So the hedgies are about to pack their bags and go to Geneva? Maybe we should give them a hand.
Let's grant that hedge funds do some useful global capital allocation work. Their work is essentially global, so in terms of usefulness, it doesn't really matter where they are located.
But Britain seems to me to be particularly ill-equipped to welcome the industry. There are two political preconditions to being global money manager, neither of which exists here.
1. a political system that will not easily be bought. But as John Kay has argued recently in the FT:
There was something particularly irresistible about the City to Westminster---maybe something rather like the Icelandic minority complex that did for them. It gave Britain---and its government---the impression of mattering on the world stage. It resonated with the unending desire in Westminster for Britain to "punch above her weight"
2. You need a political system that will stand behind the institutions that it is guaranteeing. Not one that will dash for inflation when it is made to pay for bail-outs. Britain, as Willem Buiter has consistently argued, is too divided a country for that.
Global capital allocation should be in the hands of social systems with mature, accountable, politics and under-written by people with a high degree of fiscal rectitude. Come to think of it, an EU regulatory regime that sends the hedgies to Switzerland might be the best thing all-round.
