Endorsements for Banking Across Boundaries “An innovative, well-researched and invaluable book on the importance of banks and banking to contemporary capitalism. The vital importance of their cross-boundary activity and the controversy over whether and how they really do contribute to the wealth of nations are here illuminated in novel ways.” David Harvey, Distinguished Professor, City University of New York “A trenchant, theoretically sophisticated analysis of the reciprocal relationship between economic ideas and material developments in banking and finance. In a book sure to make economists and ordinary citizens rethink the recent financial crisis, Christophers demands that we take the long historical view and place national economies in a global context. This is a fresh, exciting, and probing call for more expansive frames of economic analysis and more critical reflection on the data that allow us to know what we think we know about productivity and finance.” Mary Poovey, Samuel Rudin University Professor in the Humanities, New York University “In Banking Across Boundaries Brett Christophers walks us through a history of capitalism that considers the importance of how financial intermediation is counted in economic geographies. Crucial here is the evolution of banks’ spatial anatomy and conceptions of banks’ economic productiveness. Explained over three periods of capitalist development, Christophers does a splendid job in detailing how ideas and practices enable one another in how banks operate across boundaries and why they are considered to be productive in modern national accounting. This book is of great interest to all scholars of finance in the international political economy.” Leonard Seabrooke, Professor of International Political Economy and Economic Sociology, Copenhagen Business School Antipode Book Series Series Editors: Vinay Gidwani, University of Minnesota, USA and Sharad Chari, London School of Economics, UK Like its parent journal, the Antipode Book Series reflects distinctive new developments in radical geography. It publishes books in a variety of formats – from reference books to works of broad explication to titles that develop and extend the scholarly research base – but the commitment is always the same: to contribute to the praxis of a new and more just society. Published Banking Across Boundaries: Placing Finance in Capitalism Brett Christophers The Down-deep Delight of Democracy Mark Purcell Gramsci: Space, Nature, Politics Edited by Michael Ekers, Gillian Hart, Stefan Kipfer and Alex Loftus Places of Possibility: Property, Nature and Community Land Ownership A. Fiona D. Mackenzie The New Carbon Economy: Constitution, Governance and Contestation Edited by Peter Newell, Max Boykoff and Emily Boyd Capitalism and Conservation Edited by Dan Brockington and Rosaleen Duffy Spaces of Environmental Justice Edited by Ryan Holifield, Michael Porter and Gordon Walker The Point is to Change it: Geographies of Hope and Survival in an Age of Crisis Edited by Noel Castree, Paul Chatterton, Nik Heynen, Wendy Larner and Melissa W. Wright Privatization: Property and the Remaking of Nature-Society Edited by Becky Mansfield Practising Public Scholarship: Experiences and Possibilities Beyond the Academy Edited by Katharyne Mitchell Grounding Globalization: Labour in the Age of Insecurity Edward Webster, Rob Lambert and Andries Bezuidenhout Privatization: Property and the Remaking of Nature-Society Relations Edited by Becky Mansfield Decolonizing Development: Colonial Power and the Maya Joel Wainwright Cities of Whiteness Wendy S. Shaw Neoliberalization: States, Networks, Peoples Edited by Kim England and Kevin Ward The Dirty Work of Neoliberalism: Cleaners in the Global Economy Edited by Luis L. M. Aguiar and Andrew Herod David Harvey: A Critical Reader Edited by Noel Castree and Derek Gregory Working the Spaces of Neoliberalism: Activism, Professionalisation and Incorporation Edited by Nina Laurie and Liz Bondi Threads of Labour: Garment Industry Supply Chains from the Workers’ Perspective Edited by Angela Hale and Jane Wills Life’s Work: Geographies of Social Reproduction Edited by Katharyne Mitchell, Sallie A. Marston and Cindi Katz Redundant Masculinities? Employment Change and White Working Class Youth Linda McDowell Spaces of Neoliberalism Edited by Neil Brenner and Nik Theodore Space, Place and the New Labour Internationalism Edited by Peter Waterman and Jane Wills Forthcoming Fat Bodies, Fat Spaces: Critical Geographies of Obesity Rachel Colls and Bethan Evans Banking Across Boundaries Placing Finance in Capitalism Brett Christophers A John Wiley & Sons, Ltd., Publication This edition first published 2013 © 2013 John Wiley & Sons, Ltd Wiley-Blackwell is an imprint of John Wiley & Sons, formed by the merger of Wiley’s global Scientific, Technical and Medical business with Blackwell Publishing. Registered Office John Wiley & Sons, Ltd, The Atrium, Southern Gate, Chichester, West Sussex, PO19 8SQ, UK Editorial Offices 350 Main Street, Malden, MA 02148-5020, USA 9600 Garsington Road, Oxford, OX4 2DQ, UK The Atrium, Southern Gate, Chichester, West Sussex, PO19 8SQ, UK For details of our global editorial offices, for customer services, and for information about how to apply for permission to reuse the copyright material in this book please see our website at www.wiley.com/wiley-blackwell. The right of Brett Christophers to be identified as the author of this work has been asserted in accordance with the UK Copyright, Designs and Patents Act 1988. All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, except as permitted by the UK Copyright, Designs and Patents Act 1988, without the prior permission of the publisher. Wiley also publishes its books in a variety of electronic formats. Some content that appears in print may not be available in electronic books. Designations used by companies to distinguish their products are often claimed as trademarks. All brand names and product names used in this book are trade names, service marks, trademarks or registered trademarks of their respective owners. The publisher is not associated with any product or vendor mentioned in this book. This publication is designed to provide accurate and authoritative information in regard to the subject matter covered. It is sold on the understanding that the publisher is not engaged in rendering professional services. If professional advice or other expert assistance is required, the services of a competent professional should be sought. Library of Congress Cataloging-in-Publication Data Christophers, Brett, 1971– Banking across boundaries : placing finance in capitalism / Brett Christophers. p. cm. Includes index. ISBN 978-1-4443-3829-4 (cloth) – ISBN 978-1-4443-3828-7 (pbk.) 1. Finance. 