Sovereign Networks in the Space of Flows: The Political Geography of Offshore Banking
University of Oxford, School of Geography and the Environment, Working Papers in Employment, Work and Finance, No. 14-09
29 Pages Posted: 13 Oct 2014 Last revised: 23 Oct 2014
Date Written: October 11, 2014
The rise of offshore financial centers in many respects epitomizes the ability of transnationally mobile private capital to undermine state economic sovereignty. As recent crises in Iceland, Ireland, and Cyprus have demonstrated however, this undermining of state sovereignty poses a paradox which calls into question the stability, as opposed to simply the civic responsibility, of the offshore financial network. On the one hand, the core rationale for offshore finance is the protection of private property from the state; on the other, private property is itself ultimately dependent on state protection. Moreover, even while undermining some aspects of state sovereignty, the construction of offshore centers is fundamentally an expression of this sovereignty. Here we analyze the co-evolution of the international offshore and onshore banking systems from 2005 to 2012 in terms of the interplay between multiple modalities of state economic sovereignty. Contrary to the common perception of an inexorable growth of offshore finance, the international offshore banking network in fact withered substantially following the global financial crisis. This occurred, however, in an uneven manner. Ironically, the most resilient sections of the network were those most securely rooted in state economic sovereignty, most importantly currency sovereignty as exercised by central banks.
Keywords: Offshore financial centers, international banking regulation, global financial crisis, Eurozone crisis, lender of last resort, currency denomination, globalization, state sovereignty
JEL Classification: E58, F34, F65, G28, H63, H81
Suggested Citation: Suggested Citation