News concerning the failure, nationalization and and rescue mergers of major banks in New York and London is not coming from ‘nowhere’. Understanding what happens next is hard if one concentrates on the media search for the next particular financial weakling to be culled (the speculation has been on Morgan Stanley, seeking a Chinese partner) or on the narrative of financial re-regulation. Instead, how about reading this as a geography lesson at urban, national and global scales? Skip the epochal doom and look at the following economic geography, from The Guardian:
Shaun Springer, chief executive of Napier Scott , the financial headhunter based in the City [of London], said he was hoping to pick up a bit of business over the next few weeks as staff at Lehman and other troubled banks looked for new berths; but he knows that the golden age of the City is over.
‘What we are living through now will reverberate through the rest of the century in the same way the Great Depression did last century. We are witnessing a very real power shift. Money is moving eastwards – while they’re creating wealth, we’re losing it hand over fist. Where it ends no one knows.
‘London has enjoyed an unprecedented decade of global dominance. Let’s hope people took lots of photos to look back on in the years to come’
This makes part in sense because surely the United States government requires its own bankers and bond holders who will underwrite the cost of their nationalization of significant parts of the financial sector which is now underway. Where are the geographers commenting on this? (Feel free to add links via Comments).
-Rob
4 Comments
This is a response to a piece by Amitai Etzioni (Communitarian International Relations) entitled “Disclosure is Not Enough” which challenges Richard Thaler ’s (University of Chicago) and Cass Sunstein’s (Harvard) claim, in a recent Wall Street Journal op-ed. My response to Amitia (printed below) will be quoted in a “feedback” feature of a Communitarian Letter that we are emailing out to some 50,000 subscribers around the U.S. and the world.
I could not agree more. In effect the Thaler/Sunstein argument is that markets would work really well (even perfectly!) if it wasn’t for ignorant consumers who, by implication, are to blame for what could then – and only then – be correctly named a ’sub-prime’ crisis.
And it is worse because the dynamics of capitalism are such that the kinds of subterfuge and nefarious activities that you refer to are perfectly acceptable – indeed desirable – in a world in which accumulation is the goal and evaluative measure of success/failure; good/bad; better/worse etc.
Roger Lee
Thanks for this comment, Roger. Its not just subterfuge, capitalism is famous for its spatial fixes, by which new undeveloped areas are opened up, markets in otherwise un-connected parts of the world are found, or by which waste and negative counter-effects are exported to distant locations.
We are finally starting to see the word “geopolitics” in discussions of the financial crisis, for example, John Gray opens an editorial in the Guardian saying, “the upheaval we are experiencing is more than a financial crisis, however large. Here is a historic geopolitical shift…” (http://www.guardian.co.uk/commentisfree/2008/sep/28/usforeignpolicy.useconomicgrowth).
Though coming in the wake of years of warnings, both in the mainstream media and the blogosphere, the crisis of the New York -centered financial capitalism does make such countries as Japan reassess the global hierarchies of power, also richly documented in scholarly literature hitting the book stores over recent years, – as this http://www.nytimes.com/2008/10/21/business/worldbusiness/21yen.html?ref=worldbusiness New York Times article makes clear -, while the prospects that New York reassert its economic preeminence in the near term may be on hold for a rather protracted while, as another http://www.nytimes.com/2008/10/19/weekinreview/19impoco.html?ref=worldbusiness article assesses.
The question that more informed discussions of what may indeed be a historical shift – in economy, culture, politics and organization – seem only to adumbrate is whether one configuration of modernity becomes much relevant, both locally and globally, and another one sets in, and possibly within far shorter time-span than previously envisaged. Weber, legal, political, cultural and economic sociologist that he is, at one of my random glimpses into his Wirtschaft und Gesellschaft, does allow for shifts between incommensurate forms of capitalism with dynamics and contradictions of their own.
Consequently there may also be corresponding shifts in sociological paradigms dominating the discussion in the social sciences on both economy and society.
Further reading: A rather anodyne article but with quite insightful comments: http://www.guardian.co.uk/business/2008/dec/22/bank-of-england-john-gieve
The comments point out how much rhetorical manipulation is going on at this time.
Is this the most economic crisis in 40, 50 or 100 years? Good questions – some are about the ‘crisis’, but other questions are about economic decision-making, time horizons and, ultimately, periodicization. Can we talk about being at the end of modernity.
One further piece: we are in need of a new vision of the good life, and if they cannot come up with one centre-left political parties will go the way of the dodo, argues Guardian editorialist Larry Elliot: http://www.guardian.co.uk/business/2008/dec/22/keynes-left-economics-economy
Rather than exhorting lenders or borrowers to behave better in the future, this is an opportunity for a new ’settlement’ or social contract – but its being missed. As the comments from the first post I mentioned put it, there must be some middle solution between nationalizing the banks and simply adding more money to the financial markets through state borrowing, a form of laissez-faire capitalism. New ‘instruments’ (or regulation, not moneymaking) are required. This should be a focus.
One possible instrument that may emerge is via a form of economic scapegoating on a sectoral basis or redlining regions or peripheries which constructs a form of wealth sink. Another possibility is the inverse, a new bubble in a sector such renewables, or in an underdeveloped region. A bit like gentrifying a run-dpown (disinvested) neighbourhood. One possible sector would be a collapsed North American automotive industry, under the banner of an electric car, for example. This could go hand-in-hand with regional realignments which tend to put downward pressure on the regional economies of oil-producing jurisdictions.
The alternative as another comment from geoc in the first Guardian article above put it, is to treat global finances like a giant game of monopoly, forgive all debts and start the game over:
“Probably, the best solution for this situation is for everyone to erase every-one else’s’ debts and start over again such as one does when playing a game of Monopoly. However, before beginning the next game, possibly, it would be best to hang every last banker by every last hedge fund manager’s entrails.”
And this is what current policies amount to, except taxpayers in the OECD countries are the one’s who will ultimately pay the price via first downgraded currencies then possible hyperinflation 2-5 years out.