2. Banks and banking. 3. International banking. 4. International finance. 5. Capitalism. HG173.C574 2013 332.1′5–dc23 2012039743 A catalogue record for this book is available from the British Library. Cover image: William Michael Hartnett, The Banker’s Table, 1877, oil on canvas. Metropolitan Museum of Art, New York. Purchase, Elihu Root Jr. Gift, 1956. Acc.n. 56.21 © 2012. Image copyright The Metropolitan Museum of Art / Art Resource / Scala, Florence. Cover design by www.cyandesign.co.uk Set in 10/12pt Sabon by SPi Publisher Services, Pondicherry, India 1 2013 For my mother The bank – the monster has to have profits all the time. It can’t wait. It’ll die… When the monster stops growing, it dies. It can’t stay one size. John Steinbeck, The Grapes of Wrath In the last paper we saw that just payment of labour consisted in a sum of money which would approximately obtain equivalent labour at a future time: we have now to exam- ine the means of obtaining such equivalence. Which question involves the definition of Value, Wealth, Price, and Produce. None of these terms are yet defined so as to be understood by the public. But the last, Produce, which one might have thought the clearest of all, is, in use, the most ambigu- ous; and the examination of the kind of ambiguity attendant on its present employment will best open the way to our work. John Ruskin, Unto This Last Contents List of Figures viii List of Abbreviations ix Acknowledgments x Introduction 1 Part I Worlds Apart: Before Keynes 25 1 The Birth of Economic Productiveness 27 2 Instrumental Internationalism 57 Part II Worlds Aligned: From the Great Depression to the Eve of the Big Bang 101 3 Enclosing the Unproductive 103 4 America, and Boundaries Breached 146 Part III Co-Constituted Worlds: The Age of Financialization? 185 5 Layering the Logics of Free Trade in Banking 187 6 Anaemic Geographies of Productive Finance 229 Afterword 275 Index 282 List of Figures Figure 4.1 Sector contributions to US national economic output, 1929–1935 154 Figure 4.2 Overseas branches of US member banks 164 Figure 5.1 Finance and insurance share of US value-added, 1947–2010 206 Figure 6.1 Contribution to US national corporate profits of earnings from the rest of the world, 1990–2010 242 Figure 6.2 Value of national financial services exports, 1995–2010 253 Figure 6.3 UK financial services exports, 1986–2008 257 Figure 6.4 UK financial corporations’ foreign direct investment income, 1987–2009 258 Figure 6.5 US financial services exports, 1986–2010 260 Figure 6.6 US finance sector corporate profits and UK financial corporations’ gross operating surplus, 1980–2010 261 Figure 6.7 US finance sector income from foreign direct investment, 1999–2010 262 List of Abbreviations AIG American International Group BBA British Bankers’ Association BEA Bureau of Economic Analysis (US) BIS Bank for International Settlements CAGR Compound annual growth rate CSI Coalition of Service Industries (US) EC European Community EU European Union FDI Foreign direct investment FISIM Financial intermediation services indirectly measured FSUG Financial Statistics Users’ Group (UK) GATS General Agreement on Trade in Services GATT General Agreement on Tariffs and Trade GDP Gross domestic product GNP Gross national product GVA Gross value-added IBRD International Bank for Reconstruction and Development IBSC Imputed Bank Service Charge IFSL International Financial Services, London IMF International Monetary Fund NBER National Bureau of Economic Research (US) OECD Organization for Economic Co-operation and Development OEEC Organization for European Economic Co-operation ONS Office of National Statistics (UK) SEEF Service des Etudes économiques et financières (France) SNA System of National Accounts (United Nations) UN United Nations UNCTAD United Nations Conference on Trade and Development WTO World Trade Organization Acknowledgments My first and biggest thanks are reserved for my wise and wonderful wife, Agneta, and for our three equally wonderful children: Elliot, Oliver, and Emilia. Thank you, thank you, thank you. Thanks, too, to my parents and siblings. * * * I have been based at Uppsala University in Sweden throughout the period of researching and writing this book. The staff of the university’s Library of Economic Sciences did an invaluable and incredibly efficient job in handling unrelenting volumes of inter-library loan requests. I would also like to thank all my colleagues in the Department of Social and Economic Geography and the Institute for Housing and Urban Research for creating warm and supportive working environ- ments. A special word in this regard for Gunnar Olsson, whose particular vision and practice of scholarship – in times not necessarily conducive to either – continue to inspire. I am extremely grateful to everyone associated with the Antipode Book Series for enabling this book to see the light of day: specifically to Rachel Pain, for responding enthusiastically to my original proposal; to Vinay Gidwani, for shep- herding the manuscript through the latter stages of the process; and to Jacqueline Scott at Wiley-Blackwell for being an encouraging and accommodating editor. The book draws upon conversations with and insights provided by many indi- viduals. Those deserving special mention are: those I formally interviewed (and in some cases, repeatedly pestered) in carrying out the research, especially in the field of national accounting; Geoff Mann, for a close and constructive reading of the original proposal, and for ongoing dialogue around many of the book’s core themes; Andrew Sayer, for helping me (probably unwittingly) to clarify some of my principal arguments; Dan Davies, for his perspectives on the world of b anking; and last but definitely not least, the anonymous reviewers corralled into reading