Will London Beat New York?

Julia Vitullo-Martin, November 2006

Many Londoners believe their town will give New York a run for its money as the world’s foremost city. For nearly a year, the London papers have carried regular news articles and opinion columns on what they regard as London’s increasingly competitive position, while the major New York papers have been virtually silent.

LONDON ASCENDANT?
Londoners have a point. Theirs is now the dominant city for much of the non-American world, but particularly for Europe (and its union), the Middle East, Africa, and, increasingly, Asia. London has long been a magnet for youngsters, including foreign youngsters, and now has the largest non-national professional community of any city in the world. It manages more international money than any other place, including New York. Its art market is said to be far stronger than New York's, and its fashion industry is gaining.

At the same time, London has some of the same problems as New York. London is an even more expensive place to do business—its office costs being the highest anywhere. Like New York's population, London’s is increasing; yet the market is not building enough housing to accommodate these new residents, except for the wealthy among them.

London's infrastructure, like New York's, is under stress. Yet London, to its credit, has built new rail lines (such as the light rail out to Canary Wharf in the Docklands) and new attractions, like the Millennium Bridge and the Eye. What is more, the Olympics that the city wrested from New York will help London build more public transportation, roads, and sewer lines into currently underdeveloped areas.

New York does have one generally unnoted advantage. It may be a safer city. Violent crime in London is serious, and seems to be worsening, particularly on the Underground, where violent crime rose 14% last year, according to the British Transport Police. London maintains its crime data in a less sophisticated and comprehensible way than New York, making comparisons difficult.

Nonetheless, London's papers seem confident that the future lies with their town, not ours. "New York's days of glory will never return," the Financial Times announced this month. Its columnist John Gapper wrote scornfully, "New York is not the world's financial capital any more than the U.S. baseball championship deserves the title of World Series."

New York's senior senator, Chuck Schumer, and mayor, Michael Bloomberg, have gone so far as to publish a semi-official proclamation of worry. "To save New York, learn from London," their Nov. 1, 2006, diagnosis in the Wall Street Journal, was forebodingly titled. Their take: Unless New York improves its "corporate climate," it risks losing its pre-eminence in the global financial services sector. In truth, they're really talking more about the national corporate climate—including excessive regulation, a declining dollar, and restrictive immigration—than the local one. Indeed, a report from the bipartisan Committee on Capital Markets Regulation backed them up on Nov. 30, warning that Wall Street was "losing its leading competitive position" compared to London and Hong Kong. In the first nine months of 2006, said the report, 11 U.S. companies opted to list on the London Stock Exchange, raising some $800 million, instead of going public in New York.

New York still has higher financial services employment than any other city, Bloomberg and Schumer argue, because of its "unparalleled quality of life and cultural diversity," plus its "dynamic labor market." Of course, London has all this as well—plus a far more international orientation, in large part because of its membership in the European Union.

SHOULD NEW YORKERS BE WORRIED?
Yes and maybe.

Yes, the Financial Times is correct to note that more money is now managed in London than in the four top American financial centers combined, including New York. Columnist Gapper notes that London's current success largely derives from the expansion in London of New York's investment banks over the last twenty years, amounting to a "financial Marshall Plan" that brought American capital and expertise to the rest of the world. The U.S. may have been inept at exporting democracy, he says, but it has done a fine job of exporting capitalism. Because of expanding foreign investment opportunities, spurred more recently by the weak dollar, American money has been moving abroad.

Maybe, because for once New York's political leadership is alert to the threat, putting it in a far different category than, say, the unanticipated and nearly disastrous fiscal crisis of 1975. Sen. Schumer and Mayor Bloomberg note that while the Brits only have one regulatory body overseeing financial markets, the U.S. has ten—many of which compete to be "the toughest cop on the street." Like a recent rash of commentators, they urge the federal government to relax the Sarbanes-Oxley corporate reform law and restrict shareholder lawsuits.

