I was talking about this with my friend Evgeny Tchebotarev last night:

The transfer of sovereignty over Hong Kong (also known as the handover) happened at midnight on July 1, 1997. At the time, Hong Kong had a population of about 6.5 million people and China had a population of about 1.23 billion people. But Hong Kong punched well above its weight class and its GDP as a percentage of mainland China's GDP was about 18.4% (see above). In other words, Hong Kong represented about 0.53% of the population, but almost 1/5 of China's economic output. Today, well as of 2018, this number has declined to 2.7% (again, see above). Hong Kong still possesses a number of structural benefits compared to mainland China, but its position as a global financial center is not guaranteed.

Graph: Investopedia

Carlota Perez is a professor that specializes in the social and economic impact of technological change. In 2002, she published an influential book called Technological Revolutions and Financial Capital: The Dynamics of Bubbles and Golden Ages.

One of her arguments is that economic growth since the Industrial Revolution has occurred through a series of cycles and surges, ultimately culminating in a fifth great surge centered around information and telecommunications. This is our current economic environment.

Perez was recently interviewed by strategy + business and they published this diagram (if it’s too small, click through to the article):

The five surges of capital and technology since 1771 are:

1. Industrial Revolution
   

2. Steam and Railways
   

3. Steel, Electricity, and Heavy Engineering
   

4. Oil, Automobiles, and Mass Production 
   

5. Information and Telecommunications
   

Number 4 – oil, automobiles, and mass production – is what produced widespread suburbanization, a middle class filled with homeowners, and new forms of retail employment. And I am sure that most of you would agree that it’s not quite over yet.

According to Perez, each cycle has two phases: an installation phase and a deployment phase. This latter phase is a “golden age.” But in between these two phases is a turning point that is typically characterized by some sort of crisis and recession. 

Her belief is that we are in this turning point right now. You see it with Brexit. The demagogues being elected. And more. If you buy this, the key question naturally becomes: How do we cross this chasm and enter our next golden age?

What’s also important to keep in mind about this theory is that it means that what we are seeing today, socio-economically, is not in fact new. We’ve been through this before. I’ll end with this quote from the interview with Perez:

In the 1920s, wealth distribution looked the same as it does today. The top 1 percent received 25 percent of society’s total income. By the 1950s it was down to 10 percent. Every installation period brings inequality until the state comes back actively to reverse it and relieve social unrest.

So what’s happening today may be temporary and it may be history repeating itself. If you’re interested in this topic, you can read the full interview here.

The 2015 edition of The Global Financial Centres Index (GFCI) was just released last month. It is often used as one of the sources for ranking financial centres.

The index – which is now in its 18th edition – is created using two main ingredients. The first is an analysis of 5 broad areas of competitiveness: 1) business environment, 2) financial sector development, 3) infrastructure, 4) human capital, and 5) reputational & general factors. And the second is an online survey given to financial services professionals. The 2015 edition includes responses from 3,194 professionals.

Below are the top 25 financial centres in the world according to the GFCI (the full list has 84 cities).

Here are a couple of things to note from this year’s index: 

London has overtaken New York for the top spot – but both remain more or less at parity if you dig into the numbers. 

Dublin is performing particularly well in Western Europe.

The leading centre in Eastern Europe is Warsaw (38th), with Istanbul just behind it.

Toronto is now second in North America, only to New York.

Sao Paulo remains the top Latin American centre.

And, Los Angeles (49th) and Liechtenstein (60th) join as new entrants this year.

If you’d like to see the full report and ranking, click here.

I was talking about this with my friend Evgeny Tchebotarev last night:

The transfer of sovereignty over Hong Kong (also known as the handover) happened at midnight on July 1, 1997. At the time, Hong Kong had a population of about 6.5 million people and China had a population of about 1.23 billion people. But Hong Kong punched well above its weight class and its GDP as a percentage of mainland China's GDP was about 18.4% (see above). In other words, Hong Kong represented about 0.53% of the population, but almost 1/5 of China's economic output. Today, well as of 2018, this number has declined to 2.7% (again, see above). Hong Kong still possesses a number of structural benefits compared to mainland China, but its position as a global financial center is not guaranteed.

Graph: Investopedia

Carlota Perez is a professor that specializes in the social and economic impact of technological change. In 2002, she published an influential book called Technological Revolutions and Financial Capital: The Dynamics of Bubbles and Golden Ages.

One of her arguments is that economic growth since the Industrial Revolution has occurred through a series of cycles and surges, ultimately culminating in a fifth great surge centered around information and telecommunications. This is our current economic environment.

Perez was recently interviewed by strategy + business and they published this diagram (if it’s too small, click through to the article):

The five surges of capital and technology since 1771 are:

1. Industrial Revolution
   

2. Steam and Railways
   

3. Steel, Electricity, and Heavy Engineering
   

4. Oil, Automobiles, and Mass Production 
   

5. Information and Telecommunications
   

Number 4 – oil, automobiles, and mass production – is what produced widespread suburbanization, a middle class filled with homeowners, and new forms of retail employment. And I am sure that most of you would agree that it’s not quite over yet.

According to Perez, each cycle has two phases: an installation phase and a deployment phase. This latter phase is a “golden age.” But in between these two phases is a turning point that is typically characterized by some sort of crisis and recession. 

Her belief is that we are in this turning point right now. You see it with Brexit. The demagogues being elected. And more. If you buy this, the key question naturally becomes: How do we cross this chasm and enter our next golden age?

What’s also important to keep in mind about this theory is that it means that what we are seeing today, socio-economically, is not in fact new. We’ve been through this before. I’ll end with this quote from the interview with Perez:

In the 1920s, wealth distribution looked the same as it does today. The top 1 percent received 25 percent of society’s total income. By the 1950s it was down to 10 percent. Every installation period brings inequality until the state comes back actively to reverse it and relieve social unrest.

So what’s happening today may be temporary and it may be history repeating itself. If you’re interested in this topic, you can read the full interview here.

The 2015 edition of The Global Financial Centres Index (GFCI) was just released last month. It is often used as one of the sources for ranking financial centres.

The index – which is now in its 18th edition – is created using two main ingredients. The first is an analysis of 5 broad areas of competitiveness: 1) business environment, 2) financial sector development, 3) infrastructure, 4) human capital, and 5) reputational & general factors. And the second is an online survey given to financial services professionals. The 2015 edition includes responses from 3,194 professionals.

Below are the top 25 financial centres in the world according to the GFCI (the full list has 84 cities).

Here are a couple of things to note from this year’s index: 

London has overtaken New York for the top spot – but both remain more or less at parity if you dig into the numbers. 

Dublin is performing particularly well in Western Europe.

The leading centre in Eastern Europe is Warsaw (38th), with Istanbul just behind it.

Toronto is now second in North America, only to New York.

Sao Paulo remains the top Latin American centre.

And, Los Angeles (49th) and Liechtenstein (60th) join as new entrants this year.

If you’d like to see the full report and ranking, click here.