Is New York Still the Financial Capital of the World?

These days, many Americans — including Mike Bloomberg and Chuck Schumer — fear the answer to that question will soon be “no,” if it isn’t already; London is poised to take over.

An article [gated] in today’s Wall Street Journal about the credit crunch’s effect on the U.K. economy offers this sobering fact:

The financial sector accounts for more than one-fifth of all U.K. jobs, compared with only 6 percent of jobs in the U.S., and contributed about one-quarter of the nation’s economic growth over the past five years.

Granted, London means more to the U.K. than New York means to the U.S., but that 20 percent figure is still noteworthy.

On the other hand, if the financial markets are indeed heading for an extended downturn, the more diversified U.S. may suffer considerably less than the market-dependent U.K.

Does this mean the long dollar-to-pound slide is over?

By the way, in the very short period since Rupert Murdoch‘s News Corp. bought the Journal, it has already become a far more Times-ish general interest paper than a Financial Times markets paper, at least as evidenced by its front pages. As someone who cares less about the markets than most people who read the Journal, I am all in favor of this shift; what about you?


Martin

I am a fan of the financial/economic focus of the Wall Street Journal and the Financial Times. That's the reason why I don't subscribe to the Washington Post or the New York Times. I also love articles in the WSJ that relate finance/economics, such as science, politics, and even medicine. All of these things have an impact on the financial markets.

But if celebrities and sports replace economics and finance, the WSJ can count on losing one subscriber.

As for the UK becoming the financial center of the world, I doubt more business happens in London than in New York and Chicago combined. Add in Boston, and Washington D.C., and dozens of other cities, I think the USA still dominates the UK.

Not that it really matters to begin with. What's more important than mere size is per capita success.

daniel

i'd hate to see those haughty brits in a downturn...

but i'd really rather see about thugs and the wire. wheres my freakonomics general intrest?!

Blue Sun

New York City remains the financial capital of the world for the moment - though America's share of participation in the international financial market has halved since the start of the Reagan administration.

As long as the USD is the worlds's benchmark, the reference currency for international trade, NYC will probably remain the most important financial hub in the world. But, if we don't make radical changes in the misguided economic policies begin by the Reagan administration and taken to extremes by the current administration, it is only a matter of time before the world market turns to a more stable currency - the EURO - as its benchmark. There is already very serious talk among oil-producing nations to price their oil in EUROS instead of USD on the international bourses.

When the dollar is no longer the keystone of international finance, NYC (and our entire economy) will fade from center stage.

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bex

hold up...

Hasn't John Bogle (retired CEO of Vanguard) publicly stated that the financial markets rob the US economy of $500 billion in value each year?

I know Wall Street does some good... but aren't they currently overwhelmed with self-described financial "gurus" who do nothing but drain the economy of genuine wealth with their federally sanctioned ponzi schemes?

If London wants these con men, so much the better for the overall US economy. Good riddance. The only way I could be happier, is if the US could also outsource to London the worst performing and worst polluting companies.

Maybe this will force the New York financial sector to focus on its original purpose: empower industry by finding better returns on invested capital.

Peace.

Toby

As a haughty Brit I'd hate to see me in a dowturn as well...

London has actually been ahead of New York for about 12 months now. And yes, the credit crunch/recession will do significantly more damage to London but I wouldn't count on it to bring the business home. Having worked in financial services since the mid Nineties, one of the issues that has become clear over the last five years is how little appetite non Americans have for doing business in the US. Blame Sarb Ox and agressive attempts to enforce US law abroad. These days when I go to meetings in the City and there are several options on the table the one that keeps the Americans off side will usually win out.

The situation isn't helped by the fact that the UK government is so completely unwilling to stand up for British interests when the US is involved, but it seems pretty clear to me that the US has done more to lose financial leadership than London has done to gain it. So both London and New York will suffer over the next few years, but for different reasons. The growth will shift to the Far Side so that pretty soon measuring London's performance against New York will be academic.

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Luis Jerez

The differences between the two are very clear. The WSJ may have stayed behind in essence trying to gain a broader, let us say wider target audience thus missing out in scope and depth.

Matt

Even if London doesn't become the "financial capital" of the world, they'll certainly be the "financial reporting capital" of the world.

km

When talking about the financial capital of the world, why would one compare the number of jobs or amount of economic growth that cities account for in their own countries? That standard clerly favors cities in smaller countries and has no direct relation to a city's standing in the global financial markets.

anon

The Journal is now by far a worse publication than it used to be... I've stopped renewing my subscription because I am now constantly flipping through the pages without actually finding any article worth reading... I don't know if they will attract new customers, but I'm pretty sure they'll lose a lot of their bread and butter customers: the Wall Street folks themselves for whom reading the WSJ used to be as required as brushing one's teeth every morning...

