The Global City: New York, London, Tokyo

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Saskia Sassen



For Mara Van de Voort and Willem S. Van EIsloo

Copyright © 1991 by'Prmceton University Press Published by Princeton University Press, 41 William Street, Princeton, New Jersey 08540 In the United Kingdom: Princeton University Press, Oxford All Rights Reserved

Library of Congress Cataloging-in-Publication Date Sassen, Saskia, The global city: New York, London, Tokyo / Saskia Sassen. p. em. Includes bibliographical references and index. ISBN 0-691-07866-1 1. Financial services industry-New York. 2. Financial services industry-e-Iapan-c-Tokyo. 3. Financial services industry-EnglandLondon. 4. International finance, 5. International economic relations. 6. New York (N. Y.)-Economic conditions. 7. Tokyo (Japan)-Economic conditions. 8. London (England)--Economic conditions. L Title. HG184.N5S27 1991 332'.042-dc20 90-23017 CIP This book has been composed in Linotron Caledonia Princeton University Press books are printed on acid-free paper, and meet the guidelines for permanence and durability of the Committee on Production Guidelines for Book Longevity of the Council on Library Resources Printed in the United States of America 10















One Overview




Two Dispersal and New Forms of Centralization


Three New Patterns in Direct Foreign Investment


Four Internationalization and Expansion of the Financial Industry




Five The Producer Services


Six Global Cities: Postindustrial Production Sites


Seven Elements in a Global Hierarchy




Eight Employment and Earnings


Nine Economic Restructuring as Class and Spatial Polarization


Tables - - - - - - - - -

3.1 Average Annual Growth Rate of Direct Foreign Investment from Developed to Developing Countries, 19601987 (percent) 3.2 Inward Direct Investment Flows: SDRs and Percentage Distribution for Seven Countries, 1980-1986 (millions of SDRs and percent) 3.3A Direct Foreign Investment in the United States by Source, 1962-1988 (millions of U.S. dollars) 3.3B Direct Foreign Investment in the United States by Source, 1962-1988 (percent) 3.4 Japan, United Kingdom, and United States: Direct Foreign Investment Flows, 1979-1986 (billions of SDRs) 3.5 Japan, United Kingdom, and United States: Direct Foreign Investment Stock, 1979-1988 (billions of SDRs) 3.6 World Services Trade: Major Surplus and Deficit Countries, 1988 (billions of SDRs and percent) 3.7 Share in World Service Credits and Debits, 1975, 1980, 1985, and 1988 (percent) 3.8 United States: Share of World Trade 1975, 1980, 1985, and 1988 (percent) 3.9 Japan: Exports and Imports of Services, Investment Income, and Merchandise, 1975, 1980, 1985, and 1988 (billions of SDRs) 3.lOA U. S. Direct Investment in Japan: Selected Service Industries, 1982-1988 (millions of U. S. dollars and percent) 3.10B Japanese Direct Investment in the United States: Selected Service Industries, 1982-1988 (millions of U. S. dollars) 3.11 United States and Japan: International Service Credits and Debits and Service-Merchandise Ratio, 1975-1988 3.12 United States: Direct Foreign Investment Abroad: Industry Detail for Selected Items (millions of U. S. dollars) 3.13 U.S. Sales to and Purchases from Unaffiliated Foreigners of Selected Services, 1986 (millions of U. S. dollars) 3.14 Top Eight Exporters of Services, 1980 (billions of U. S. dollars)



38 39 39 41 42 48 49 50

51 53

53 54 57 58 59




Ten A New Urban Regime?

