The insanely prolific Dan Gross had a piece in the NYT Sunday mag about New York’s diminished profile as a financial center. Dan ascribes this mainly to the increasingly “multipolar” nature of the global economy, meaning that it’s not so much that there’s something wrong with New York as that there’s a lot more action in and around Shanghai, Dubai, Singapore, etc., than there used to be.
I tend agree with him there, but even in a multipolar financial system some poles will be more equal than others. And London, not New York, has been emerging lately as the most important pole of them all.
Why’s that? The main reason would seem to be location. London is within reasonable air travel distance of the U.S., the Middle East and Asia, and perhaps more importantly is in a time zone that allows easy communication with both Asia and the U.S. during the workday. As economic activity becomes spread more widely, that central location becomes ever more valuable. And barring some serious continental drift, there’s really nothing New York can do about it.
But what could New York do to improve its competitive position? I’ve got a few ideas:
1) Regulation. This has been the issue Hank Paulson & Co. have been harping on. And since it’s the only thing Hank Paulson & Co. can do anything about, they probably should be harping on it. I’m extremely dubious of the argument that Sarbanes Oxley is driving lots of market activity away from the U.S. But the U.K. has a significantly more rational (if not always more effective) financial regulatory regime: Just one agency, the Financial Services Authority, and a tendency to focus on principle rather than picayune detail. We could probably use something more like that.
2) Livability. Having lived in both New York and London in the past decade, I’d have to say that New York is better. Better weather, better public transit, better restaurants, friendlier people and, most important, better playgrounds (except for that Diana, Princess of Wales’ Memorial Playground in Kensington Gardens, but that’s the exception that proves the rule). London does have better TV, better lamb chops, better drivers, better access to cool European destinations, and better soccer–which is important to me. But soccer great and former Londoner Thierry Henry says “New York is the best city in the world,” and who am I to argue with that? The completion of Red Bull Park in Harrison, NJ, will make metropolitan New York even better. The addition of another soccer team, maybe in Queens, plus regionwide lamb-improvement and driver-education efforts, might make it insurmountably better.
3) Taxes. They’re low by global standards in both places, but the U.K. tax system is much more geared to the interests of expat rich people. That makes it a haven for lots of Russian and Middle Eastern billionaires, which is a mixed blessing, but it also makes it easier to attract really smart derivatives geeks from abroad. I’m not sure what the U.S. ought to do about this, but it’s something that ought to at least be part of the political debate here.
4) Passport Control. The immigration people at Heathrow are polite to non-U.K.-citizens and usually get them through the line very quickly. I know that from personal experience. Meanwhile, I’ve heard from lots of foreigners that coming through immigration at Kennedy (and elsewhere in the U.S.) is an excruciatingly slow and often demeaning process. This is potentially disastrous for the long-term prospects of both New York and the U.S. in general. And while I’m being sort of jokey in the rest of this post, I’m dead serious about this: Discouraging foreign businesspeople from visiting the U.S., which we now effectively do, is a potentially disastrous policy.
Update: Felix Salmon seconds the emotion, and adds a crucial detail:
In fact, it’s a much, much bigger issue than putting more and friendlier immigration officers on staff at JFK. The really big issue is allowing business people to visit NYC on business in the first place.
Many international executives simply can’t get a visa to visit the US, or if they can it takes months. This applies especially to businessmen from what is arguably the world’s largest economy, China. If NYC wants to remain relevant, it has to start looking west rather than east, and taking full advantage of the US’s Pacific Rim status. That means encouraging, not discouraging, human business links with China.
Have you ever wondered why Hank Paulson spent so much time flying back and forth to China when he was CEO of Goldman Sachs? Yes, the country was important to him, but it wasn’t that important. Rather, it was the one country where he had to go there, because they were simply incapable of coming here.