Political opportunism trumps long-term competitiveness

Almost a decade of somewhat desperate attempts to regain economic stability has seen countries adopt vastly different strategies to recover from massive national debt.

Core in this divergence has been the approach to personal and business taxes targeted to contain ‘bankers bonuses’.

Today’s report in the Wall Street Journal ranks cities from Most to Least Desirable as voted by 50,000 of the world’s top financial services money-earners.

New York, Zürich, Zug, Dubai and Shanghai top the list while the laggards are dominated by London, Hong Kong, Frankfurt and Paris.

The winners seem to have kept personal and corporate taxes low, even in the face of mounting national debt, in the hope that economic activity will create an environment of growth; one that will have an overall beneficial economic effect.

New York, and the US economy in general, now seems poised on a precipice as the soaring national debt mountain threatens to dominate the ‘feel good’ factor of global leadership in financial services.

London and Hong Kong have both fallen foul of politicized tax strategies that have seen personal taxes rise to “extortionate” levels.

The Chinese government appears to have given Shanghai a tacit green light to take over Hong Kong’s role as the regional financial services capital.

The Middle East is still vying to become the ‘One Global Trading Center’ for financial instruments, using new software technology to automate trading and facilitate deal-making. Many believe that this fight has just begun.

Although individuals are the least mobile of all business resources, we are now seeing the lengths to which top earners are prepared to go, to protect their current and future wealth.

What started as a coordinated international program to stabilize the world economy has resulted in divergent and crystallized positions that are about to collide. There will likely only be one winner.

Warning: Hazardous thinking at work

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