Appendices Bibliography


321 323 339 355 391


6.14 United States: National Employment Share of Major Cities in Producer Services, 1977-1987 (percent) 6.15 United States: National Employment Share of Major Cities in Selected Producer Services, 1977-1987 6.16 United States: Location Quotients of Selected Producer Services Industries, 1977-1987 6.17 Law Firms with Foreign Branches: Manhattan, Los Angeles, and Chicago, 1988 6.18 New York and Chicago: Employment Growth Rates in Producer Services, 1977-1987 6.19 New York and Chicago: Percentage Employed in Selected Industries, 1981-1985 6.20 United States, New York, Los Angeles, and Chicago: Employment in Information Industries, 1985 6.21 United States: Location Quotients of FIRE and Services in Selected Locations, 1985 6.22 United States, New York, Los Angeles, and Chicago: Foreign Deposits at the 200 Largest U. S. Banks, 1976 and 1986 (billions of dollars and percent) 6.23 Japan: National Employment Share of Major Cities in Selected Producer Services, 1977-1985 6.24 Japan: Location Quotients of Financial and Service Industries in Major Cities, 1977-1985 7.1 Number of Headquarters of the Top 500 Transnational Firms in the World's Seventeen Largest Metropolitan Areas, 1984 7.2 Capitalization in Leading Stock Markets, 1987 and 1989 (billions of U. S. dollars) 7.3 Top Twelve Banking Centers Ranked by Income and Assets of Top Fifty Commercial Banks and Top Twenty-Five Securities Firms, 1985 and 1986 7.4 New York, London, and Tokyo: Share of World's 100 Largest Banks, 1988 7.5 New York, London, and Tokyo: Share of World's TwentyFive Largest Securities Firms, 1988 7.6 United States, United Kingdom, and Japan: Foreign Liabilities and Assets of Deposit Banks, 1982-1989 (billions of U. S. dollars) 7.7 Cities Ranked by Cumulated Assets of the Twenty-Five Largest Insurance Firms, 1985 7.8 Foreign Investment Share in Private Sector Pension Assets by Country, 1980-1990 (percent)


148 150 151 153 155 155 156 157

158 160 161

170 172

176 178 179

180 181 182


3.15 U. S. Service Balance of Payments, 1983 (OTA mid-range estimates, in billions of U. S. dollars) 4.1 Funds Raised on International Markets by Type of Instrument, 1985--1989 (millions of U.S. dollars) 4.2 International Capital Markets: Major Financing Instruments, 1984-1989 (percentage breakdown) 4.3 Borrowing on International Capital Markets by Main Borrowers, 1984-1989 (percent and billions of U. S. dollars) 4.4 Japan, United Kingdom, and United States: Funds Raised on International Markets, 1985-1989 (millions of U. S. dollars and percent) 4.5 Pension Funds by Major Countries, 1985 (billions of U. S. dollars) 6.1A United States: Growth in Total Employment and Producer Services Employment, 1977-1987 6.1B United States and New York: Employment Changes by Industry, 1977-1985 6.2 Great Britain and London: Employment Changes by Industry, 1978-1985 6.3 Japan and Tokyo: Employment Changes by Industry, 1975-1985 6.4 Great Britain and London, United States and New York, Japan and Tokyo: Employment Share of Selected Producer Services, 1970s and 1980s (percent) 6.5 New York and London: Share of Producer Services in Employment, 1970s and 1980s 6.6 New York and London: Producer Services Location Quotients, 1970s and 1980s 6.7 New York, London, and Tokyo: Location Quotients for Real Estate, 1970s and 1980s 6.8 New York: Industrial Specialization in the New York Metropolitan Region (NYMR), 1956 and 1980 6.9 Population and Employment Distribution in the New York Metropolitan Region, 1956-1985 6.10 Manhattan, the City of London, and Tokyo's Central Business District (CBD): Share of Selected Industries, 1970s and 1980s (percent) 6.11 United Kingdom: National Employment Share of Major Cities, 1971-1984 (percent) 6.12 Japan: National Employment Share of Major Cities, 19751985 (percent) 6.13 United States: National Employment Share of Major Cities, 1977-1987 (percent)


60 72 73 74

75 76 130 130 131 132

133 134 135 135 137 138

139 140 140 141



9.3 Japan: Selected Entries of Foreigners by Type of Visa, 1987 D.l Tokyo: Residential Land Price by District, 1986-1987 (D. S. dollars) D.2 Japanese Prefectural Cities: Average Residential Land Prices Relative to Tokyo, 1985-1986 D.3 Japan: Land Prices in Major Cities, 1985 (yen per square meter)


