greater authority to cities, metro areas, and other forms of local government control. The solutions to our toughest problems will increasingly come from local leaders, acting in close concert with institutional investors, global corporations, and higher levels of government.

At the federal level, interest rates, negative gearing (NG) regimes, capital gains tax (CGT), fringe benefits tax (FBT) amongst a multitude of other macro-economic actions are the purview of  the federal government and the Reserve Bank of Australia. NG, CGT and FBT are highly valued by the housing investment community. Many experts argue that it is the interaction between the CGT discount and NG that encourages and rewards speculative property investment, therefore driving up house prices.

Countless journalistic inches have been expended on the issues of housing affordability, energy efficiency and disparities between different jurisdictions and the effects of national policy on these different jurisdictions over the past decade. The hyper-active commentary of the changes to higher and school education regimes announced by the federal government early May could also be seen as a failure of the federal government to recognise local, regional and state differences in the delivery and access  to  education, not to mention the public versus private sector debate.

Centralized, hyper-specialised, one-size-fits-all approaches found at the federal level in federated nation-states are fundamentally ill-suited for today’s challenges. The City Deals intervention by the Australian Federal Government, and in Queensland, the implementation of the Economic Development Act and the creation of the Priority Development Areas, could also be seen as unnecessarily interventionist by some in the land and infrastructure  development space, as those  interventions dramatically affect the market outside of these geographically isolated spaces.

Today’s problems demand rapid, locally-tailored solutions that take a holistic approach to problem solving. These approaches deploy the expertise, capacity, and resources of the public, private, and civic sectors in collaboration and sometimes in competition. Local governments are the closest entities to meet the needs of the community. It can also be argued that the local level is not only more innovative, but that it is also a more effective form of governance, where local economic policy should be decentralized to local leaders and organizations who have the best handle on their economies.

Our ability to innovate and grow the economy depends on the clustering of talent, companies, and other economic assets in cities. Metropolitan areas are the primary spaces for technological innovation and wealth creation, as well as for social progress and the fostering of open-mindedness and political freedom, devising and testing new strategies for creating high-paying jobs and raising living standards.

Research from the OECD shows that decentralized local government is more effective and efficient than centralised control. Local governance gives citizens more choices, where the community develops to best suit the needs and wants of its residents.

American urban studies theorist Richard Florida argues that nation-states have too much power and their power is not consistent with the economic power of cities and metropolitan areas – spaces that are geographically concentrated, clustered and the focus of “spiky knowledge capitalism.” The knowledge economy paradigm is overtaking the economic power of natural resource exploitation and the labour/manufacturing sectors. The parallel paradigm shift is to innovation and clustering of talent and economic assets into our cities and metropolitan areas. The clustering of talent and economic assets makes the city and metropolitan areas the new  economic and social organising units.

These geographic divides that separate cities, suburbs, and rural communities may limit our ability to form a national consensus around urban issues and balance the needs of these centres with those of the geographically dispersed, low density rural centres/communities. It is difficult to realistically expect singular national policy and strategy to address the very different needs and desires of urban and rural communities.

Densely populated regions need transit and affordable housing, whereas less dense cities have traditionally focused on building better roads and bridges. Housing needs to suited to the demographic,  geographic  and weather conditions of the locality. Development policies, it could be argued, are best when tailored to local conditions and local needs. Empowering cities, suburbs, and rural communities respects both  our  differences in values and our very different needs.

Benjamin Barber, author of If Mayors Ruled the World, wrote “The road to prosperity, no less than the road  to global democracy, runs not through states but through cities…Cities are now the guardians of the  future, the bastions of diversity.”

Rural communities in Australia are the guardians of our safe food and environmental diversity. In some cases, they are becoming the centres of social, racial and economic diversity through the availability of more affordable housing stock, comparatively high remuneration levels (relative to the housing/income ratios of major cities) and, due to technology and communication improvements, the ability to develop and grow nationally and internationally successful enterprises.

In an interview with New York Magazine, Barber proposed that the tax dollars generated in cities should serve the municipality rather than being sent to Washington. This is in the context that US cities create 80 per cent of American GDP and tax revenue.

Could the same argument be made in Australia in relation to GST collections and redistributions? Should GST be sent back, proportionally, to those places generate the GST? Where rural communities are active in the mining and resources sectors, should these communities receive a more equitable share of the Resource Rent tax and Minerals Resources Rent tax takings?

The devolution of power to the local level, it could be argued, would benefit the social, cultural and  economic stability made available through this “localism.” The localism opportunity focuses on the needs of the resident, and less on the needs of the neighbouring community or the need of the nation (excluding national security and defence, trade policy and international policy frameworks in human rights, free speech and cross border infrastructure development).

Individualism, diversity, collaboration and competition can be the hallmarks of localism. For those whom have long argued for smaller government, for shrinking federal control and shifting power to the states and local governments, it is time to hold them to their word. This is an area where mayors and local officials can lead. A broad coalition of mayors calling for devolving and shifting power toward greater local control in the United States could find complementary actions in Australia and in other federated  countries.

Recognising the limitations of the Constitution of Australia and the lack of recognition of local governments  in the document, there is a capacity to balance and rebalance power among and between federal, state and local governments. Political power should mirror the economic power that cities provide. Instead of  using the arbitrary political boundaries, the nature of federalism could change to a  more  dynamic  federalism that reflects these power shifts.

Collaborative networks at the local level are inventing a wide array of innovative approaches to problem solving – modernizing and creating new instruments, intermediaries, and institutions to enable the investments  necessary  to  overcome our greatest challenges. Add investments in human capital, sustainable infrastructure, transformative redevelopment, clean energy and energy efficiency, and innovative urban technologies. This process is gradually but fundamentally transforming our notions of city governance. Cities are modernising and creating new special-purpose public, quasi-public, and civic institutions that are unlocking the value of underutilised public assets and financing a wide range of transformative projects.

These new instruments, intermediaries, and institutions point to a new cycle of problem-solving. Cities are inventing and improving new kinds of market-oriented responses that, once proven and standardized, can be adapted to multiple  communities.

The federal government plays an irreplaceable role across many areas of policy, like guaranteeing the social safety net, conducting our foreign affairs, funding basic research, and leveraging private investment in infrastructure. But it is increasingly questionable that centralized policymaking and implementation can keep up with many of the rapidly evolving challenges of the 21st century. The world is transforming from the bottom up, driven by the innovative actions of networks in our cities and metropolitan areas.

Given the reliance of local government on the income generated by urban and infrastructure development to maintain government services, there is a need to consider how urban planning practice is managed at the local level, and consider reducing the levels of state government interventions in the planning system in Australia. In recognition that the levels of trust in electorates of some state governments and the federal governments are being challenged, perhaps there is a need for state governments to pull back to planning law that focuses on process and reduces opportunity for state input into planning scheme content and planning application assessment.

These views may be controversial to some. They certainly challenge the status quo regarding federal, state and local governance arrangements, and given the very clear political movement elsewhere in the world on “localism” and “populism” it is appropriate to start the conversation here in Australia.