What Works: Success in Stressful Times. Hamish McRae

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СКАЧАТЬ give tax breaks to companies. Getting human capital is much more complicated.

      People are the key to building a financial centre. They are also the key to its survival down the years. Somehow each new generation has to take on the ethos built up by the previous generation-or at least the positive aspects of it-and modify it to fit new conditions. There are fascinating similarities between people in the City now and those a generation ago. Most obviously money is a powerful motivator, but it is not just that. Money is a way of keeping the score-it says how good you are-and successful people are hugely competitive. But there are also social limits to competition in this business, for people have to play in teams; loners do not do well. Sustained success is achieved partly by competing, but also by co-operating.

      A further element for lasting success is effective regulation. Even ahead of the current crisis London has had its regulatory failures: in banking the collapse of Bank of Credit and Commerce International;¹² in pensions the stealing from workers by Robert Maxwell;¹³ and in insurance the near-collapse of Lloyd’s of London.¹⁴ We now know that the changes to the system put in by the Labour government of 1997 at best failed to insulate London from inherent weaknesses in the international financial system and at worst contributed to the failure. On the other hand the model adopted by the British authorities for the rescue of the banking system worked comparatively well and became a model for bank rescues in other countries.

      But to see the City through the prisms of regulation and rescue seems to me to be a narrow and distorted way of looking at the place. In any case banking is only one part of the financial services industry, albeit an important one, and over the years London’s regulatory advantage over New York has encouraged most major US banks and securities houses to base their international business there. As for Tokyo, its obstructive system is one of the reasons why it has failed to become a truly international centre, as many had expected back in the 1980s.

      Regulation is only a means to an end. That end is to have efficient, open and transparent markets. And arguably London is able to get away with lighter regulation because it has managed, compared with other centres, to sustain a reputation for fundamental straight-dealing through many incarnations of regulatory environment.

      I do not think anyone fully understands how this spirit endures down the generations. There must be some element of peer pressure to do the right thing. There must also be a continuing climate of openness-of looking to the world rather than just to the UK or to Europe. But I think the strongest glue holding the City together over time is simply the profound embedded appreciation of the power of the market. Do not over-intellectualize. Respond instead to whatever the market signals that people want and then you will make money. And by making money you will have served a social as well as an economic purpose.

      This may be a bit idealized-a vision of City aspirations that is, for many workers in the financial services industry, a long way from their own experience. There are plenty of greedy people in London, quite a few crooks who will manipulate markets to their own advantage. There has been quite a lot of insider dealing and, as we are now well aware, quite a lot of excess. To many people this is distasteful, and even enthusiasts for the City would have to acknowledge that these excesses undermine both its reputation and ultimately its performance.

      But there is no denying that it has brought home the bacon for the economy of the capital and the south-east of England. Inner London is the richest place in Europe in terms of GDP per head.¹⁵ The biggest single impetus transforming the UK from having a per capita income towards the bottom of the European league table in the early 1980s to one close to the top by the early 2000s has been the strength of its financial services industry. That dominance brings problems, of which more in a moment, but it has brought prosperity to millions.

      There is a list of features about London that goes beyond finance: more visitors through its airports than any other city in the world; more international telephone calls; the largest non-national professional community on the planet; more book titles published than anywhere else. According to United Nations data¹⁶ the UK exports more cultural products and services than any other country including the USA.

      There are, of course, many other elements of the economy, especially education, communications and culture. But the City has been the engine driving it all along.

       •Become a magnet for skills •Develop an open attitude to talent •Appreciate the power of the market

      3. WHAT COULD GO WRONG?

      In 2008 the engine faltered. The world had a classic financial market crash, leading to a serious global economic recession, one that may eventually turn out to be deeper than any since the Second World War. Writing at the end of 2009, it was still not possible to judge the extent to which London-based institutions contributed to the collapse. The blame game had some way to run. Pointing out that, as far as UK institutions were concerned, the most serious problems occurred in banks that were headquartered elsewhere, particularly in Edinburgh and the north of England, cut little ice. The financial breakdown originated in the USA rather than the UK or continental Europe but financial institutions everywhere found themselves under the cosh. It is true, too, that there have always been crashes and there always will be crashes in the future. But inevitably and understandably the reputation of the City was seriously damaged, just as it was by previous disasters, including the dot-com bust and the subsequent collapse in share prices. And while all financial centres that were involved in international business suffered, the London economy and financial services in particular took a huge blow.

      Markets recover; confidence returns; growth resumes. It is too early to make any firm judgements but to me the damage of 2008/9 both to the world economy and specifically to the City feels very like the damage during the 1970s. The world then was racked by runaway inflation and experienced what was its most serious post-war recession to date. The key difference, aside from the fact that inflation is under control, is the world economy is vastly more global than it was forty years earlier.

      That leads to what seems to be an even bigger issue than the fallout from the 2008/9 recession. It is what happens to globalization. A number of things trouble me here. One is rising inequality. As a rule, globalization of the world economy decreases inequalities between countries but increases inequalities within them. Perhaps the most important consequence of the present burst of globalization is the rise of China and India from developing to some sort of developed status. Rising inequality is most evident in these countries as some people get left behind, but it is also a feature of the US economy and of the London one. This creates strains and injustices that must be tackled.

      It may be that in trying to cope with these strains, a British government makes the same mistake as US administrations have done, bringing in legislation, taxation or regulation that has the effect of shifting business elsewhere. There will in any case be some rebalancing of international finance, with Asian centres taking on a larger role. As China moves towards becoming the world’s largest economy, is it almost inevitable a Chinese city will become the principal financial centre of the region. The main issue would seem to be whether it is Hong Kong or Shanghai. That will depend as much on the willingness of the authorities to permit such a development as the acumen with which both cities are run. Tokyo is the prime example of a domestic financial centre that has not developed significant international business because the Japanese authorities have maintained a regulatory environment that has deterred international participation.

      Beyond this, however, we have to accept that as financial power shifts east so, too, will the value system of international finance. Global capitalism will no longer march principally СКАЧАТЬ