310 349 352 353


7.9 Private Sector Pension Assets Invested Abroad by Country, 1980-1990 (millions of u. S. dollars) 8.1 New York, London, and Tokyo: Population and Employment, 1977-1985 8.2 New York, London, and Tokyo: Distribution of Employment in Manufacturing and Service Industries, 1970s and 1980s (percent of total employment) 8.3 New York: Employment Changes by Industry, 1977-1985 8.4 United States, New York, and Manhattan: Employment Distribution by Industry, 1984 (percent) 8.5 London: Employment Changes by Industry, 1981-1987 8.6 United Kingdom, London, and City of London: Employment Distribution by Industry, 1981 (percent) 8.7 Great Britain: Employment Changes in London and the Southeast, 1971-1981 8.8 Tokyo: Employment Changes by Industry, 1977-1985 8.9 Japan: Employment Distribution, 1975-1985 8.10 Japan, Tokyo, and Tokyo's Central Business District (CBD): Employment Distribution by Industry, 1980 (percent) 8.11 New York: Median Weekly Earnings of Office Workers by Industry Group and Occupation, 1981 and 1987 (dollars) 8.12 New York City: Average Weekly Earnings by Borough and Industry, 1985 (dollars) 8.13 United States: Relative Salary Levels for Selected Occupations by Industry, 1986 8.14 Great Britain and London: Average Weekly Earnings by Occupation and Sex, 1986 (pounds) 8.15 Great Britain and London: Average Weekly Earnings by Sex, Selected Industry, and Manual/Nonmanual Occupation, 1986 (pounds) 8.16 London: Average Adult Full-Time Weekly Earnings, 1979-1985 (pounds) 8.17 Great Britain: Average Gross Weekly Earnings by Area, 1986 (pounds) 8.18 Japan and Tokyo: Average Monthly Earnings 1977-1987 (yen) 8.19 Tokyo: Average Monthly Earnings by Industry and Sex, 1988 (yen) 9.1 Japan: Entries of Asians by Country of Origin, 1983-1987 9.2 Japan: Entries of Foreigners by Continent of Origin, 1986


183 198

199 203 204 208 209 210 215 216

218 225 226 229 230

232 234 236 236 237 309 310



THIS BOOK is part of a project that began many years ago. There are, then, many persons and institutions to thank, many more than I could list here. Financial support for the research and travel came from several institutions: the United Nations Centre for Regional Development in Nagoya, Japan; the Revson and Ford Foundations, for a project on the employment of immigrant women in New York that was central to my research on low-wage workers and informal labor markets; the Chicago Institute for Architecture and Urbanism, for research on social class and space; the Department of Economics of the University of Tokyo, for generous support with research assistants during my stay in Tokyo; the School for International and Public Affairs of Columbia University, for support on research on labor markets as part of a larger project funded by the Andrew and Flora Hewlett Foundation. There are other institutions that were central to my work. The Social Science Research Council through the Committee on New York provided assistance in the preparation of a major paper on New York City; the Economic Social Science Research Council of England supported an English-American team doing research on New York 'City and London; the Department of Urban Planning at MIT set up a team of U. S. and Japanese researchers working on deindustrialization and economic restructuring; the Development and Population Unit of City College of London provided various kinds of assistance, as did the Bartlett School of Planning. Many staff members of the Greater London Council and the various units after its abolition were particularly helpful. In Tokyo, many individuals and institutions were extremely helpful and often crucial to the research: the Tokyo Metropolitan Government and several of its staff members were unusually supportive and provided much important information. I also wish to thank staff at the Ministry of Labor, Ministry of Trade and Industry, and Office of Immigration of the Ministry of Justice. I am particularly indebted to Kalabao, an organization for immigrant workers set up by daily laborers in Japan, the poorest workers helping the most vulnerable newcomers. Many colleagues and friends, as individuals and as members of research teams, need to be thanked: Susan Fainstein and Norman Fainstein, Manuel Castells, Janet Abu-Lughod, Bennett Harrison, Michael Storper, Ann Markusen, Michael Smith, Kiriro Morita, Peter Marcuse,













Ian Gordon, Michael Harloe, Nick Buck, Michael Edwards, Hidehiko Sazanami, Toshio Iyotani, Toshio Naito, Mika Iba, Tokue Shibata, Haruhi Tono, Naoko Iyori, Mako Yoshimura, Munesuke Yamamoto, and many others. Research assistance was a major part of this study. Michelle Gittelman and Peter Marcotullio were key persons in the research on the financial markets and the trade in services. Sako Osaka helped with preparation of materials in Japanese. Wendy Grover used her detective instincts to get at much information on the informal economy. And then there was a group of students who worked little miracles with the entering of the text and preparation of tables, and all of it under the pressure of deadlines. Jesus Sanchez, Jerry Johnson, Brian Sahd, David Silodor, Karen Hemeleski, and Julie Burros were the most supportive assistants one could have wished for. I also need to thank Ted Reinert and Barbara Hemeleski for solving many a computer crisis when all seemed lost and Jinnah Mohamed for final preparation of tables. Gail Satler often took full responsibility for ensuring that the various parts of the project functioned smoothly and managed matters while I was away. I would also like to thank the many people at Princeton University Press for their support, particularly my editor, Gail Ullman, and her assistant, Cindy Hirschfeld, and Jane Low, in charge of editorial/production. The copyeditor, Lyn Grossman, took on an unusually large burden of editing and proofing; I am immensely grateful for all her work. It is my experience that in all major projects there are one or two individuals who play a critical role, one not necessarily related to time spent on the project, but more to the strategic character and the substance of their contribution. My single largest debt is to Zhen Wu from the Department of Urban Planning at Columbia University and to Professor Kiriro Morita from the Department of Economics at Tokyo University. Zhen Wu was an exceptional researcher, whose intelligence and determination made all the difference. She did a lot of the research on the producer services in London and in New York City for Chapters Five, Six, and Eight. Professor Kiriro Morita made the most important contribution to my research in Tokyo. He provided me with researchers and introduced me to several key people. His generosity and interest· were exceptional. And then there are those on the family front. My husband, Richard Sennett, and my son, Hilary Koob-Sassen, were a great source of support, love, and many a fine dinner. Without them there would have been so much less laughter and enjoyment.

