London Remains the Financial Capital of the World
A BNP Paribas Real Estate survey has found that 82 percent of respondents consider London to be the world’s leading financial centre, helping to assuage fears that the financial crisis had weakened its position. Despite the turmoil in the financial sector over recent years, and in contrast to the somewhat pessimistic outlook of some commentators regarding the London market, BNP Paribas Real Estate’s latest banking survey shows that London remains the world’s leading financial centre. Eighty-two percent of respondents cited the capital as the global leader, compared to just 16 percent who specified New York. Indeed, the outlook for London is positive, with 60 percent of respondents confirming the UK as their focal point for growth over the next three years. London benefits from two key advantages that can never be taken away. First, London’s central position in the time zones means that throughout the working day it is possible to speak to, and do business with, the markets in Hong Kong and Singapore in the morning and New York in the afternoon. No other financial centre in the world can provide such connectivity to the global markets. Second, London also remains the centre of the English-speaking world and is therefore a magnet for English-speaking talent.
Source: Excerpted from “London Remains the Financial Capital of the World,?” by Dan Bayley, The Banker, January 6, 2011, www.thebanker.com/Comment/Bracken/London-remains-the-financial-capital-of-the-world?ct=true. Reprinted with permission.
Factor endowments lie at the center of the Heckscher-Ohlin theory. While Porter does not propose anything radically new, he does analyze the characteristics of factors of production. He recognizes hierarchies among factors, distinguishing between basic factors (e.g., natural resources, climate, location, and demographics) and advanced factors (e.g., communication infrastructure, sophisticated and skilled labor, research facilities, and technological know-how). He argues that advanced factors are the most significant for competitive advantage. Unlike the naturally endowed basic factors, advanced factors are a product of investment by individuals, companies, and governments. Thus, government investments in basic and higher education, by improving the general skill and knowledge level of the population and by stimulating advanced research at higher education institutions, can upgrade a nation’s advanced factors.
ANOTHER PERSPECTIVE Factor Endowments: A Quiz
One of the most significant factor endowments is education, with important measures being literacy rate and the literacy rate gap between the genders. Which of the following countries do you think has the largest literacy gap between males and females? (a) Iraq, (b) Rwanda, (c) Chile, (d) India.
The answer may surprise you. It’s not Iraq, although in nearly all countries of the Middle East, men are more likely than women to be literate. With 74 percent literacy overall, Iraq has a nearly 20-point gap between males and females. Nor is it Rwanda, with a 12-point gap and a 70 percent literacy rate overall. And it certainly isn’t Chile, with its 96 percent literacy rate and less than a 1-point gap between the sexes. It is India, with an overall adult literacy rate of 61 percent and a gap of nearly 26 points between males and females.
Source: U.S. Central Intelligence Agency, The World Factbook 2010,www.cia.gov.
The relationship between advanced and basic factors is complex. Basic factors can provide an initial advantage that is subsequently reinforced and extended by investment in advanced factors. Conversely, disadvantages in basic factors can create pressures to invest in advanced factors. An obvious example of this phenomenon is Japan, a country that lacks arable land and mineral deposits and yet through investment has built a substantial endowment of advanced factors. Porter notes that Japan’s large pool of engineers (reflecting a much higher number of engineering graduates per capita than almost any other nation) has been vital to Japan’s success in many manufacturing industries.