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Centers of Progress, Pt. 28: New York (Finance)
Today marks the twenty-eighth installment in a series of articles by HumanProgress.org called Centers of Progress. Where does progress happen? The story of civilization is in many ways the story of the city. It is the city that has helped to create and define the modern world. This bi-weekly column will give a short overview of urban centers that were the sites of pivotal advances in culture, economics, politics, technology, etc.
As many great cities lay in ruins after World War II, New York City assumed a new global prominence and even overtook London’s central position in the international financial markets. It soon became home to the world’s largest and most prestigious stock market on Wall Street and forever changed finance. Wall Street is often considered to be both a symbol and geographic center of capitalism.
Today, New York City is the most populous city in the United States, with over 8 million people. And the greater New York metropolitan area, with over 20 million people, is among the world’s most populous megacities.
In the American psyche, New York represents opportunity. Ellis Island was the historical gateway through which many immigrants arrived in the country during the 19th and 20th centuries, and New York remains a popular immigrant destination in the United States. In fact, it may be the world’s most “linguistically diverse” city, with hundreds of languages spoken within its boundaries.
New York is also where ambitious Americans of all stripes traditionally go to make a name for themselves in industries as diverse as writing, theater, commerce, fashion, mass media, investment banking, and more. And those who “make it” often stick around. New York is home to more billionaire residents than any other city. The metropolis’s nicknames include The City That Never Sleeps, The Big Apple, Gotham, The Capital of the World (popularized by Charlotte’s Web author E.B. White), The Greatest City in the World, and, in the surrounding region, simply The City.
New York’s cultural and economic importance is difficult to overstate. The city is a popular tourist spot, home to the iconic Statue of Liberty, the towering Empire State Building, the famous Broadway theater district, and the bustling Times Square that is the site of the famous New Year’s Eve ball drop. As such, New York has been called the world’s “most photographed” city. It has been estimated that if the New York metropolitan area were a country, it would boast the eighth-largest economy in the world (a rank currently held by Italy). The city is also a research hub, home to over a hundred colleges and universities, including New York University, Columbia University, and Rockefeller University.
Perhaps the city’s geography destined it to be a center of commerce. Located in one of the world’s largest natural harbors, the site where New York now stands was a logical place for human settlement. Originally the area was inhabited by the Lenape people and other Native American tribes. They used the natural waterways for fishing and to trade and wage war with nearby tribes. The first European to visit the site was an Italian, Giovanni da Verrazzano, who was exploring the region in service to the French, in 1524. He named the area New Angoulême, after the French King Francis I (who was known as Francis of Angoulême before assuming the French throne) and soon departed.
Then in 1609, the English explorer Henry Hudson (the namesake of Hudson Bay) arrived. He also soon left, but not before noting the large local beaver population. Beaver pelts were a valuable commodity. Word of Hudson’s discovery spread quickly and inspired the Dutch to found several fur trading outposts in the area in the early 17th century. Those included a 1624 settlement in what is now Manhattan, initiated by the Dutch West India Company. By 1626, the Dutch had constructed Fort Amsterdam, which would serve as the town’s nucleus until the fort’s demolition in 1790. The town was appropriately named New Amsterdam and served as the capital of the local Dutch colonies collectively called New Netherland. To this day, several local place names maintain Dutch origins, including Harlem and Brooklyn (named after Breukelen).
The Second Anglo-Dutch War (1665–1667), despite ending in a Dutch victory, resulted in the British gaining control of the city as part of a treaty. In exchange, the British ceded the Dutch what is now Suriname, as well as Run, a small island that produces nutmeg, in what is today Indonesia. At the time, it seemed as though the Dutch had gotten a far better deal than the British—nutmeg was extremely valuable, and the island complex that includes Run was famous in Europe, while New Amsterdam was a relatively obscure outpost. “Few would have believed a small trading village on the island of Manhattan was destined to become the modern metropolis of New York,” according to Australian historian Ian Burnet.
After the exchange, New Amsterdam was promptly renamed New York after the English King Charles’ brother James. James’ title was the Duke of York, and he was the admiral who led the campaign to conquer the city during the war. The city rapidly grew. By 1700, New York had a population of almost 5,000 people. By the time of American independence in 1776, New York’s population was about 25,000. In 1800, New York City had approximately 60,000 inhabitants. Boosted by immigration, it had well over 3 million by 1900.
