The Pound is so strong because it is the global reserve currency, the currency of international trade
and the currency of the greatest economy on Earth.

London is so expensive because it is the capital city of the greatest economy on Earth, the centre of
an Empire upon which the sun never sets. London is the global centre of international trade and
finance.

I am writing this from the historical perspective of 1879.

It's interesting to take a historical perspective, but no I don't agree.

The British economy underperformed the US economy and the economies of other European
countries in the post-war period up until about 1980. In the early 80's the British economy was
overtaken in size by the French economy and even the Italian economy. Today, largely due to the
economic reforms of the Thatcher government during the 1980's, the British economy has prospered
and is the 4th largest in the world, after the US, Japan and Germany, all countries with much larger
populations than Britains.

The reason why London in particular is so expensive is due to two industries, being finance and the
media. As LP posted recently, London accounts for 31% of global fx trading, more than the total of
its nearest four competitors. As everyone on the phorum knows, London also occupies top (or high)
positions in derivatives, hedge funds (more money is managed in St James than in the whole of
Frankfurt!), equities and corporate finance.

History certainly plays its part here: London (The City) has been a financial and trading centre since
the Romans (deep Thames water in the East of London makes for docks and trading, shallow
Thames water in the West of London allowed the invading Romans to cross the Thames at
Westminster, the historical (and current) site of government in England). However, the financial
sector was falling apart in the post-war period. Successive Labour governments drove tax rates
higher, thus driving more and more money offshore and into the hands of foreign competitors.

Today's finance industry owes more to micro-economic reforms in the 1980's such as Big Bang and
macro reforms such as simplification of tax codes and lowering of tax rates.

London is expensive because it is an economically successful city with a modern knowledge based
economy principally built around finance and media. Although both of these industries have strong
historical roots, their current success owes more to events in the 1980's than the 1880's.

My 2d.

There, it's so much better just to edit responses than to write whole new posts. Good one.

Yes, the Thatcher reforms. But I do agree with your friend about the importance of the historical
roots in Empire. Without these, London might have been as strong a trading centre as, say, Paris or
Frankfurt. European trade would be dominated by Amsterdam. Or Lisbon. Ha!

The Spanish empire was a proper "raping" empire.  They sought (mined, stole and rode the high seas) gold and silver and sent it back home.

The British empire was based on trade.  Empire came into existance with the City.  Surplus capital from the landed elites in England, for whom industrial investment was unacceptable became involved in the first financial institutions that were created to invest overseas.  Another misconception is that all the money went into Empire.  Taking 1914 as an example, £1780MM was invested in Empire; £1983.3MM outside of Empire (mainly US, Argentina, Brazil, and Russia).

Can't find anything to hand on historic net flows of capital.  I recall though that you may be suprised (re: "raping the world") if I can find them.

yes indeed, I was about to respond with

http://www.infoplease.com/ce6/history/A0836734.html

it was trade....but totally evil and forced trade.

But then there's good stuff too. Everywhere the British went, they rode rough shod over local cultures and imposed common law, education, government, civil service, efficient transport systems. In short, The Empire imposed the institutional infrastructure that modern development economics theory says is necessary for nations to emerge from agrarian poverty. Australia, Canada, the United States, India, Hong Kong, Singapore and many others all owe their economic success to The Empire. Those (like Zimbabwe) that chose to throw away the benefits of British institutions have, without exception, fallen back into the mire.

Score card: totally evil and forced trade (BAD) vs institutional foundations necessary for economic development (GOOD).

EDIT: posts crossed. I agree with a lot of what you say.

Not to get off topic here, but I just wanted to follow up on a comment by Balt. Locke's chapter on slavery is given below (for the interested). I'm not sure if this constitutes a justification of slavery (since Locke seems to equate the state of slavery with the state of war, which according to Locke is the antithesis of his ideal State of Nature; e.g., Locke at least seems to be saying that slavery --- when it exists --- does so outside of  his ideal). Perhaps this could be turned in to a justification by way of justification of the State of War. I don't now about that though. What I do know, as this chapter points out in the end, is that Locke uses God (the judeo / christian one) as a primary source for many of his arguments. But of course, God is Dead, so Locke's conclusion's are pretty clearly wrong. Instead, what remains (as discussed above) is Beaver. 

                          CHAP.  IV.



                          Of SLAVERY.



     Sec. 22.  THE natural liberty of man is to be free from any

superior power on earth, and not to be under the will or

legislative authority of man, but to have only the law of nature

for his rule.  The liberty of man, in society, is to be under no

other legislative power, but that established, by consent, in the

commonwealth; nor under the dominion of any will, or restraint of

any law, but what that legislative shall enact, according to the

trust put in it.  Freedom then is not what Sir Robert Filmer

tells us, Observations, A. 55. a liberty for every one to do what

he lists, to live as he pleases, and not to be tied by any laws:

but freedom of men under government is, to have a standing rule

to live by, common to every one of that society, and made by the

legislative power erected in it; a liberty to follow my own will

in all things, where the rule prescribes not; and not to be

subject to the inconstant, uncertain, unknown, arbitrary will of

another man: as freedom of nature is, to be under no other

restraint but the law of nature.

     Sec. 23.  This freedom from absolute, arbitrary power, is

so necessary to, and closely joined with a man's preservation,

that he cannot part with it, but by what forfeits his

preservation and life together: for a man, not having the power

of his own life, cannot, by compact, or his own consent,

enslave himself to any one, nor put himself under the absolute,

arbitrary power of another, to take away his life, when he

pleases.  No body can give more power than he has himself; and he

that cannot take away his own life, cannot give another power

over it.  Indeed, having by his fault forfeited his own life, by

some act that deserves death; he, to whom he has forfeited it,

may (when he has him in his power) delay to take it, and make use

of him to his own service, and he does him no injury by it: for,

whenever he finds the hardship of his slavery outweigh the value

of his life, it is in his power, by resisting the will of his

master, to draw on himself the death he desires.

     Sec. 24.  This is the perfect condition of slavery, which

is nothing else, but the state of war continued, between a

lawful conqueror and a captive: for, if once compact enter

between them, and make an agreement for a limited power on the

one side, and obedience on the other, the state of war and

slavery ceases, as long as the compact endures: for, as has been

said, no man can, by agreement, pass over to another that which

he hath not in himself, a power over his own life.

I confess, we find among the Jews, as well as other nations,

that men did sell themselves; but, it is plain, this was only to

drudgery, not to slavery: for, it is evident, the person sold

was not under an absolute, arbitrary, despotical power: for the

master could not have power to kill him, at any time, whom, at a

certain time, he was obliged to let go free out of his service;

and the master of such a servant was so far from having an

arbitrary power over his life, that he could not, at pleasure, so

much as maim him, but the loss of an eye, or tooth, set him free,

Exod. xxi.

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