The World's Most Influential Cities

In the past century, the greatest global cities were generally the largest and centers of the world’s great empires: London, Paris, New York and Tokyo. Today size is not so important: Of the world’s 10 most populous cities, only Tokyo, New York and Beijing are in the top 10 of our ranking of the world’s most important cities. Instead, what matters today is influence.

To rank the world’s global cities, I worked with urban geographer Ali Modarres, former Accenture analyst Aaron Renn and demographer Wendell Cox. We have attempted to go beyond some of the standard methods of evaluating the global importance of cities, which include assessing the concentration of support services available for multinationals, such as financial and accounting firms, or the size of the overall economy. Efficiency and access to capital and information, we believe, is more critical to being an important global city than number of jobs, and regional GDP is a false measure, since it doesn’t reflect whether the source is domestic or global economic activity.

In order to quantify cities’ global influence, we looked at eight factors: the amount of foreign direct investment they have attracted; the concentration of corporate headquarters; how many particular business niches they dominate; air connectivity (ease of travel to other global cities); strength of producer services; financial services; technology and media power; and racial diversity. (Click here for a more detailed description of our methodology.) We found those factors particularly important in identifying rising stars that, someday, might challenge the current hegemony of our two top-ranked global cities, London and New York.

Inertia and smart use of it is a key theme that emerged in our evaluation of the top global cities. No city better exemplifies this than London, which after more than a century of imperial decline still ranks No. 1 in our survey. The United Kingdom may now be a second-rate power, but the City’s unparalleled legacy as a global financial capital still underpins its pre-eminence.

Ranked first in the world on the Z/Yen Group’s 2013 Global Financial Centres Index, which we used for our list, London not only has a long history as a dominant global financial hub, but its location outside the United States and the eurozone keeps it away from unfriendly regulators. Compared to New York, it is also time-zone advantaged for doing business in Asia, and has the second best global air connections of any city after Dubai, with nonstop flights at least three times a week to 89% of global cities outside of its home region of Europe.

A preferred domicile for the global rich, London is not only the historic capital of the English language, which contributes to its status as a powerful media hub and major advertising center, but it’s also the birthplace of the cultural, legal and business practices that define global capitalism.London hosts the headquarters of 68 companies on the 2012 Forbes Global 2000 list and is a popular location for the regional HQs of many multinationals. (Our HQ ranking component, in which London ranks third, is based on GaWC’s 2012 Command and Control Index, which factors in company size and financial performance, as well as total number of Forbes Global 2k HQs).

Beyond these traditional strengths, London has become Europe’s top technology startup center, according to the Startup Genome project. The city has upward of 3,000 tech startup sas well as Google’s largest office outside Silicon Valley.

nearly four times that of second place Tokyo New York, which comes in a close second in our study (40 points to London’s 42), is home to most of the world’s top investment banks and hedge funds, and the stock trading volume on the city’s exchanges is and more than 10 times that of London.

Like London, New York is a global leader in media and advertising, the music industry (home to two of the big three labels), and also one of the most important capitals of the fashion and luxury business. With iconic landmarks galore, international visitors spend more money in New York each year than in any other city in the world.

The Challengers And Those Slowly Fading

London and New York are clearly the leaders but they are not the hegemonic powers that they were throughout much of the 20thcentury, and their main competitors are now largely from outside Europe. Paris may rank third in our survey, but it is way below New York and London by virtually every critical measure, and the city’s future is not promising given that France, and much of the EU, are mired in relative economic stagnation.

Rather than a true indication of global reach, Paris’ high ranking is partly the product of the city’s utter domination of the still sizable French economy and the concentration of virtually all the country’s leading companies there (it ranks fifth on GaWC’s Command and Control Index with 60 HQs of Forbes Global 2K companies).

Elsewhere, Europe boast a veritable archipelago of globally competitive cities — Munich, Rome, Hamburg — but none is large enough, or unique enough, to break into the top 10 in the future. East Asia is likely to place more cities at the top of the list.

For most of the last century, Tokyo has been Asia’s leading city. It is still the world’s largest city, with the largest overall GDP. In her seminal work on world cities, Saskia Sassen placed it on the same level as London and New York. Tokyo’s limitations resemble those of Paris — its high ranking stems partly from the extreme concentration of domestic companies — and it will be handicapped in the future by a severe demographic crisis, a lack of ethnic diversity and very determined regional rivals.