New York City took on its central importance in the postwar period. The Germans never acted on plans to bomb New York, deeming the operation too expensive. Thus, spared by the protective breadth of the Atlantic Ocean, New York emerged from World War II not only unscathed, but prospering and poised to dominate global business and culture.
By the late 1940s, New York had risen to become the world’s biggest manufacturing center, boasting 40,000 factories, a million factory workers, and the world’s busiest port, which handled 150 million tons of waterborne freight goods a year. New York was suddenly the city of choice for many top corporations doing business internationally—including Standard Oil, General Electric, and IBM. The nickname “Headquarters City” was added to the metropolis’s collection of monikers. Even the newly formed United Nations was headquartered in New York (built 1947–1952). “The New York [of] 40 years ago was an American city,” reminisced the British writer J. B. Priestley in 1947, “but today’s glittering cosmopolis belongs to the world, if the world does not belong to it.”
The city inherited Paris’s role as the center of the art and fashion world. New York was a refuge for foreign artists fleeing war-battered Europe, like the Dutch painter Piet Mondrian (1872–1944), and a hothouse of creativity cultivating groundbreaking American artists like Jackson Pollock (1912–1956). The city’s musical influence also expanded rapidly, from influential interpretations of classical music by the New York Philharmonic at Carnegie Hall to bebop, the new form of music pioneered in Harlem’s nightclubs that would take the world by storm.
Above all, the city was at the center of postwar globalization. The British writer Beverly Nichols described the state of the megalopolis in 1948:
“There was the sense of New York as a great international city to which all the ends of the world had come. London used to be like that, but somehow one had forgotten it, so long had it been since the Hispanos and Isottas [luxury cars from Spain and Italy, respectively] had glided down Piccadilly, so many aeons since the tropical fruit had glowed in the Bond Street windows. Coming from that sort of London to America, in the old days, New York had seemed just—American; not typical of the continent, maybe, but American first and foremost. Now it was the center of the world.”
Fittingly, the newly internationalized New York took on the role of the world’s financial capital and the site of the world’s two largest stock exchanges: the New York Stock Exchange and, later, National Association of Securities Dealers Automated Quotations (NASDAQ).
Since its humble origins in 1792, when 24 brokers signed the Buttonwood Agreement, thus establishing a securities trading operation in the city, the New York Stock Exchange has flourished in the face of adversity. The U.S. Civil War (1861–1865) helped the financial district expand by prompting more securities trading and the stock exchange moved to its current location at 11 Wall Street in 1865. But it was World War II that let the stock exchange gain unparalleled global prominence.
Credit cards were also among New York’s postwar financial innovations. In 1946, a banker named John Biggins thought to create charge cards that could be used at various shops throughout New York’s Brooklyn neighborhood. Shopkeepers could deposit the sales slips at Biggins’ Flatbush National Bank, which would then bill cardholders.
In 1989, an iconic bronze statue known as the Charging Bull or the Wall Street Bull was erected in the Financial District of Manhattan to represent capitalism and prosperity. (A play on the term “bull market” that denotes positive market trends).
As the symbol of capitalism, Wall Street became the target of the anti-capitalist “Occupy Wall Street” protest movement in 2011. The protestors were concerned about economic inequality, fearing that the prosperity created by the market system was not widely shared. In reality, Gordon Gekko-types are hardly the only beneficiaries of financial markets. Wall Street plays an invaluable role in everything from facilitating ordinary Americans’ retirements through their 401ks to funding promising innovations—ultimately expanding the economic pie and raising living standards. As my former colleague and securities lawyer Thaya Brook Knight put it:
“At its core, here’s what Wall Street does: It makes sure that companies doing useful things get the money they need to keep doing those things. Do you like your smartphone? Does it make your life easier? The company that made that phone got the money to develop the product and get it into the store where you bought it with the help of Wall Street. When a company wants to expand, or make a new product, or improve its old products, it needs money, and it often gets that money by selling stock or bonds. That helps those companies, the broader economy and consumers generally.”
New York City remains the world’s leading financial center and the heart of the U.S. finance industry, to the point that “Wall Street” has become shorthand for financial capitalism itself. While many still consider Wall Street the world’s financial center, new technologies have allowed investing to become increasingly decentralized. Today, anyone can buy and sell stocks using a smartphone while enjoying the comforts of home, and internet forums with names like “Wall Street Bets” can compete with traders on the literal Wall Street. Still, anyone who shares in the economic benefits of the financial sector should thank New York City for taking banking to new heights. It is appropriately our twenty-eighth Center of Progress.