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digitize, preserve and extend access to Geografiska Annaler. Series B, Human Geography
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global scope of industry and corporate strategy has claimed increasing attention over the past decade. And while any 'new' economic geography must have something to say about the nature of
an issue of profound academic and practical enquiry - witness the immensely successful HSBC
advertising programme on local and global conventions that litter airports around the world.
Clearly, money is more than a medium of exchange. It is representative of social status and political power in all kinds of societies. As well, ac-
commitment to localities.
may be thought to be a 'golden' thread binding together the interests of different generations in eco-
security systems operate. Being revenue and expenditure-based systems rather than fund accumulation and investment systems, contributions from
the current working population flow through the
state to retired older generations. The commitment
of working men and women to the welfare of their
children is a moral claim on younger generations'
future income. The flow of money between generations over time is a moral economy of intergenerational solidarity as much as it is a public regime of
tax and income redistribution. Even so, current
Introduction
Money can be found everywhere. From the remotest corners of the world to the global centres of finance, money is implicated in the simplest tasks of
everyday life through to the most complex derivative transactions in the global economy. Since the
earliest cultivation of crops, money has been essen-
money, however, should not blind us to the co-existence of rather different cultural conceptions of
its nature and functions; the semiotics of money is
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GORDON L CLARK
analysis. Inevitably, it is argumentative, even speculative at times. Where appropriate, research underpinning the argument is cited, crossing over between economic geography and finance. If some
readers find the argument difficult to grasp absent
detailed examples and illustrations, I would contend that the existing theoretical conceptions impoverish our geographical imagination. Missing is
a way of seeing finance as a whole: too often, empirical research hides naive theoretical conceptions
of the world of finance. Throughout, I use a metaphor to sustain my argument. Not only are these
kinds of literary tropes useful for constructing ar-
nance is global. Since we are accustomed to money as a medium of exchange and as a social icon
we barely think about these issues except when
money fails us (functionally and symbolically).
By contrast, more often than not we gaze upon finance at a distance via the media (Clark et al.,
2004). Finance seems to happen elsewhere, most
obviously in the metropolitan centres of the global
wealth against the 'neon lights' of the global financial metropolis. Every moment of every day
the results of trading are posted on our television
sets, appearing like enormous billboards that may
be seen at an instant thousands of miles away. If
seemingly obscure and threatening to many citizens of Continental Europe and Central and Eastern Europe, it is not lost on younger generations
that their future welfare is less dependent on the
golden thread of reciprocal obligation than it is
upon the performance of these electronic billboards (Clark and Whiteside, 2003).
In this paper, I want to convince economic geographers that global finance is so important that
doomsday prophecies should be seen for what
they are - dark figments of imagination combining
reasonable doubts about the stability of the whole
with unexamined and barely conceptualized notions of how finance is geographically organized
gument in the absence of firm foundations, it is apparent that metaphors are the life-blood of the finance industry (see Allen (2000) for an intriguing
Geography-of finance
There is a modest but rapidly growing body of academic research that could be captured under the
banner of the 'geography of finance' (see Leyshon
pothesis (EMH) effectively ruled out for a generation this kind of research programme. The EMH as
100
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of information is such that no agent can systematically deceive others. If information is not uniformly distributed, economic agents can compensate in
ways such that the long-term efficient allocation of
capital is unharmed. Third, the time and place of an
economic agent is less important than the imperatives of market pricing: market pricing is a univer-
2005). It could be argued that these systems are immature relative to their Anglo-American counter-
and segmented by history and geography as reflected in national institutional structure and legal prac-
map of finance has been largely ignored in the finance literature (since the rise of modem portfolio
theory) and even in economic geography (with its
emphasis on the spatial patterns of commodity production). Their project has opened up an immense
terrain of interesting and important issues (see e.g.
geographers' presumption in favour of path dependence and differentiation (Gertler, 2001). Some
of the most important finance theorists find such
and the ever-present prospect of unobserved differences in incentives and potential pay-offs. Here, the
theory of finance as seen through the lens of the ef-
ficient markets hypothesis has given way to a realization that formal channels of communication and
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GORDON L CLARK
turn and cheaper labour.' In many respects, the hyper-mobility of capital was, and remains, a key as-
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their communities, and industries in ways unimagined at the height of twentieth-century industrial
capitalism. But we should not get carried away by
the rhetoric of a new global order (any more than
we should be carried along in the wake of outrageous claims made on behalf of the new economy
and clusters of innovation). Recent research on European capital market integration (W6jcik, 2003)
and the venture capital process (Babcock-Lumish,
2003, 2004) suggest that location remains a crucial
determinant of investment management and per-
formance.
nomic stimulus.
of its homogenizing imperative. Diversity and differentiation are often relegated to mere (often ignored) detail in a tapestry woven out of abstract
concepts. There is little consolation in the argument
that all abstract concepts come to grief when confronted with the reality of history and geography
(Callinicos, 1995).
