Ewald Engelen: Amsterdam should get its hands dirty
16 October 2008- If Amsterdam is serious about promoting the financial sector, it should accept increased social polarisation and not be squeamish about hedge funds and private equity firms, argues Ewald Engelen.
Part two in a series on Amsterdam and the Crisis
Engelen, associate professor at the Amsterdam Metropolitan Institute for Development Studies of the University of Amsterdam, points out that the financial sector in Amsterdam is not as successful as it is sometimes assumed. It has decreased and then stabilised since 2001, while growing in cities like London, Dubai, Paris and Shanghai.
On the other hand, ups and downs are not as sharp in Amsterdam as in other cities. Therefore, the impact of the credit crunch will probably not be as severe as elsewhere, Engelen says. However, there will be considerable job losses as a result of the takeover of ABN Amro. The fact that the bank is now in public hands will not change that, he expects.
Engelen is sceptical about the prospects for the Zuidas business district. "The financial sector will not be attracted by glass palaces with marble walls. It's far more important to create good housing and to lobby the national government for changes in its migration policies".
It has been argued that the municipality should stop trying to attract large corporations and should instead promote small entrepreneurs. Engelen is little impressed. "We all like artists, the most spoiled group in society. However, there are few jobs in that. A headquarters has an impact, you will need cleaners, people who process paper, catering services".
Engelen says Amsterdam should also try to attract hedge funds and private equity firms. Such firms have been criticised for making large profits by stripping companies and destroying jobs. However, Engelen says that such criticism is often based on ignorance.
"There is a huge inconsistency in our economic policy. On the one hand we want to attract financial services to the Netherlands, but when it regards hedge funds and private equity firms, we say: for Heaven's sake, let's keep them out. Those notions are incompatible. Therefore, I have my doubts as to how serious we should take these policies".
Asked whether he thinks that Amsterdam should get its hands dirty, he says: "Yes. You should build houses for the very rich and thus accept that the income distribution becomes more unequal. There is nothing wrong with that, as long as people at the lower end benefit as well". Engelen points out that every high-paying service job yields ten more jobs in sectors like retail, catering and the cultural sector.
And if Amsterdam should fail to make the choices needed to attract financial services; would that be a problem? Engelen thinks it would. "First of all, it would be a pity from a nostalgic point of view. Amsterdam is one of the oldest financial centres in the world. I probably wouldn't be the only one to regret it if this sector would disappear".
"Second, financial services will be a very profitable sector in the coming years, paying good salaries. And third, there are huge market opportunities in South East Asia. They are still lacking expertise on financial services and Dutch parties could play a role there".
Dr. Ewald Engelen. Image: Trade union FNV Bondgenoten protests against private equity firms at the Maxeda headquarters in Amsterdam, July 2008. Photo FNV Bondgenoten
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