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It's a very important concept. Hopefully later in the week I'll be able to post some bits from the latest Larry Elliot book which has some circumstantial evidence that the "City of London" has indeed had this investment substitution effect over many years in the UK.

One thing that of course is not easy to assess is just how many of the financial instruments in use will stop being employment centres if economic conditions trend as you suggest.

by Metatone (metatone [a|t] gmail (dot) com) on Mon Jun 18th, 2007 at 12:32:37 PM EST
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Incidentally, in the UK case, there is an extra wrinkle in that it's possible to draw a line following the influx of North Sea Oil revenue, through the manipulations of the exchange rate to privilege the City over manufacturing, which sounds even closer to the Dutch disease...
by Metatone (metatone [a|t] gmail (dot) com) on Mon Jun 18th, 2007 at 03:30:19 PM EST
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On the Larry Eliott book (Guardian excerpt from), see darragh's diary.
by afew (afew(a in a circle)eurotrib_dot_com) on Mon Jun 18th, 2007 at 04:42:26 PM EST
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