Here, I would make a couple of points about the
status and significance of abstraction and the metaphor used herein.4 It could be argued that one great
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GORDON L CLARK
sity for life and, more often than not, benign in effect if handled by humans. By contrast, mercury is
large concentrated doses can kill.7 In the fourth instance, water is passive. It must be organized or its
managed.
income and revenue for consumption and investment through the claims of stakeholders (as in Ger-
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through established networks. Likewise, global finance collects in pools of money being an essential
component of any trading process as well as being
a necessity when accounting for the flow of money
regarding enforcing the integrity of finance capitalism. As is apparent, unregulated or ungoverned fi-
units on the basis of the demand and supply of financial services, there are very strong imperatives
behind the collection of small units of money into
large financial institutions. The process of collec-
2005).
Stocks and flows of global finance
Characteristically, mercury tends to (1) run together at speed, (2) form in pools, (3) re-form in pools
if disturbed, (4) follow the rivulets and channels of
any surface however smooth it may appear to be,
between owners and managers of money. If segmented and distributed into smaller and smaller
lationship between the allusion and its object. Indeed, a metaphor works because of the apparent
point. 10 Put slightly differently, whereas a metaphor can suggest ways of conceptualizing social issues and institutions, they are neither sufficient in
specifying the characteristics of the metaphorical
object nor do they stand as adequate representations of underlying economic and social processes.
Metaphors are instruments of inspiration, and they
are instruments of communication, as any participant in related industry conferences will immediately recognize."1
Let us look once again at the characteristics of
global finance. Most importantly, let me suggest
that empirical analysis of the geography of global
finance can show how each of the five characteris-
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GORDON L CLARK
can be explained by reference to the economic advantages of remaining within large pools of finance,
whether those be institutions or national markets.12
attributing to each transaction a marginal cost rather than having to set up each transaction as if completely new and different from other transactions.
edged that 'herd behaviour' is characteristic of financial markets, with many market participants
each issue according to the underlying fundamentals. Again, the recent experience of the DOT.COM
bubble has been a salutary lesson for those other-
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and the cost of investment management. Put slightly differently, in circumstances of market stability
and shared expectations, markets become more and
more efficient, forcing market agents into the most
are irrelevant, nor that the disadvantages of 'running together' outweigh maintaining a conventional investment strategy. All the evidence suggests
that an unconventional strategy may be severely penalized by market agents if relatively unsuccessful;
the threat of client defection and the consequent
collapse of scale economies may be so significant
that convention dominates strategy (Clark, 2000).
'running together' may lead to mutually destructive competition. Inevitably, opportunities outside
the existing market framework, and hitherto untold
aftermath of the DOT.COM bubble, many commentators believe that global markets have returned to a concern with value as expressed by the
price/earnings (P/E) ratio and the like (Shiller,
2002). In simple terms, the P/E ratio of a listed
company is a function of its stock price (P) and its
reported income (E). Such measures of value may
be particular to a firm, sector and region of origin.
