He was clearly betting on the wrong horse, but Kindleberger’s treatise should still be top of European regulators’ reading list on the eve of a potentially messy end to decades of unfettered free trade with Britain.
His insights into the forces that make or break a financial center resonate in post-Brexit Europe. Over-centralization carries big risks, bringing what he called “diseconomies of scale,” such as information bottlenecks, spiraling overheads and interference by politicians. His work is a challenge to those who scoff at the idea that London could ever face any serious competition.
The U.K. financial capital arguably became too concentrated for its own good. The 2016 Brexit vote showed euro-zone officials were right to warn that it was risky to have a third of all EU capital markets activity and 90% of euro-denominated derivatives clearing in one place.
Back in the 1970s when Kindleberger was writing, the City looked