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Financial services don't make a global city, people do
By Dan Steinbock |
May 14, 2013, Tuesday
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Print Edition
Print Edition
IN the past, a "global city" was defined by the predominance of its financial services. In reality, that's the vulnerability of all mega cities. The real strengths are historical assets, global mindset, diverse industries, sustainability - and people.
In the early 1990s, the sociologist Saskia Sassen suggested that "global cities" are metropolises, in which "finance and specialized service industries have restructured the urban social and economic order." These "global cities" were characterized by such examples as New York, London, Tokyo, Frankfurt and Paris.
Today - two decades later - the idea of global cities is outdated.
First, the differences between advanced-country metropolises and emerging-country megacities are falling down. Second, even if emerging megacities, including Shanghai, can learn from the successes and failures of Western metropolises, there is no reason to imitate these old urban centers blindly. Third, many new megacities may be destined to benefit from great financial industries, but they should beware of excessive reliance on financial service industries.
That, at least, is the lesson of New York City to Shanghai.
After World War II, most European capitals were devastated, along with Tokyo. In contrast, New York City emerged as the international center of the postwar order, with the UN headquarters, the mid-Manhattan building boom, powerful exporters, the world's financial engine and lucrative property markets.
By the 1970s, America's diminished growth prospects and the rise of global challenger cities, coupled with surging social welfare costs, drove New York City to the edge of bankruptcy. When the city sought aid from Washington, President Ford vowed he would veto any bail-out.
Compared to the 1970s, the era of Ed Koch in the 1980s was a time of restrained optimism and polarization, along with booming Wall Street and homeless in the streets. The rebound came with Rudy Giuliani in the 1990s, when national expansion enabled Wall Street's resurgence, revitalization of Times Square, and the concentration of financial services, corporate headquarters and new infrastructure in New York City.
After the terrorist attacks of September 11, 2001, Lower Manhattan suffered a temporary exodus of business. However, Michael Bloomberg focused the city on private-public building projects which led to a residential construction boom. As a result, the city's US$6 billion deficit turned into a US$3 billion surplus.
But there was a price to New York City's renaissance. It was no longer expansion for the people, but for the finance of the city.
Koch challenged business. Giuliani worked with business. Bloomberg wanted business to lead. The good news: NYC learned the art of market-driven growth. The bad news: NYC grew dependent on markets. Today, all global cities, including NYC and London, struggle to diversify with and away from financial services.
Four lessons
What are the overall lessons of the leading global metropolis, New York City, to Shanghai, the leading emerging megacity?
The first principle is to protect your existing strengths, while building new capabilities.
Today, we may admire NYC's international mindset, grid plan, trade, zoning and skyscrapers. However, the city's international mindset evolved already in the 16th and 17th centuries. History matters.
The second principle is to build old industries, cultivate new ones, diversify, and to seek sustainability. In addition to Wall Street, NYC has more corporate headquarters than any other global city. It enjoys great business services.
Third, global cities must prepare for extreme risk, and that includes security risks, such as terrorism; economic risk, such as deep income differences; and ecological risk, such as Hurricane Sandy that can wreak havoc in a dense super city.
But when everything is said and done, all of these strengths are necessary but not adequate. There is a fourth ingredient: people.
At one point or another, all of us have desired to have a bite of the Big Apple because it features the most multicultural melting pot globally. Financial services do not make a global city. People do.
The author is the research director of international business at the India, China and America Institute (USA) and a visiting fellow at the Shanghai Institutes for International Studies (China). Shanghai Daily condensed the article.
In the early 1990s, the sociologist Saskia Sassen suggested that "global cities" are metropolises, in which "finance and specialized service industries have restructured the urban social and economic order." These "global cities" were characterized by such examples as New York, London, Tokyo, Frankfurt and Paris.
Today - two decades later - the idea of global cities is outdated.
First, the differences between advanced-country metropolises and emerging-country megacities are falling down. Second, even if emerging megacities, including Shanghai, can learn from the successes and failures of Western metropolises, there is no reason to imitate these old urban centers blindly. Third, many new megacities may be destined to benefit from great financial industries, but they should beware of excessive reliance on financial service industries.
That, at least, is the lesson of New York City to Shanghai.
After World War II, most European capitals were devastated, along with Tokyo. In contrast, New York City emerged as the international center of the postwar order, with the UN headquarters, the mid-Manhattan building boom, powerful exporters, the world's financial engine and lucrative property markets.
By the 1970s, America's diminished growth prospects and the rise of global challenger cities, coupled with surging social welfare costs, drove New York City to the edge of bankruptcy. When the city sought aid from Washington, President Ford vowed he would veto any bail-out.
Compared to the 1970s, the era of Ed Koch in the 1980s was a time of restrained optimism and polarization, along with booming Wall Street and homeless in the streets. The rebound came with Rudy Giuliani in the 1990s, when national expansion enabled Wall Street's resurgence, revitalization of Times Square, and the concentration of financial services, corporate headquarters and new infrastructure in New York City.
After the terrorist attacks of September 11, 2001, Lower Manhattan suffered a temporary exodus of business. However, Michael Bloomberg focused the city on private-public building projects which led to a residential construction boom. As a result, the city's US$6 billion deficit turned into a US$3 billion surplus.
But there was a price to New York City's renaissance. It was no longer expansion for the people, but for the finance of the city.
Koch challenged business. Giuliani worked with business. Bloomberg wanted business to lead. The good news: NYC learned the art of market-driven growth. The bad news: NYC grew dependent on markets. Today, all global cities, including NYC and London, struggle to diversify with and away from financial services.
Four lessons
What are the overall lessons of the leading global metropolis, New York City, to Shanghai, the leading emerging megacity?
The first principle is to protect your existing strengths, while building new capabilities.
Today, we may admire NYC's international mindset, grid plan, trade, zoning and skyscrapers. However, the city's international mindset evolved already in the 16th and 17th centuries. History matters.
The second principle is to build old industries, cultivate new ones, diversify, and to seek sustainability. In addition to Wall Street, NYC has more corporate headquarters than any other global city. It enjoys great business services.
Third, global cities must prepare for extreme risk, and that includes security risks, such as terrorism; economic risk, such as deep income differences; and ecological risk, such as Hurricane Sandy that can wreak havoc in a dense super city.
But when everything is said and done, all of these strengths are necessary but not adequate. There is a fourth ingredient: people.
At one point or another, all of us have desired to have a bite of the Big Apple because it features the most multicultural melting pot globally. Financial services do not make a global city. People do.
The author is the research director of international business at the India, China and America Institute (USA) and a visiting fellow at the Shanghai Institutes for International Studies (China). Shanghai Daily condensed the article.
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