One of the legacies of the financial crisis is likely to be a new form of macroeconomic model: state directed capitalism. There is broad consensus that although Communism was unsuccessful, as demonstrated by the Soviet Union, neither did unrestrained capitalism, as demonstrated by the massive public externalities generated by the financial crisis. The government will play a much more important role in the economy since the rise of state directed capitalism.
Governments are also becoming more competitive in the way they vie with other states for talent, investment and the primacy of key financial, industrial and other productive centres in the countries they govern.
Sovereign Wealth Funds (SWFs) have invested about $6 trillion in the global economy. They largely reside in SAAAME countries; 39% of SWF assets under management are in Asian SWFs, 36% in Middle Eastern SWFs and only 14% of SWF assets in European SWFs.
Profitability and growth are likely to be more dependent on the fortunes of the real economy than before the financial crisis, which will in turn be more closely tied to government policies.
As such, it will be important to work with industry and consumer groups to help influence and shape government policies. It will also be important to develop a strong relationship with government to make sure your strategy anticipates and is aligned to government priorities and investment plans.
Long-term economic planning offers the chance for well-placed financial institutions to develop an integral, indispensable position in the economic models of the future.
Q: Will London and New York remain the world’s pre-eminent international financial centres over the next 10 years?