China’s Global Cities

China’s share of the world economy has grown from 5% in 1994 to 14% in 2012.The combined volume of trading on the Shanghai and Shenzhen stock exchanges already exceeds that of Tokyo, and Shenzhen’s volume is approximately three times that of nearby Hong Kong.

Hong Kong still enjoys greater freedom than the rest of China and remains the largest financial center in the Asia-Pacific region, ranking third in the world after London and New York. The vast majority of the world’s major investment banks, asset managers, and insurance companies maintain their Asia-Pacific headquarters in the former British colony.

But its preeminence is being threatened by Shanghai, traditionally Hong Kong’s chief rival, and Beijing. We ranked China’s capital eighth, ahead of Shanghai (19th). With the advantage of being the country’s all-powerful political center, Beijing is the headquarters of most large state-owned companies and is home to the country’s elite educational institutions and its most innovative companies.

But right now the leading global city in East Asia is Singapore, which ranks fourth on our list. With a relatively small population of just over 5 million, Singapore’s basic infrastructure is among the best on the planet. Like Hong Kong, it also benefits from a tradition of British governance and law, one reason the World Bank ranked its business climate the world’s best; China ranked 96th. Singapore’s justice system is ranked 10th in the world in The Rule of Law Index.

That is all drawing in international business: Singapore places first among global cities in our ranking of foreign direct investment, with a five-year average of 359 greenfield transactions. It’s a favored location in many industries for Asia-Pacific headquarters; a study by the consultancy Roland Berger named Singapore the leading location for European companies to establish an Asia-Pacific HQs.

Singapore vies with Hong Kong as the financial center of Asia, ranking fourth in the world in that category.

Global Capital of the Middle East

Much of what we see in the media about Middle Eastern cities are scenes of destruction and chaos. Yet in a relatively quiet corner of the Arabian Peninsula, Dubai is ascending, ranked seventh on our list. Its globalization strategy hinges largely on its expanding airport, which includes the world’s largest terminal and an even larger airport under construction. It ranks first in the world in our air connectivity ranking, with nonstop flights at least three times a week to 93% of global cities outside of its home region.Its hub location and business-friendly climate have made it a favorite for companies looking to establish a Middle East headquarters or point of presence. As a crossroads of humanity, Dubai is unparalleled among global cities for its diversity: 86% of its residents are foreign born.

North America

Our rankings rewarded cities that are both ethnically diverse and, in some cases, dominate a critical industry. This is what we refer to as a “necessary city,” a place one must go to conduct business in a particular field, or to service a particular region of the world.

This focus on the “necessary” city led to what will no doubt be a controversial result: a 10th place ranking for the San Francisco Bay Area, on the strength of its central role in the tech industry, tied on our list with Los Angeles and Toronto. The Bay Area did not even make the top 20 in the 2014 A.T. Kearney rankings, which placed both Chicago and Los Angeles in the top 10.

Not long ago Los Angeles, North America’s second-largest metro area, saw itself as a potential rival to New York and a legitimate world city. Hollywood is nearly synonymous with the American entertainment industry and is by far the world’s largest in terms of revenue and influence. Last year the industry enjoyed exports of almost $15 billion.

But L.A.’s share of entertainment employment is shrinking and its former second industry, aerospace, has declined significantly, losing over 90,000 jobs since the end of the Cold War. Several key companies have decamped from the metro area in recent years — Nissan, Occidental Petroleum, Toyota — for more business-friendly places.

The situation is arguably worse in Chicago, which ties for 20th. The Windy City first rose to world prominence after overcoming rival St. Louis in the late 19th century. It boasts one of the world’s most diverse economies, but has not developed strong dominance in any industry. Chicago is an also ran in media and technology and, outside of commodities, is no longer a major global financial center.

The big winner today is the Bay Area, which overwhelmingly dominates the list of technology leaders; not only is the metro area home to a glittering array of tech standouts, companies based elsewhere in the U.S., and in other countries, feel compelled to site operations there. Even a penny pinching retailer like Wal-Mart is growing its Silicon Valley presence.

