Sanctuary Economies: Why Cities Defy Their Nation-States
Dhwani Aachi
Introduction
The term “sanctuary cities” refers to urban areas that limit cooperation with federal immigration enforcement. However, the underlying logic extends far beyond immigration. As globalisation becomes more uneven, major cities are increasingly diverging from the political and economic priorities of their nation-states.
Sociologist Saskia Sassen’s concept of the “global city” helps explain why. Cities like London and New York act as command centers in the global economy, drawing in resources and talent from across the world. National governments, on the other hand, often gain politically from policies that emphasise protectionism, strict borders, or national identity. This gap has given rise to what can be called “sanctuary economies,” where cities selectively defy national policies to preserve the economic conditions they rely on, a development signalling a reconfiguration of sovereignty itself as states gradually cede influence to powerful subnational actors.
Economic Causes: Why Cities Need Openness
In 2023, London generated 22.3% of the UK’s GDP, a share driven by industries that rely on international labour markets, foreign investment, and cross-border financial activity. London’s economic weight, therefore, stems from global rather than purely local connections.
This dependence is built into the very structure of global cities. Their productivity comes from agglomeration: dense clusters of firms, specialist workers, and fast-moving information flows that can function only in open, highly connected environments. To succeed, these ecosystems need access to large, flexible labour markets, which national protectionist policies can severely restrict. While high-skill migrants drive the knowledge economy, lower-wage migrants sustain vital sectors such as hospitality, transport, and care. Openness also shapes fiscal strength and investment. Global cities draw substantial foreign direct investment, host multinational headquarters, and welcome international students. Each of these factors boosts tax revenue and consumer spending. Therefore, in cities built on global connections, openness is less of a political choice and more of an economic necessity.
In this context, sanctuary-style policies serve as economic signals. By presenting themselves as open, even when national politics move in the opposite direction, cities reassure firms, investors, and workers that they remain internationally oriented.
Why Nation-States Move in the Opposite Direction
Just as cities have strong economic reasons to stay open, states often have equally strong political reasons to stay “closed.”
National governments must respond to voters across the entire country, and those voters do not benefit from globalisation the same way London or New York do. Much of a state’s electoral base lies in older, rural, or post-industrial regions, where people are more exposed to the downsides of global competition. These areas tend to see immigration or foreign capital as cultural or economic threats. Politicians, therefore, gain support by promising a return to national self-sufficiency.
There are also practical incentives behind national restrictions on immigration. States bear the fiscal responsibilities of welfare systems, healthcare, and social services, which makes governments more cautious about large inflows of migrants. Cities, meanwhile, often benefit from increased migration without shouldering the same political or fiscal pressure. What looks economically essential from a city’s perspective can appear politically costly from the state’s.
All of this means that cities and nation-states often move in opposite directions, not because one is “right” and the other is “wrong,” but because their economic structures and political incentives simply don’t align. This mismatch is what sets the stage for sanctuary economies, and the backlash they inevitably provoke.
Case Study: London vs Westminster
London is one of the clearest examples of a sanctuary economy whose growth model pushes it into direct conflict with its own state. The city’s economic structure is deeply globalised: finance, tech, higher education, creative industries, and advanced services make up a large share of local output. For instance, the financial and insurance sector alone accounts for roughly a quarter of London’s total economic output and employs over 360,000 people, of whom 11% are from the EU.
This tension intensified with Brexit. London relied heavily on EU passporting, enabling nearly 5,500 UK-registered companies to offer services across Europe without separate licenses. For Westminster, ending passporting was seen as a way to reclaim sovereignty while for London, it threatened a major pillar of its economy. The City of London Corporation lobbied openly for a bespoke post-Brexit arrangement to retain access to EU markets, directly opposing the government’s stance.
The migration debate exposed a similar divide. London’s universities and business leaders have repeatedly opposed Westminster efforts to restrict the “Graduate Route” post-study work visa and have lobbied heavily against reforms, arguing that attracting top global talent is essential to the city’s world-leading universities, tech startups, and creative industries.
Furthermore, as Westminster tightened immigration rules and framed mobility as a political liability, the Mayor of London launched the “London is Open” campaign, an explicit signal to global talent, investors, and universities that the city intended to remain outward-facing. London & Partners, the city’s investment agency, continued to operate overseas offices in cities such as Paris, New York, and Shanghai. They effectively conducted city-level economic diplomacy even as the national government repositioned the UK away from the EU.
These moves have attracted criticism from national politicians who accuse London of being out of step with the country. But for the city, the economic cost of closing itself off from the world is too high. The city has consistently prioritised openness over contraction, and in doing so, it demonstrated the central argument of sanctuary economies: when a city’s growth model depends on global connectivity, it will prioritise openness even if the national political climate is moving in the opposite direction.
Conclusion
The tension between cities and nation-states is often framed as a political disagreement, but at its core, it is driven by economics. Global cities such as London occupy positions in the economy that depend on openness to people, capital, and ideas. Even small national restrictions can disrupt the labour markets and investment flows that underpin their prosperity. Sanctuary-style policies are less about making a statement and more about protecting the conditions that make urban growth possible.
The sequence is straightforward. Cities globalise first and build industries that rely on mobility and connectivity. When national governments move toward protectionism, cities respond by safeguarding the openness that sustains them.
Nation-states operate under a distinct set of pressures. Their political incentives reflect the concerns of voters who may not benefit from globalisation and may feel its effects more sharply. When national politics leans toward protectionism, cities face a choice: align with a restrictive narrative or defend their economic foundations. Sanctuary economies emerge when they choose the latter.
As globalisation continues to benefit regions unevenly, this divide is unlikely to fade. The friction between urban openness and national restriction will remain a defining feature of political economy in the years to come.
References:
2. https://www.nhsemployers.org/articles/impacts-changes-uk-immigration-policy
3. https://ukandeu.ac.uk/passporting-and-equivalence-the-impact-of-brexit-on-the-city-of-london/
4. https://www.london.gov.uk/sites/default/files/eu_exit_and_financial_services_report_final.pdf
5. https://www.vera.org/news/what-is-a-sanctuary-city
7. https://www.britannica.com/topic/global-city
8. https://files.londonandpartners.com/l-and-p/assets/abouts-us/london_and_partners_strategy_2018_2021.pdf