New York, commonly regarded as the finance capital of the world, has been ranked first in the World's Financial Centers by the Global Financial Centres Index.
History of New York
Dutch settlers, working for the Dutch West India Company, established New Amsterdam on Manhattan's southern tip. Ever since business has been the area's most important activity.
Amsterdam Map in 1660
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However, the British arrived in 1664 and took over the area, eventually naming it "New York" after the Duke of York. From there, they battled back and forth and the name was switched between "New Amsterdam" and "New York" four more times before it was eventually confirmed "New York" for good in 1674.
Wall Street was named after a wall built at its location in 1653 to separate the British and Dutch neighbors. Eventually, the wall came down in 1699. Since then, Wall Street is known as the center of the Financial District.
Geographical Advantage
New York's supremacy in trade has a lot to do with geographical factors, but it was helped along by a number of more contingent developments. Not only was New York a central location for inbound European merchants, but its ports proved to be much more convenient than either Philadelphia's or Boston's. The Hudson River proved to be much more navigable and less prone to freezing over than both the Delaware River and the Charles River.
Photo: Internet
New York's geographical advantage was supplemented by the construction of the Erie Canal (1817–1825), and with the establishment of Black Ball Lines in 1818.7 8
Maps of the Erie Canal
Photo:Wikipedia
While the Erie Canal connected the Hudson River to the Great Lakes and consequently to the fastest-growing parts of America west of the Appalachian Mountains, the Black Ball Line provided the first-ever regularly scheduled transatlantic passenger service. Both the Canal and the Line helped to solidify New York's place as America's center of commercial trade and central transportation hub.
Photo: New York State Archives
Canal packet boat passengers traveled in relative comfort from Albany to Buffalo in five days—not two weeks in crowded stagecoaches. Freight rates fell 90% compared to shipping by ox-drawn wagon. Freight boats carried Midwestern produce from Buffalo to Albany. Most continued on to New York City's seaport, towed down the Hudson River in fleets behind steam tugboats. Mid-western farmers, loggers, miners, and manufacturers found new access to lucrative far-flung markets.
Photo: Wikipedia
As the first port of entry for many immigrants, New York became a convenient place for them to settle, helping stimulate an unstoppable rise in the city's population that would grow to be 10% larger than Philadelphia's by 1820 and as much as twice as large by 1860.9 The flow of immigrants also helped to increase manufacturing and commercial activity even further.
These new immigrants also brought with them a more adventurous risk-taking spirit that stood in contrast to the more cautious nature of Philadelphia's Quaker heritage.
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DeWitt Clinton is often referred to as the "Father of the Erie Canal," mayor of New York City.
In the beginning, the project was considered impossible by many who cited a lack of funds, untrained engineers, and unforgiving terrain.
De Witt Clinton threw all his political weight behind the project, beginning a Canal Fund.
Photo: Pinterest
The building of the Erie Canal continued for eight years.
The canal provided impressive revenue for the state of New York. Turning a profit in its first year, the canal steadily made money until the tolls were abolished in 1883.
Steamships, cheap transportation by rail and canal, abundant labour, and professional expertise made New York increasingly dominant.
By the mid-1800s, it handled more goods and people than all the other American ports combined.
Financial innovation
New York quickly developed a reputation for being a city of innovative business enterprise with an entrepreneurial ethos that lent itself to speculative investment behavior. Speculation further enhanced the voluminous trade in New York's securities markets by keeping them awash with liquidity.
For instance, in order to finance the increasing amount of stock trading in New York, a market for call loans developed. Using securities as collateral, stock traders could borrow money from the banks to be used for further speculative investments. This behavior proved mutually beneficial for New York's banks and its stock market as the banks earned interest off of the loans while the borrowed money allowed for further securities trading.
New York developed a safety fund system in the early 1800s, requiring member banks to contribute a small percentage of its capital annually to a state-managed fund that could be used to reimburse noteholders when a bank failed. This was probably the earliest form of deposit insurance.
New York enacted a free banking law in 1838 but required that banknotes be backed by government bonds.
Presumably, this would protect depositors and noteholders, since if the bank failed, then the collateral could be sold to satisfy the bank's customers.
In 1853, the New York Clearing House Association was a clearinghouse bank established in New York. It simplified the chaotic settlement process among the banks of New York City. It attracted more and more businessmen to set up banks in New York.
From 1890 to 1930, New York City dominated the entire nation in terms of communications, trade, finance, popular culture, and high culture. More than a fourth of the 300 largest corporations in 1920 were headquartered in New York City.
In 1898, the modern City of New York was formed with Brooklyn's consolidation (until then an independent city), Manhattan, and outlying areas.
World War & New York
New York emerged from the war as the world's leading city, with Wall Street leading the United States ascendancy.
After World War I, the United States changed from a debtor nation before the war to a creditor nation, and its economy developed rapidly.
During the same period, London was in relative decline due to war.
Photo: Internet
During the Second World War, because the United States was far away from the battlefield, the United States' safe and reliable financial environment attracted a large amount of capital.
After the Second World War, the Bretton Woods Agreement was negotiated in July 1944 by delegates from 44 countries at the United Nations Monetary and Financial Conference held in Bretton Woods, New Hampshire. Thus, the name "Bretton Woods Agreement.
Under the Bretton Woods System, gold was the basis for the U.S. dollar, and other currencies were pegged to the U.S. dollar's value.
The dollar status also further established New York's status as the world's international financial center.
In the late 20th century, telecommunication and high technology industries developed so fast. New York City was especially successful at this transition. Entrepreneurs created many small companies, as industrial firms such as Polaroid withered.
New York also increased its dominance of Wall Street's financial services industry, led by banking expansion, a rising stock market, innovations in investment banking, etc.
Overall, New York entered the new millennium "in a position of economic strength and optimism".
New York has always led the world financial trend from Internet concept stocks to real estate investment to new energy investment.
Today, New York is still the most active place in the world for information, commercial services, and securities trading categories.
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