Andrew

6% of America's current population (roughly 301 mill) is 18 million. 20% of UK's population (~60 mill) is 12 million. So it seems that there are still 6 million more jobs in America than the UK. Not a very telling statistic.

ashishtx

The figure 1/5 and 6% indicates the fraction of the people currently working or having a job and is not related to the population of the country.

GBC

One of the reasons London does so well (and will continue to do well) is that its timezone allows trading in all the main markets - the US, UK, Europe and Asia - something New York or Chicago lacks.

JS

A story on CNBC got me thinking again about this. NY merchants only accepting Euros, WTF?

Segundo?

Peter

Hasn't London _always_ been the financial capital of the West? After all, Manhattan wasn't even inhabited by Europeans until well after the wool market collapse of 1550 caused England to look to develop markets in the New World.

Required

Required#

the financial markets rob the US economy of $500 billion in value each year?

I know Wall Street does some good... but aren't they currently overwhelmed with self-described financial "gurus" who do nothing but drain the economy of genuine wealth with their federally sanctioned ponzi schemes?

If London wants these con men, so much the better for the overall US economy. Good riddance. The only way I could be happier, is if the US could also outsource to London the worst performing and worst polluting companies.

Maybe this will force the New York financial sector to focus on its original purpose: empower industry by finding better returns on invested capital.

Peace.

- Posted by bex

scottT

I can't believe how many people have been doped by these news articles about London being the financial capital of the world. It reminds me of this major scandal few years back when an Indian news agency claimed that 40% of people working in NASA are Indian and later after fooling so many naive and ignorant Indian extremists went public and announced it was all a prank. Hello people, wake up. Did you all just become too stupid and lazy to question what somebody tells us? Lets take a brief look at the facts. 1) NYC has more than twice as many billionaires than the entire UK. 2) NYC has the largest stock market in the world with about 3 times the value as the petty London Stock Exchange, which keep in mind is not even the largest stock market outside the United States. The largest stock markets in the world are NYSE (USA), NASDAQ (USA), Tokyo (Japan), and then jolly old old loser London (UK). 3) NYC has the largest gold deposit in the world, the New York Federal Reserve Bank, which has twice as much gold as the second largest gold deposit in the world, Fort Knox, which is also in the USA. 4) I list this last as it is not such an important factor as those mentioned above, NYC has more skyscrapers than any other city in the world. So, after considering the facts, how on earth can the idiots in the media even come up with claiming that London is more superiour in any sense, especially financially, than NY. I'd love to hear their primitive reasoning to this. It looks like those imperialistic Brits after all those generations of inbreding and mating with their livestock and attempting to enslave the world's population still want to believe that they are #1, though the fact remains they lost this title to the USA by the 2nd half of the 1800s and actually even used up their entire gold reserves to buy weapons and supplies from the USA during WWII, which I will like to point out that the Brits got their asses kicked by Germany during WWII. For anyone with common sense and independent and critical thinking, I'd place NYC as the financial capital of the world anyday. That is without doubt. 2nd place goes to Tokyo, which has the 3rd largest stock exchange in the world and largest stock exchange outside the USA and is home to more Fortune Global 500 companies than any other city in the world, even more than NYC! This is quite an accomplishment and being home to the hq of so many of the world's most powerful companies truly is a testiment to the city's power. Then, Tokyo is home to the world's 2nd most powerful country financial and technologically in the world, Japan. The UK is far behind in finance and tech, actually even behind their archrival France. As I trust most of you reading this have an internet connection, I will leave it to you to practice your research skills and find the stats I am most likely refering to. After Tokyo there is fierce competition for the title of the world's 3rd most important financial center. The competitors are Los Angelas, Hong Kong, Chicago, Boston, San Francisco, London, and Washington DC. Some of you might be wondering why Washington DC and let me tell you why. First of all it is the capital to the most powerful country in human history and this is power. Second, it is home to the World Bank and many other international agencies. To meassure the power of each city just ask yourself what would happen if something suddenly destroyed that city. If NYC was wiped out the entire world economy would go down with it (as we've witnessed). If London was wiped out the effects wouldn't be that tragic. There would be some tears, but we'd recover soon enough.

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Rich

London certainly rattled Scott T. Where do I begin. Well, a city's financial dominance is measure by more factors than just stock market size and number of skyscrapers. Things like international currency trading, hedgedunds, insurance market etc are also important. As for WWII, slightly off subject but in the Battle of Britain Germany lost. The UK was one of few European countires to independently beat Germany. Of course the UK needed help of the US afterwards but it was Russia who beat he Germans and not the US/UK. Back to ecomomics.... 100 years ago who was the world's largest economy by far? The UK. Who had the largst Empire and are the largest the world has ever known? The UK. Perhaps China might rival that one day.

Arthur

Just have a look to the market capitalisation of the New York Exchange and the NASDAQ.
No comparison.....

Arthur

Compared to the other stock exchanges in the world I meant.
And why all other markets just follow Wall Street ???......