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Money Flows like Mercury: The Geography of Global Finance

Author(s): Gordon L. Clark

Source: Geografiska Annaler. Series B, Human Geography, Vol. 87, No. 2, Special Issue:
Power Over Time-Space: The Inaugural Nordic Geographers Meeting (2005), pp. 99-112
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Gordon L Clark

Clark, G.L., 2005: Money flows like mercury: The geography of

global finance. Geogr. Ann., 87 B (2): 99-112.
ABSTRACT. If the social relations and inherited configuration of
production were at the core of economic geography a decade ago,
these aspects of the world are increasingly taken for granted. The

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-

human agency and the role of institutions in structuring the land-

cumulating money gives successive generations a

scape, care must be taken not to exaggerate their significance for

constructive interaction. In point of fact, the global finance industry is an essential lens through which to study contemporary capitalism from the top-down and the bottom-up. If we are to understand the economic landscape of twenty-first century capitalism,
it should be understood through global financial institutions, its
social formations and investment practices. This argument is developed by reference to the recent literature on the geography of
finance and a metaphor - money flows like mercury - designed
to explicate the spatial and temporal logic of global capital flows.
Some may dispute this argument, but in doing so they lament the
passing of an era rather than advancing a convincing counterclaim about how the world is and what it might become. All this
means that we have to rethink the significance of geographical
scale and organizational processes as opposed to an unquestioned

chance to invest in the future. In this respect, money

commitment to localities.

Key words: economic geography, metaphor, finance, globalization

may be thought to be a 'golden' thread binding together the interests of different generations in eco-

nomic prosperity and social stability. To illustrate,

consider for the moment how pay-as-you-go social

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

generations may squander their children's future


on consumption just as their children may refuse to

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-

pay for retirement (Clark, 2003a).

Over the twentieth century, money was transformed into finance (institutions, theories of management, and codes of practice; Clark et al., 2005).
Money is collected, tagged and pooled together in
public and private institutions that have themselves

space. Of course, every now and again, utopias are

and institutional hierarchies from the local to the

tial for the circulation of commodities in time and

become integrated into distinctive geographical

constructed eschewing money in favour of self-suf-

global level. Financial institutions cover the world

ficiency, trust and untraded interdependency.

Whatever the idealism of such autarkic experi-

but do so in a highly differentiated manner allowing

ments, money persists whether in the shadows cast

by institutional imperfection or in individuals' se-

geography to explain the spatial provision of finan-

cret desires, avarice and greed. The ubiquity of

come the object of academic enquiry, and has been

systematically organized along theoretical principles that claim a degree of universality which Emile
Durkheim and Georg Simmel would find hard to

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

for the application of the principles of economic

cial services. As such, money as finance has be-

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credit; a universal English grammar of financial

theory and its instruments has supplanted the geographical and social life of money. Financial insti-

only way of avoiding increased income inequality

and a war between the generations over the distribution of future income (Clark, 2003b).

financial terms notable for their commonalities of

nance rather than reporting the results of empirical

interpretation rather than their differences. What-

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-

tutions distribute to their consumers dictionaries of

ever the attractiveness of HSBC's 'local meaning'

advertisements, we may be sure that the rules governing financial management are deliberately global (Clark and Thrift, 2004).
It could be contended that money is local and fi-

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

economy, especially Tokyo, London and New

York (in order of time and place). For many of us,

particularly those whose retirement incomes are
reliant upon the performance of national and global stock markets, we price our current and future

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

This paper is about conceptualising global fi-

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

discussion about twentieth century capitalism in

general). This should not be construed as an attack
upon the utility of analytical models; I do not see
the issue as an either/or choice (compare Krugman

(1996) with Scott (2004)). Rather, metaphor is

used, as it is always used, as a means of conceptual
innovation (Rorty, 1980). The hard graft of convert-

ing metaphor into models is developed elsewhere

(see e.g. Clark and O'Connor, 1997).

