Investopedia defines a financial center, or a financial hub, as a city with a strategic location, leading financial institutions, reputed stock exchanges, a dense concentration of public and private banks, and trading and insurance companies. Also, these hubs are equipped with first-class infrastructure, communications, and commercial systems, and there is a transparent and sound legal and regulatory regime backed by a stable political system. Such cities are favorable destinations for professionals because of the high living standards they offer along with immense growth opportunities.
Many places in the world would require a long time of selling to promote their professional and cultural advantages, New York City is not one of them. It is commonly referred to as the finance capital of the world and has topped the ranks of the World’s Financial Centers by the Global Financial Centers Index (GFCI). This has a lot to do with the fact that many buildings in the city have a connection to the financial world. These buildings represent the global significance and impact that NYC has in terms of commerce, media, finance, fashion, art, technology, research, entertainment, and education.
History of Financial Development in New York and Current Status
The history of this status can be traced to World War I where the U.S. was the world’s largest debtor nation in 1914 because foreign countries like to invest their money in the US, hence, they owned a lot of American assets. However, after World War I, the U.S. went from being the world’s largest debtor nation to the world’s largest creditor nation. It is this transformation that paved the way to the status New York City has acquired as the leading international financial center. The aftermath of the second world war also played its role in mapping out opportunities that about in The City as we have it today. The financial status of New York City after World War II is astronomically different from the city it once was.
A lot of the change is attributed to the war for its role in lifting the city out of depression and placing it in a position of financial prosperity. Several factors contribute to this boom. One is economic dominance. Within a few years, the level of commercial activity within the city was unprecedented. It is reported that towards the end of the 1940s, New York had over a million factory workers in over 40,000 factories making it the largest manufacturing center in the world.
Besides that, it also boasted of having the world’s biggest port. Being home to the largest corporations in the United States and the world at large, it was trading hundreds of millions of dollars each day. One major attraction of this city was the fact that a hundred and thirty-five out of the United States’ 500 largest industrial companies were located in New York. This included Standard Oil, General Electric, U.S. Steel, Union Carbide, IBM and RCA. Today, Manhattan is the world’s leading center of banking, finance, and communication. It is also home to the New York Stock Exchange (NYSE) on Wall Street. In 2020, some of the largest companies in New York still include IBM, Deloitte, PepsiCo, JPMorgan Chase, PricewaterhouseCoopers, Citi, Verizon, ABM Industries, Pfizer, Standard Chartered USA.
More than that, another reinforcement of its position was the selection of New York as permanent headquarters for the United Nations. This brought more influence as well as recognition for the city. The position of New York as a successful and industrious city is also linked to the cultural boom that shaped it and the cultural diversity it is known for. In a city where over 200 languages are spoken and where over 40 percent of the population was born outside of the United States, it seems like the most befitting place for the headquarters of the United Nations.
The war also played a major role in a huge art and cultural shift from Paris being the center of the art world across the Atlantic to New York City. The events leading up to fascism in Europe and the resulting unsettlement led to the migration of multiple significant artists including Marcel Duchamp, Fernand Leger, Wassily Kandinsky, and Piet Mondrian. The city is also the nation’s most important center for mass media, journalism, and publishing.
New York City is proof that the more developed and affluent that a city becomes, the more money that will be pumped into creating art galleries, museums, concert halls, and other cultural venues. This is also a pointer to the fact that culture or cultural capital plays a key role, operating alongside more traditional economic factors, in shaping urban development.
While the aforementioned contributors to the City’s affluence play a large role in its development and current status, New York City’s most important economic sector lies in its role as the headquarters for the U.S. financial industry, which is known as Wall Street. It encompasses the entire fabric of finance in the City. It is often described as both the symbol and geographic center of American capitalism. Essentially, Wall Street refers to all the banks, hedge funds, and securities traders that drive the American financial system.
Silicon Alley is the headquarters for Tech and Biotech in New York City. It encompasses the Internet, new media, telecommunications, digital media, software development, biotechnology, game design, financial technology, and other fields within information technology that are supported by its entrepreneurship ecosystem and venture capital investments. The financial influence of Silicon Alley is so high, it generated over US$7.3 billion in venture capital investment in 2015. It is commonly referred to as New York’s intellectual capital.
Another major force in the city’s economy is real estate. According to Forbes, in 2014, Manhattan had six of the top ten ZIP Codes in the United States by median housing prices. Also, Fifth Avenue in Midtown Manhattan commands the highest retail rents in the world, and the most expensive home sale ever in the United States was transacted in Manhattan, at a selling price of US$238 million, for a 24,000 square feet penthouse apartment overlooking Central Park. This proves that New York is home to some of the world’s most valuable real estate. It also shows that each sector and feature of New York City plays a huge role in creating and maintaining the position of New York City in the world in terms of financial relevance.
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