May 5, 2009 City Council packet - Laserfiche WebLink

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has risen, Tokyo, Hong Kong, and Singapore have become major financial centers —yet in size and scope, they still trail New York and London by large margins. In finance, "there is a huge network and agglomeration effect," former assistant U.S. Treasury secretary Edwin Truman told The Chrisrian Science Monitor in October —an advantage that comes from having a large critical mass of financial professionals, covering many different specialties, along with lawyers, accountants, and others to support them, all in close physical proximity. It is extremely difficult to build these dense networks anew, and very hard for up-and-coming cities to take a position at the height of global finance without them. "Hong Kong, Shanghai, Singapore, and Tokyo are more important than they were 20 years ago," Truman said. "But will they reach London and New York's dominance in another 20 years? I suspect not." Hong Kong, for instance, has a highly developed IPO market, but lacks many of the other capabilities —such as bond, foreign-exchange, and commodities trading —that make New York and London global financial powerhouses. "A crucial contributory factor in the financial centres' development over the last two centuries, and even longer," writes Cassis, "is the arrival of new talent to replenish their energy and their capacity to innovate." All in all, most places in Asia and the Middle East are still not as inviting to foreign professionals as New York or London. Tokyo is a wonderful city, but Japan remains among the least open of the advanced economies, and admits fewer immigrants than any other member of the Organization for Economic Cooperation and Development, a group of 3o market -oriented democracies. Singapore remains for the time being a top -down, socially engineered society. Dubai placed 44th in a recent ranking of global financial centers, near Edinburgh, Bangkok, Lisbon, and Prague. New York's openness to talent and its critical mass of it —in and outside of finance and banking —will ensure that it remains a global financial center. N THE SHORT RUN, the most troubling question for New York is not how much of its finance industry will move to other places, but bow much will simply vanish altogether. At the height of the recent bubble, Greater New York depended on the financial sector for roughly 22 percent of local wages. But most economists agree that by then the financial economy had become bloated and overdeveloped. Thomas Philippon, a finance professor at New York University, reckons that nationally, the share of GDP coming from finance will