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

and Thrift, 1998; Leyshon et al., 1998; Martin,

1999, 2000; Pryke and Allen, 2000; Tickell, 2000).
Outside of geography, there are historians, economists, and finance analysts who have joined the re-

search programme (see, e.g. Greve, 2002; Calem

and Nakamura, 1998; Degryse and Ongena, 2005).
Yet it could be argued that the efficient markets hy-

and structured. Furthermore, I emphasize that we

are individually and collectively more reliant than
ever upon financial institutions and practices for

pothesis (EMH) effectively ruled out for a generation this kind of research programme. The EMH as

our welfare; our future well-being (especially in

Europe) is more likely a function of the global financial integration of demographic and economic
prospects than the fiscal capacity of governments
facing high costs of demographic ageing.' If this
appears to some a most frightening prospect, the
alternatives are worse. Global finance may be the

market 'prices continually and instantaneously re-


articulated by Fama (1970) and others holds that

flect all available information' (Davis and Steil,

2001, p. 441). Three articles of faith follow if we

accept this proposition. First, agents can see

through local institutional arrangements governing

financial commitments and obligations, pricing

those arrangements according to their underlying
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fundamental market value. Second, the distribution

velopments in finance, economic sociology and

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-

economic geography, and may be discerned in the

theoretical arguments of Clark and O'Connor

(1997), research on the social norms underpinning

the venture-capital process (Babcock-Lumish,

2003, 2004; Martin et al., 2003), the design of investment portfolios and the effect of peer groups on

stock-market participation (Hong et al., 2003,

sal language understood and shared by traders

2004), and research on the financing of firms in re-

whatever their location in time and space.

Even so, it is arguable that recent research has
systematically undercut the plausibility of such as-

lation to regional development (Pollard, 2003).

In between, of course, is the research on European capital market integration. There the hegemony of Anglo-American theories of financial systems is being challenged by empirical reality.
Whereas Anglo-American financial systems tend
to be market-centred top-down systems regulated
and controlled by institutions of national and perhaps international scope, some of the larger Euro-

sumptions (compare Fama (1970) with Fama and

French (2004)). The literature in behavioural finance and economics devoted to disputing the robustness of the EMH is growing rapidly and covers

many issues economic geographers should find

congenial (see Brocas and Carrillo (2003) and

compare with Clark et al. (2000)). Furthermore, La

Porta et al. (1997, 1998) have sought to map global
finance, linking nation-state legal traditions and the
scope of investor protection to domestic stock market liquidity. Their project is important in that they

pean financial systems are better understood as bot-

tom-up institutions within systems of regulation

that are poorly integrated at the national level, let

alone at the European level (Clark and W6jcik,

show the landscape of finance to be differentiated

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-

parts and that a close reading of Anglo-American

history would have it that the geographical consol-

tice (see also Wood, 1997). At one level, it could be

argued that all they have done is mapped and correlated macro-scale indicative variables. However,
such criticism would be facile; the institutional

part of the capital market integration process. This

is an argument, however, of convergence to global
'best practice' which runs against many economic

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.

Claessens and Laeven, 2003).

If La Porta et al. have mapped global finance
across nations, others are mapping finance at various scales underneath the nation-state, including
regions and localities. Some of the most interesting
work has focused upon the venture-capital process
and clusters of innovation, arguing that proximity
is an essential ingredient in managing the flow of
information between entrepreneurs and investors

idation of trading and regulation is an inevitable

geographers' presumption in favour of path dependence and differentiation (Gertler, 2001). Some
of the most important finance theorists find such

presumptions incredible (Allen and Gale, 2000).

Research on these threads and themes is accel-

erating, drawing in many younger scholars across

the disciplines of economics, finance, geography
and sociology. It is now quite common to find papers on the 'geography of finance' in leading journals such as the Journal of Finance, but it is unlikely that this research programme would have been so

well received without the 1990s DOT.COM boom,

bubble and bust. Doubts about the functional effi-

ciency of financial markets raised in detailed stud-

ies of market patterns and processes by Shleifer

(2000) and others were given credence by the 'irrationality' of the most advanced stock-markets

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-

over the last decade of the twentieth century (Shill-

ficient markets hypothesis has given way to a realization that formal channels of communication and

er, 2000). Furthermore, it is arguable that the

DOT.COM bubble was driven by geography - ex-

market pricing often rely upon informal and social

systems of negotiation and the monitoring of behaviour. This is an area of overlap with recent de-

pectations of unending prosperity without business

cycles based upon new technology and higher levels of labour productivity conceived and fostered in

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clusters of innovation. It was contended that Sili-

nancial markets is saturated with information if not

con Valley is a new form of capitalism, one based

on the promised value of stock options and the
management of talent rather than institutional in-

knowledge - this is difficult to reconcile with the-

vestors and their maps of corporate mergers and ac-

quisitions (see Florida's (2002) treatment of talent

and Teece's (2000) analysis of the issue of management).