But there's something else that goes far beyond issues regarding either city's financial-services dominance. London has become a public-policy innovator, tackling problems, discussing solutions, and actually implementing reforms in what may be a more open-minded and flexible way than New York has—at least in the past.

LEARNING FROM LONDON?
London got a head start on New York in the 1980s, when it began redeveloping its ruined waterfront, converting unused property into hotels, restaurants, residences, and, in the Docklands, immense office towers that have attracted top banks and corporations from all over the world. And while the Canadian Reichmann family went bankrupt more than once in building Canary Wharf—which looks like an outsized Battery Park City—its prescience has now been conclusively proved by the Wharf's occupancy and ongoing expansion.

But it's not just in development that London is doing so well. Its gift for innovation can be seen in its approach to an issue that confronts almost every large, complex city: street homelessness. London recognized early that rough sleeping is destructive not only for those who do it—but for the neighborhoods that endure it. As a result, London today has about 1,500 street people (what Londoners call "rough sleepers") or less than half of New York's, even though at 7,465,100 people, London is only a little smaller.

American advocates, including New York homeless services commissioner Robert Hess, attribute London's success to the adoption of the right strategy, which was funded nationally and generously. Specifically, London shifted funding from expensive, vast emergency shelters to small, local "safe havens" that have fewer than 150 beds. "London has reduced the number of people sleeping on the streets by two-thirds over the last five years, so they're a little ahead of us," says Commissioner Hess, adding that New York will have also reduced street homelessness by two-thirds by the time Mayor Bloomberg leaves office. "They offered a new kind of sheltering model that lends itself to a great level of success for people who, but for that safe haven, would be living on the streets." (New York will be opening its first safe haven with the Bowery Residents Committee on Dec. 7.) Or, as White House homeless czar Philip Mangano argues, "With these big seemingly intractable social problems, you have to be able to produce visible results. Prime Minister Blair understood this. London first got success with the rough sleepers—the group deemed to be most unchangeable—and now they're having success with homeless families."

Similarly, as in New York, many London neighborhoods were choking on traffic in the 1990s. After taking some intermediate steps, like increasing licensing fees, London introduced full-fledged congestion pricing in 2003, eventually charging cars $16 each to enter the pricing zone. According to 2005 data from Transport for London, traffic congestion has since decreased about 28% while bus ridership into London increased 38% the first year and 12% the second year. Whether these early results actually held up over the last year—and every cab driver in London seems to say they haven't—won't be known until TFL produces its 2006 annual report.

Nonetheless, in its heroic effort to tame its traffic, London did something important that New York might not be willing to do were it to implement a similar scheme. It used the new revenues to pay for doubling the available buses, thereby providing a generous carrot to offset the stick.

Or take the pressing issue of power: Most of central London's energy is supplied by an electricity substation beneath Leicester Square, which would be just to the left of the Ticket Booth were it above ground. This is not only efficient in energy terms, but in planning terms as well. The substation, which cannot be seen, takes up no precious site of its own. New York neighborhood opposition to substations has prevented Con Edison from being similarly efficient, with the exception of its substation at 7 World Trade Center—in a commercial neighborhood.

London is now systematically and boldly using the 2012 Olympics to finance and build an infrastructure of roads, rails, bridges, housing, stadia, and other needed facilities in a formerly derelict section of East London. When the Olympics are over it will have a new mixed-use neighborhood to supply residences and offices to its booming population. In short, London doesn't just ponder new ideas, it implements them, even when they cost money.

WHAT’S NEXT
From the Olympics to high finance, London has held New York in its gun sights for some ten years. It clearly won on the former, and is claiming it will soon win on the latter. But it hasn't won yet—and meanwhile has attracted its opponent’s attention.

Mayor Bloomberg knows what he has to do—work with Washington on the regulatory environment, deal with destructive ongoing problems like traffic congestion, continue to rezone dilapidated manufacturing areas, and rebuild the city's infrastructure to welcome the million people who hope to live and work here. No one should count New York out.