Water will run downhill

Interesting article in the FT today titled "How the City of London defeated the prophets of doom". London, once feared obsolete as a financial centre because of the rise of the Euro and the might of Manhattan, has had a booming resurgence, for three reasons:

(a) Sarbanes Oxley. It's become so expensive and onerous to list in New York that everyone is flocking to London instead. In 1999, the dollar value of IPOs in New York (around $80bn) was around 10x the value in London. Last year, London raised $10.3bn and the US only $6bn.
(b) The Bush war on terror. Arabs, flush with cash, don't want to put their money in the US where what they regard as a capricious and high-handed administration might decide to seize it. Instead, they're reinvesting in their own countries, starting a Middle East capital centre and leaving the rest with London.
(c) Over-regulation on the Continent, which makes it easier to fire people when things slow down.

Money is like water -- it's very hard to prevent it sinking to the lowest levels. You just have to leave one little crack.

The beginnings are there for the end of the American era, and our leaders are doing everything they can to speed it along.

Jewel in the crown

Lot of stories about India this week. Intel is planning to invest $1bn there in the next five years. So, too, Microsoft. AMD is thinking of building its next chip plant there. And on top of this, Mac the Knife at Morgan Stanley is offshoring 2,000 back-office jobs there. Suddenly it seems to be the place to go, sort of reminiscent of China a couple of years ago.

It was perhaps inevitable. There's something very enterprising about the Indian culture. I remember back in Africa, on a beach, sharing barbecued goat with some local Indians who came over to our island for a Sunday afternoon outing.

"We are the Jews of Africa", said one of them, and there are, indeed, similarities. Africa is full of Indians, or was, many of them small-time entrepreneurs running little shops selling to the natives (not, generally, to the so-called Europeans). They have in common, also, a dedication to education and a bent for math.

Another characteristic they share is a high propensity for saving. I was having dinner a while ago with some money managers in Philadelphia (in a Japanese restaurant owned and run by Morimoto, or whatever his name is, from Iron Chef). One of the analysts, an Indian, told me this, that all the Indians he knew saved far more than they spent.

Thrift, education and enterprise, a good recipe for eventual economic dominance.

We in America are fairly good at enterprise. But thrift and education are not conspicuously ours. There's not all that much we can do about becoming more thrifty, but we could be doing a lot more for education. If we took cut the defense budget by just 1% we'd have an extra $4.5bn a year to spend on education. Even the blundering old defense hawks ought to realize that it's actually a far better investment than building more planes and bombs. Education leads to prosperity, and, as history shows, prosperity is the best defense.