Framing global finance

Any viable 'geography of finance' must have

something credible to say about market patterns
and processes. One of our strengths is a commitment to documenting and articulating how markets
function given their history and geography. However, our research programme must be able to set

the empirical agenda within a larger overarching

conceptual framework. Here, of course, we come
up immediately against the putative hegemony of
other disciplines and especially the theoretical
foundations of modem finance. As we all know,
modem portfolio theory, the capital asset pricing
model and the efficient markets hypothesis are essential components of an intellectual framework
found in each and every finance textbook (Bodie et
al., 2001). Risk and return, one way of representing
this logic, is a widely shared conceptual peg, pro-

viding a reference point for empirical analysis,

whatever the circumstances. It is not immediately
obvious how we should proceed, even if we accept,
for the moment at least, the significance of this the-

oretical framework for investment management

(see Litterman et al., 2003).
Even so, criticisms can be made, one of which
follows from observations made in the previous
section. The theoretical agenda as set out in textbooks may be compromised by the context in
which practice takes place. The claimed universal-

oretical assumptions (Hilton, 2003). At the same

time, we should recognize that the flows of global
finance are dominated by pools of capital and institutional investors that come, more often than not,

from the Anglo-American world. Pension fund

capitalism is one expression of the uneven map of

finance (Clark, 2000), just as the institutional

framework (Hawley and Williams, 1999) and the
theory of investment has been exported to the rest

of the world (Clowes, 2000).

What we need is a conceptual framework for the
study of global finance that is sensitive to path dependence and differentiation but recognizes that no
nation-state or region can stand apart from the pow-

er exercised by institutional investors (Clark and

Hebb, 2004). Here, there are a number of leading
contenders. For example, there are those that draw
inspiration from Marxian conceptions of capitalist
accumulation and the circulation of money to argue

that global finance now floats free of geography

whether that be the nation-state, regions, or towns
and cities. Consider the following metaphorical offering from Fredric Jameson (1997, p. 251): 'now,
like the butterfly stirring within the chrysalis, it sep-

arates itself from that concrete breeding-ground

and prepares to take flight. We know today and only
too well ... that the term is literal. We know that
there exists such a thing as capital flight: the dis-investment, the pondered or hasty moving on to the
greener pastures of higher rates of investment re-

turn and cheaper labour.' In many respects, the hyper-mobility of capital was, and remains, a key as-

sumption underpinning how many geographers

have understood the causes and consequences of
neoliberalism over the past twenty years or so.2

This idea if not its Marxian foundations is also

shared by other commentators and policy-makers

ity of 'risk and return' may be undercut by the fact

including Richard O'Brien (1992) and the past

that the meaning of risk is more often than not deep-

president of the European Central Bank, Wim Du-

ly cultural; there are obvious dangers in imposing

a univocal theoretical framework upon cultural set-

tings where the meaning of risk is negotiated

through local relationships (Douglas and Wil-

davsky, 1982). Likewise, we should take care not to

assume that the practice of finance is always regulated by theory - even in Anglo-American econo-

mies. Living-up to theoretical expectations is a

most demanding task, not easily reconciled with
the evidence from psychology about how people
actually behave. Heuristics dominate agent decision-making precisely because the real world of fi102

isenburg (2001). They emphasize the liberating

force of new communication technologies in transforming local and national capital flows into global
flows. At the limit, the 'end of geography' supposes

that communication technologies allow for and

have encouraged financial trading from any place at

any time; the implication being that there are no

privileged locations vis-a-vis risk and return. There
is little doubt about the impact that advanced communication technologies have had on the daily flow
of information and capital. Likewise, there is little
doubt that in particular circumstances these types
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of flows can have profound effects on nation-states,

noring counter-claims of virtue animated from sim-

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

ilar political positions if not the same sense of mor-

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-


Consider, as well, the argument made by Paul

Slack (1998, p. 162) regarding public perceptions
of London during the seventeenth century. Recognizing that London was emerging as a global city of

merchant capitalism, he was interested in meta-

al outrage. Neither version of the 'end of

geography' supposes that the scope and mobility of

global finance can be or will be restricted. Indeed,
O'Brien's (1992) version suggests that the ubiquity

of finance is a natural stage along the inevitable

path of global development. On the other hand,
Jameson's (1997, 1999) version harks back to a
time (mid-twentieth century) when capital was apparently 'grounded' by nation-state institutions
and workers and communities, notwithstanding evidence to the contrary (Clark, 1989).
It would be wrong to be nostalgic for the past;
capitalism has a clear logic (then and now).3 Jameson is hardly a friend of capitalism past or present.
Yet embedded in his argument seems to be regret

for the passing of an era (industrial capitalism),

phors that emphasized its role in the circulation of

while O'Brien looks to the future with unbridled

commodities, income and wealth. Beginning his

optimism (communication technology).

essay, he suggests that public attitudes to London in

the seventeenth century were:
no different from other great cities in the past

in being pictured simultaneously as Babylon

and Jerusalem; and the polarity had particular

appeal in an intellectual climate where such

binary oppositions were familiar rhetorical
devices. It was as natural to set urban images

Money flows like mercury

In this section, I introduce a way of conceptualizing
global finance which relies upon a metaphor summarized as 'money flows like mercury'. Before doing so, a couple of remarks need to be made about
the value of abstraction for research in the social

light, and learning as it was to contrast the no-

sciences and in economic geography in particular.