One Overview

FOR CENTURIES, the world economy has shaped the life of cities. This book is about that relationship today. Beginning in the 1960s, the organization of economic activity entered a period of pronounced transformation. The changes were expressed in the altered structure of the world economy, and also assumed forms specific to particular places. Certain of these changes are by now familiar: the dismantling of once-powerful industrial centers in the United States, the United Kingdom, and more recently in Japan; the accelerated industrialization of several Third World countries; the rapid internationalization of the financial industry into a worldwide network of transactions. Each of these changes altered the relation of cities to the international economy. In the decades after World War II, there was an international regime based on United States dominance in the world economy and the rules for global trade contained in the 1945 Bretton Woods agreement. By the early 1970s, the conditions supporting that regime were disintegrating. The breakdown created a void into which stepped, perhaps in a last burst of national dominance, the large U. S. transnational industrial firms and banks. In this period of transition, the management of the international economic order was to an inordinate extent run from the headquarters of these firms. By the early 1980s, however, the large U. S. transnational banks faced the massive Third World debt crisis, and U. S. industrial firms experienced sharp market share losses from foreign competition. Yet the international economy did not simply break into fragments. The geography and composition of the global economy changed so as to produce a complex duality: a spatially dispersed, yet globally integrated organization of economic activity. The point of departure for the present study is that the combination of spatial dispersal and global integration has created a new strategic role for major cities. Beyond their long history as centers for international trade and banking, these cities now function in four new ways: first, as highly concentrated command points in the organization of the world economy; second, as key locations for finance and for specialized service firms, which have replaced manufacturing as the leading economic sectors; third, as sites of production, including the production of innovations, in these leading industries; and fourth, as markets for the products

1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1



industrial homeworkers in remote rural areas are now part of that chain. The transnational corporations continue to control much of the end product and to reap the profits associated with selling in the world market. The internationalization ancl expansion of the Hnancial,il)q.ustry has 1JrQilghtg!~"~!l1J9.ilarge ,l1umb~r gf smaileJ;;fiQ~n9i~lmarkets,a growth which has fed the expansion of the global industry. But top-level control and management of the industry has become concentrated in a few leading financial centers, notably New York, London, and Tokyo. These account for a disproportionate share of all financial transactions and one that has grown rapidly since the early 1980s. The fundamental dynamic posited here is that the more globalized the economy becomes, the higher the agglomeration of central functions in a relatively few sites, that is, the global cities. The extremely high densities evident in the business districts of these cities are one spatial expression of this logic. The Widely accepted notion that density and agglomeration will become obsolete because global telecommunications advances allow for maximum population and resource dispersal is poorly conceived. It is, I argue, precisely becauseofthe ter~ ritorial dispersal facilitated by telecommunicattontha] aggrome~~ti~~'~f centraliZIng actIvities has sharply increased.' This is not a mere continuation of old patterns of agglomeration; there is a new logic for concentration. In Weberian terms, there is a new system of "coordination," one which focuses on the development of specific geographic control sites in the international economic order. A second major theme of this book concerns the impact of this type of economic growth on the economic order within these cities. It is necessary to go beyond the Weberian notion of coordination and Bell's (1973) notion of the postindustrial society to understand this new urban order. Bell, like Weber, assumes that the further society evolves from nineteenth-century industrial capitalism, the more the apex of the social order is involved in pure managerial process, with the content of what is to be managed becoming of secondary importance. Global cities are, however, not only nodal J?gi~!~J.?!:_!!1.~SQQr.QiIl_~!i()}1.()f..QE9