Thus, for example, high-tech stocks were found to
have extremely high P/E ratios because their stockmarket prices were largely a function of their sector
and region (Silicon Valley) rather than their market
revenue. Clearly, a company's competitive position
in its sector can affect its market value. But equally,
the value of all companies may be seen to be a function of the demographic and economic potential of
their home jurisdiction. And in a global economy,
those companies domiciled in countries with rela-
Even so, the metaphor works well when we consider how financial institutions go about seeking
other opportunities outside of market conventions;
they do so by exploiting the co-existence of other
agents in target markets using existing, albeit unfamiliar, rivulets and channels of information to ex-
above, it should be acknowledged that global finance is more than an element dominated by structural imperatives (the constituent characteristics of
the element itself). Deliberation and reflection are
crucial to the formation and implementation of market strategy. Likewise, adjustment and response to
others' behaviour are part of the process of forming
market expectations whatever the advantages of following market sentiment. In other words, the tensions between agency and structure are important in
the global financial services industry just as they are
important in other industrial sectors. But notice, often missing from the global arena are governmental
agencies with the same geographical reach as private financial institutions (Stiglitz, 2002). In many
respects, global finance is truly global, whereas nation-state government regulatory agencies struggle
to keep up with the expanding horizons of the private
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GORDON L CLARK
nal control systems: rogue traders, recurrent currency crises and the risks of taking on unaccounted
liabilities at the local level have prompted the introduction of systematic control systems sensitive
create enterprise-wide risk balance sheets. Furthermore, the evidence suggests that trading between
markets and within firms is managed increasingly
through teams of traders rather than through individual traders - the social discipline of team membership being a crucial device for identifying risky
behaviour on the part of individuals while sustaining the transfer of market-sensitive information between markets within the firm. The reference point
for determining enterprise-wide risk profiles are
nation-state regulatory policies, more often than
not those used in the most transparent financial
markets of the world (London and New York).
At the limit, global finance has a strong interest
in the development of global financial standards. If
Conclusions
time and space. Here, I suggest one way of proceeding through a metaphor: 'money flows like mercury'. I am open to alternatives.
mation is now ubiquitous, information is at a premium in financial markets. On the upside of the
equation, access to 'local' information is a necessity in driving higher rates of return. On the down-
108
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influence.
for guaranteeing individual and collective well-being. I disagree. It is increasingly obvious that our
well-being and the well-being of those who are
Acknowledgements
This paper is based upon research funded or supported by the ESRC, the ESF, and a number of financial service companies and pension-related in-
stability, standard-setting and transparency. My argument, in this respect, is in reaction to those that
hope to insulate continental European institutions
from the corrosive forces of global finance (see
Clark, (2003b, c) and compare with Engelen,
(2003a, b)). Not only is global financial integration
a necessity for securing the welfare of the baby
boom generation, it is also a necessity for improving the welfare of the vast majority of people living
on the margins of the global economy. There is
between blocs of developed and developing countries is accelerating; this much is obvious from the
financial flow data made available by the global financial corporations.
At the same time, the elites of poor countries
stand to gain a great deal by exploiting imperfect
local regulatory systems and the lack of transparency. It is surprising to be confronted with arguments to the effect that poor communities of less
developed countries have an interest in remaining
outside the developing global financial architecture. Some commentators and those who picket
the World Trade Organization seem to believe autarky to be the best solution. While it is obvious
that few people have gained from currency crises
faced by countries such as Argentina, Brazil, Korea and Mexico over the past decade, it is arguable
that these crises are, in the first instance, endogenous to those countries flowing out to the rest of
the world being reinforced by capital flight from
those countries most at risk. Again, the metaphor
of 'money flows like mercury' has much to offer
in understanding this type of capital crisis. Likewise, the existence of differential maps of infor-
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GORDON L CLARK
plows his fields and sows his grain, - the anticipated returns.' See also Hovenkamp (1991) for related commentary.
would argue that these metaphors are not just rhetorical flour-
4. For some, metaphor has a bad name, being a form of rhetorical gesture standing in the place of reasoned thought. If language was literal, if it simply replicated the objective world,
then neither rhetoric nor metaphor would be of much use. In
ing is impossible or that people are unable to distinguish between that which is meant literally and that which is meant
metaphorically. Argument and meaning-making combine all
kinds of techniques to sustain communication. Metaphor is
7. I was reminded by Erica Schoenberger of the ancient connection between gold and mercury - that the latter has been
used by many in all kinds of circumstances to separate gold
from its immediate environment. In this respect, it has been
attributed great value and the risks associated with its poi-
110
combining claims of technical proficiency with well-rehearsed techniques of persuasion (Thrift, 2001). At a recent
CSFB (London) sponsored conference on pension fund investment, metaphors like 'headwinds' (difficulties facing the
global economy), 'tailored to fit' (the design of investment
strategies), 'bears and bulls' (market agents with very different expectations) etc all made an appearance in presentation. I
ish; they are constitutive and conceptual tools used to make
inferences in circumstances of great uncertainty about the
causes and consequences of financial decision-making.
12. This is a most interesting issue in finance and geography.
More often than not it is treated as an unwarranted bias in
Gordon L Clark,
Mansfield Rd.,
Oxford OX] 3TB,
United Kingdom
E-mail: gordon.clark@ouce.ox.ac.uk
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