With finances, the U.S. has not done very well in the past few years. New York was formerly the world's top financial sector. However, because of financial problems the World Economic Forum has determined that out of 55 countries that made the cut on the Financial Development Index, London is now in first place.
The Index rates countries on the stability of their financial systems and markets. Countries are evaluated on more than 120 different criteria. These variables range from institutional and business environments to the size of equity and bond markets, along with technology infrastructure, and the ease of getting personal and commercial loans.
Since last year Britain rose in the index from spot No.2 to No. 1. Britain has also faced the rough markets but was able to stay afloat and claim first place because of the strength of its foreign exchange, derivatives, and insurance coverage. Another surprising jump was Australia. In just one year Australia was able to move up 9 numbers on the index in order to claim second place. New York on the other hand fell from first to third place.
London is now in first place but experts wonder if they will be able to maintain their position. New York is still wealthier but the index is based on more than just wealth. Currently, individuals in Britain are criticizing the government for unnecessary and increased regulation along with higher tax rates.
Other countries like France and Germany also fell down the list. They previously had been in the top ten but are now in rankings 11 and 12. As it turns out the largest and most industrialized economies are the ones that have been hit the hardest by the global recession. Because of the size, nature, and diversity of these countries they have been exposed more than others by the downturn. Most developed nations fell sharply on the Index because of the credit crisis.
However, the fall of these wealthy and powerful countries let other developing countries like Brazil, Chile, and Malaysia onto the list. Because the large countries were hurt by the economy these other countries have been able to close in some of the gap between themselves and Western countries. Some of these countries were able to pull through the crisis relatively unscathed because they learned from past crises or were not integrated enough into world financial systems.
Overall the index showed how much the global economy has affected these countries. In this years top 10 there were significant declines in developed countries but strengthening in developing countries overall scores. The most surprising discovery of all was Australia's banking system and the fact they moved up 9 rungs on the Index.
Experts believed Australia would hold steady and improve a little bit but not jump from No. 11 in last years index to No. 2 in 2009. Even though countries are struggling with their financial systems, Britain and the U.S. remain at the top because of the amounts of capital, financial transparency, and other advantages that will keep them in the top for years.
However it's essential to understand that financial systems in the U.S. and U.K. are still in trouble. The decrease in rankings on the index and the lead in relation to other countries drastic decline is concerning. What leadership decides to do in the near future is critical to the recovery and strength of not only individual countries but also global financial systems.
Tags: business degrees, credit crisis, economics degrees, finance degrees, financial crunch, financial index, US falls, World Economic Forum