Other North American cities with a growing global footprint include 10th ranked Toronto, tied with Los Angeles and Bay Area. Toronto, as the economic capital of Canada, has becomes a focus for international investment into that stable and resource rich country. It is also among the most diverse cities on the planet — 46 % of its population is foreign born.

Rising Stars

In North America up and comers include No. 14 Houston, with its domination of the U.S. energy industry, a huge export sector and an increasingly diverse population. The Washington, D.C., metro area ranks 16th, a testament to the capital’s growth as an aerospace and technology center.

Overseas, other urban centers that could move up in the future include No. 16 Seoul, Shanghai and No. 20 (tie) Abu Dhabi. But outside of Dubai no other cities in our top 20 come from the developing world. The Indian megacities Delhi and Mumbai rank in the low 30s along with Johannesburg in South Africa. In Latin America, the place to watch is No. 23 Sao Paulo. But until these areas can develop adequate infrastructure — from roads, transit and bridges to relatively non-corrupt judicial systems — none can be expected to crack the top 10, or even 20, for at least a decade.

For the time being, the future of the global city belongs not to the biggest or fastest growing but the most efficient and savvy, and those with a strong historical pedigree. This raises the bar for all cities that wish to break into this elite club.

No. 1: London

FDI Transactions (5-Year Avg.): 328
Forbes Global 2000 HQs: 68<
Air Connectivity:  89%*
Global Financial Centres Index Rank: 1

* The air connectivity score is the percentage of other global cities outside the city’s region (e.g., for London, cities outside of Europe) that can be reached nonstop a minimum of three times per week.

No. 2: New York

FDI Transactions (5-Year Avg.): 143
Forbes Global 2000 HQs: 82
Air Connectivity:  70%
GFCI Rank: 2

No. 3: Paris

FDI Transactions (5-Year Avg.): 129
Forbes Global 2000 HQs: 60
Air Connectivity:  81%
GFCI Rank: 29

No. 4: Singapore

FDI Transactions (5-Year Avg.): 359
Forbes Global 2000 HQs: N/A
Air Connectivity:  46%
GFCI Rank: 4

No. 5: Tokyo

FDI Transactions (5-Year Avg.): 83
Forbes Global 2000 HQs: 154
Air Connectivity:  59%
GFCI Rank: 5

No. 6: Hong Kong

FDI Transactions (5-Year Avg.): 234
Forbes Global 2000 HQs: 48
Air Connectivity:  57%
GFCI Rank: 3

No. 7: Dubai

FDI Transactions (5-Year Avg.): 245
Forbes Global 2000 HQs: N/A
Air Connectivity:  93%
GFCI Rank: 25

No. 8 (TIE): Beijing

FDI Transactions (5-Year Avg.): 142
Forbes Global 2000 HQs: 45
Air Connectivity:  65%
GFCI Rank: 59

No. 8 (TIE): Sydney

FDI Transactions (5-Year Avg.): 111
Forbes Global 2000 HQs: 21
Air Connectivity:  43%
GFCI Rank: 15

No. 10 (TIE): Los Angeles

FDI Transactions (5-Year Avg.): 35
Forbes Global 2000 HQs: N/A
Air Connectivity:  46%
GFCI Rank: N/A

No. 10 (TIE): San Francisco Bay Area

FDI Transactions (5-Year Avg.): 49
Forbes Global 2000 HQs: 17
Air Connectivity:  38%
GFCI Rank: 12

No. 10 (TIE): Toronto

FDI Transactions (5-Year Avg.): 60
Forbes Global 2000 HQs: 23
Air Connectivity:  49%
GFCI Rank: 11

Remaining Cities

This piece originally appeared at Forbes.

Joel Kotkin is executive editor of NewGeography.com and Distinguished Presidential Fellow in Urban Futures at Chapman University, and a member of the editorial board of the Orange County Register. His newest book, The New Class Conflict is now available for pre-order atAmazon and Telos Press. He is author of The City: A Global History and The Next Hundred Million: America in 2050. His most recent study, The Rise of Postfamilialism, has been widely discussed and distributed internationally. He lives in Los Angeles, CA.

Photo: "City of London skyline at dusk" by jikatu - Licensed under Creative Commons Attribution-Share Alike 2.0 via Wikimedia Commons