At a time when fears of recession thicken the air, Time looks at three cities that are driving the global economy and, in fact, are made by and are making globalisation: New York, London and Hong Kong, collapsed in the somewhat unwieldy shorthand, Ny-lon-kong. Michael Elliot tracks how these cities are overlooked when explanations are found for the robustness of emerging market economies even during fears of a slowdown in the developed world: “Connected by long-haul jets and fiber-optic cable, and spaced neatly around the globe, the three cities have (by accident — nobody planned this) created a financial network that has been able to lubricate the global economy, and, critically, ease the entry into the modern world of China, the giant child of our century. Understand this network of cities — Nylonkong, we call it — and you understand our time.” The three cities have much in common. They were all once centres of manufacturing, and managed a transition to services. All were significant ports — Hong Kong still is. And all have a multicultural population: in 2006, 31 per cent of London’s residents had been born outside Britain; in New York 34 per cent had been born outside the US; and Hong Kong has traditionally been a magnet for immigrants. But men and women of the financial sector, writes Elliot, can choose to live anywhere — what has drawn them to these cities is great connectivity and a conducive local environment made of ease of doing business and a vibrant cultural scene. It matters because: “If the 19th century was the age of empire and the 20th one of war, so the 21st century, to date, is an age of finance. It is the banks and investment houses, the mutual funds and money managers, taking in their clients’ cash and spreading it around the world, who have made today’s global economy what it is.”
The Economist (January 19) looks at the possible backlash to Arab and Asian sovereign wealth funds showering their money on Wall Street. Sovereign wealth funds refer to the surplus savings of developing countries, wealth that’s grown spectacularly recently on account of rising oil prices and exports. An example of their quick intervention: “On January 15th the governments of Singapore, Kuwait and South Korea provided much of a $21 billion lifeline to Citigroup and Merrill Lynch, two banks that have lost fortunes in America’s credit crisis.” The leader notes two concerns. One, these funds are not always transparent in their decision-making. Two, they may invite a nationalist backlash — for instance, French President Nicolas Sarkozy has already said he’d save French firms from “aggressive” funds. So what’s to be done? The Economist recommends annual reports to disclose investment, or investment through hedge funds. But as it admits, the problem lies in the perceptions in the countries where this money goes, not in the funds.
Meanwhile: Newsweek focuses on the falling dollar: “The dollar — along with America’s economic place in the world — has been on a well-documented downward spiral since 2002. Back then, a Euro was worth 86 cents. Today, it buys $1.46. Of course, the Euro’s relative youth makes talk of ‘historic lows’ easy to dismiss. More telling is that the US Dollar Index, a futures contract reflecting the dollar’s strength against six other major trading currencies, hit the lowest mark in its 35-year history just before Christmas.” Countries are beginning to de-link their currencies from the dollar and the US may not be able dominate the world on credit.