The City of London is known for its invisible earnings, as a hub of financial services such as insurance, commodities trading and investment. What is less well known is that the City of London Corporation is the oldest continuous democratic commune in the world. Two thousand years of self-government is quite an achievement. For no one to really notice is perhaps the greatest achievement of all. Invisible earnings, invisible power.

The law and practice of the Romans, the City’s founders, became the basis of London’s institutions and political language. The status of “citizen” has been retained ever since. The City also adopted through its democratic ward system and court hustings many aspects of Saxon civic practice. The “folk-moot”, for example, was a regular meeting of all citizens at St Paul’s Cross, called by the ringing of the bells, where matters of concern would be discussed and voted upon. This formed the basis of the Corporation of London and founded its position in the Ancient Constitution.

While laying waste to the rest of the country, William the Conqueror “came friendly” to London, recognised the liberties of its citizens, pledged to defend their freedoms and fortified the City against barbarian attack. London’s special status within the constitution was upheld by a stream of charters and privileges that protected the City of London from external interference.

In Magna Carta, the 1215 charter of rights between King John and the barons, not only are the rights of the “whole body” of citizens respected but the mayor of London was designated as one of two guarantors charged with ensuring that the Crown kept its side of the bargain.

The Corporation of London, which announced itself as a “commune” in 1191, was recognised as one of the great institutions of the Ancient Constitution, with a place only one step below the sovereign. The combination of wealth, functioning democratic and legal institutions and an effective system of civic militias meant the Crown could never subordinate the City of London to its rule. London taxed itself, judged itself and governed itself.

In this way the most cosmopolitan city in England, carved out of a forest by the Romans, became the custodian of the ancient liberties of the English people and the champion of common law against state encroachment.

From the 1580s, London became home to 10,000 internal refugees a year, most displaced by enclosure in the north and Midlands. By 1625 it had 400,000 inhabitants – 20 times more than any other English city.

In 1632 the crown asked the Corporation to extend its privileges and institutions to the new areas of London, but the Corporation refused. Instead of expanding and extending its democratic practices and legal protections to the new inhabitants living without civic status in the suburbs of Westminster, Clerkenwell, Whitechapel and Southwark, the City of London turned its back on London as a city. The “great refusal” of 1637 defined the modern history of London. Instead of seeking to integrate the new arrivals, the Corporation put large resources into transferring its unwanted excess population to the Ulster Plantation and the Corporation of Londonderry, which were established for that purpose. The bowler hats and umbrellas of the Orange Orders derive from their sponsorship by the Corporation of London.

The Stuarts made two serious attempts at London reform. One led to the execution of the king, the other – an attempt by Charles II to establish that the monarchy was the source of the Corporation’s authority – led to the Stuarts’ replacement by William and Mary, whose Second Charter in 1690 leaves no doubt as to who were the greatest beneficiaries of the Glorious Revolution. It declared: “That the mayor, commonalty and citizens of London shall for ever hereafter remain, continue and be, and prescribe to be, a body politic, in re, facto, et nomine … and shall have and enjoy all their rights, gifts, charters, grants, liberties, privileges, franchises, customs, usages, constitutions, prescriptions, immunities, markets, duties, tolls, lands, tenements, estates and hereditaments whatsoever.”

The 18th century was a glorious epoch for the City and its Corporation. Conflict, however, remained between the Corporation and the Crown, and two different concepts of state and empire developed, one based on “free trade” and championed by the Corporation, the other based on prerogative rule and the sovereignty of the Crown. The City of London supported George Washington and provided funds and men for the cause. The citizens of London reminded the king, to the point of treason, that it was they and not he who had won the civil war.

Even as Parliament displaced the Crown as the fundamental unit of sovereignty and democracy displaced the Divine Right of Kings as the principle of legitimacy, the state still refused to subordinate the Corporation of London to national laws and practices. Its assets and its ancient privileges remained untouched.

The City survived each wave of Victorian municipal reform. The Corporation’s assets, its property inventory and financial portfolio remain unpublished.

London as a whole was not to have city status. The County Council was ruled from County Hall. The same could be said for today’s Greater London Authority. New Labour may have given the Bank of England its independence, but its zeal for modernisation did not extend to the City of London.

In September 2008, we glimpsed for a moment the consequences of having a financial sector, prone to volatility and vice, as the driver of our national economy. Some £1.6tn was transferred to the banks so that the economy could continue to function. The City of London, our most ancient democratic city, had become a lobbyist for globalised capital and there was no accountability. Or rather, we learnt that accountability was too important to be left to accountants.

The moral of the story is that what we learnt in politics is true for the economy: that unless the executive was held to account there would be vice, abuse and unconstrained self-interest. The City of London needs to be held to account by the citizens of London and its inheritance made available for the good of the city. Maybe it is time, after 2,000 years, for all of London to become a city, for the Guildhall to be its parliament and for there to be one mayor of a united city who lives in Mansion House.