Among global financial centers, researchers often distinguish such cities as New York, Tokyo, or London. One of the questions is whether these global centers can arise in South America, Africa, Middle East or the countries of the former Soviet Union. It is possible to say that such an event is rather unlikely because these regions lack several important conditions.
In particular, one can speak about legal protection of various property rights, advanced economy, and sophisticated commercial infrastructure. These are the main aspects that should be discussed more closely.
At first, it is necessary to define such a term as global financial center. It can be described as an urban area with significant concentration of various financial organizations which participate in international and domestic transactions (Sassen, 1999, p. 80). It should be mentioned that the countries with global financial centers have certain common traits.
First of all, it is possible to speak about the reduced intervention of the state into the economic activities of businesses and individuals (Sassen, 1998, p. 78). In contrast, businesses activities in the countries of the Soviet Union remain tightly regulated, and the intervention of the state obstructs many financial transactions. This is one of the main obstacles that should be considered.
Apart from that, one should remember that the countries with global financial centers have legal systems that ensure the rights of companies, investors, or traders (Sassen, 1999). This characteristic is typical of the United States, England, Germany, or Japan. This is one of the reasons why stock exchanges emerge in these countries.
In turn, many developing countries of the world lack the legislature and court system that can defend the rights of companies and individuals (The City of New York Office of the Mayor, 2007, p. 15). This is one of the reasons why they do not attract companies that operate at an international level. On the whole, effective court system can contribute to the rise of global financial centers.
Apart from that, one should speak about the political instability of countries in Africa, South America, or Middle East. These states have many political upheavals, and such events can put the assets of companies or individuals at risk. In the opinion of many financial analysts, financial transactions in such regions cannot be properly protected. This is one of the main factors that prevent many African or South American countries from achieving financial growth. This is one of the main arguments that can be made.
Finally, it is important to remember about the presence of highly developed communication as wells commercial infrastructure (The City of New York Office of the Mayor, 2007, p. 15). Global financial centers are more likely to arise in countries with advanced economies. At the present moment, England, Germany, the United States and Japan are not likely to be matched by developing countries such as Russia, India, Brazil, or Argentina. This is another factor should not be overlooked.
These examples show why the countries of South America, Africa, or the Soviet bloc are not likely to become the global financial centers. One should focus on such obstacles as lack of appropriate legislation, governmental intervention, and political instability. Still, one should take into account that economic development of many countries is unpredictable, and the situation can change in the distant future.
Reference List
Sassen, S. (1999). Global Financial Centers. Foreign Affairs, 78(1), 75-87.
The City of New York Office of the Mayor. (2007). Sustaining New York’s and the
US’ Global Financial Services Leadership. Retrieved from https://www.law.du.edu/images/uploads/bloomberg-schumer.pdf