London is the world’s most economically important city (sorry, New York)

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MasterCard released a report today ranking the 50 most important “centers of commerce” around the world. Here’s the top ten:

1. London
2. New York
3. Tokyo
4. Chicago
5. Hong Kong
6. Singapore
7. Frankfurt
8. Paris
9. Seoul
10. Los Angeles

I had breakfast this morning with Yuwa Hedrick-Wong, the Singapore-based MasterCard economic adviser in charge of the ranking project, and Michael Goldberg, chief academic officer of U21 Global (the “Graduate School for Global Leaders”) in Singapore and a member of the “knowledge panel” that helped draw up the criteria for the rankings.

The six dimensions on which cities were judged were “legal and political framework,” “economic stability,” “ease of doing business,” “financial flow,” “business center” (which measures things like airplane traffic and amount of commercial real estate), and “knowledge creation and information flow.” Said Hedrick-Wong: “What we really tried to understand was global cities and their level of contribution to global commerce.”

The goal here, other than to get some nice publicity for MasterCard, was to get corporate customers to focus more on what really matters in global commerce. “Emerging-market cities are often way ahead of the rest of the country,” said Hedrick-Wong, “whereas global companies continue to use countries as their unit of analysis.” Some examples: Shanghai (No. 32), Mexico City (No. 42), Mumbai (No. 45).

London beat out New York for No. 1 entirely on the strength of its “financial flow” and “business center” rankings. “At a very fundamental level, London makes its money from the global market,” Goldberg said. He also argued that, nowadays, “the locus of economic activity is cities, not nation-states.” Sounds like more bad news for Mudcat.

Update: Commenter YMM asks which indicators were used to calculate the “financial flow” and “business center” rankings. Financial flow is pretty straightforward: it’s the volume of equity, bond, derivates and commodities trading, plus the “presence and intensity of” global banking, insurance and securities companies. London beats New York on this dimension mainly because of much higher bond-trading volumes. New York is No. 2 in the world in financial flow, and Chicago No. 3.

The business center ranking measures a whole bunch of things including how easy it is to start or close a business and hire or fire workers, the availability of credit, shipping traffic, air passenger traffic, international air passenger traffic, air cargo traffic, the amount of commercial real estate, amount of convention and meeting business, and number of five-star hotels. Hong Kong ranks tops in the world in all this, just ahead of London.