Theoretical abstraction is highly valued by economists. They view much of economic geography as
theoretically impoverished albeit rich in insight

tions of London as economic parasite and eco-

and raw material for further synthesis. On the other

of sin, extravagance, dirt, and infection

against those of (country) stability, wealth,

nomic stimulus.

hand, many geographers are sceptical about the

claimed virtues of theoretical abstraction because

In a similar vein, at the height of the DOT.COM

bubble the tabloid press in London and New York
revelled in stories of financial excess and greed. Re-

reading Jameson and others concerned about the

power of Anglo-American financial capitalism one
is struck by a familiar line of moral outrage albeit
clothed in theoretical gesture.
Neither version of the 'end of geography' is ad-

equate to the task. Both are simplistic about the

driving forces behind global capital market integration, and both draw implications - moral and otherwise - about finance capitalism that are hard to

credit. The argument about the communications

revolution supposes the scope of global finance to
be limitless - only at the margin mediated, but not
controlled, by nation-state regulation. The argument about the hegemony of Anglo-American finance sees only the costs of global capital flows ig-

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

advantage of economic geography as practised by

geographers is its capacity for theoretical innova-

tion drawn from real circumstances. Too often eco-

nomic principles are handed down to economic

geography as a settled framework developed by
others with higher-level responsibilities. One goal
for economic geography (like anthropology and
psychology) must be to add to the theory-building

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process through bottom-up conceptual innovation.

In the second instance I would suggest that abstraction is a cognitive necessity. All the evidence in

sity for life and, more often than not, benign in effect if handled by humans. By contrast, mercury is

psychology suggests that people use conceptual

poisonous. Great care must be taken in handling

mercury, given that small accumulated doses and

pegs and devices to sort through the available data.

Experimental psychology suggests that people are

large concentrated doses can kill.7 In the fourth instance, water is passive. It must be organized or its

unable to assimilate the available information with-

geography is characterized by aimless meanders.

By contrast, mercury runs together at speed. Because of its weight, its viscous properties and its
'stickiness', it is never ever randomly distributed,
even if set upon a smooth and undifferentiated
landscape.8 In the fifth instance, water pools together by default (framed by typography, human
activity, and so on). By contrast, mercury pools by

out conceptual short cuts or heuristics. This does

not mean, however, that the processing of information need be coherent or entirely efficient. Approximation is the preferred strategy rather than onceand-for-all theoretical perfection in all its glory.

One way to understand the significance I attach

to the metaphor is to begin with a weaker version
of much the same idea.5 Imagine that money flows
like water across the economic landscape. What is
implied by such a metaphor? Three ideas suggest
themselves working off the properties we normally
associate with water. While scarce in a global
sense, when poured on to the landscape water is
ubiquitous if the landscape is smooth and undifferentiated. Otherwise, water follows the topography
of the landscape, its flows governed by channels
and obstructions, differences in elevation, and the
gravitational force of the Earth. If the origins of wa-

ter are in nature, economic and social development

across the world has relied upon damming and distributing water for health and prosperity. In many
respects, water is a positive force for well-being in-

cluding trade and the circulation of commodities,

even if it is also a medium for the transportation of
disease. At the limit, water is a threat when unmanaged or when it is so scarce as to put in play life and
death. We could go on, of course, with both the hy-

draulics and political ecology of water (money) as

my colleagues have so ably shown (Castro et al.,
But the water metaphor is not adequate to the
task. In the first instance it suggests that money
comes from heaven - that it is a common good
shared by humanity. One of the difficulties of advancing environmental quality has been to capture
water's creation and to manage its distribution in
ways consistent with human and other species'
well-being. By contrast, mercury (Hg) is normally
synthesized from the mineral cinnabar (HgS) and
processed in a chemist's laboratory.6 It is owned at
the point of extraction and processing. In the second instance, even if water is not ubiquitous, its
scarcity is climatological and social. By contrast,
mercury is rare by virtue of the known deposits and
need to process it from raw material. Inevitably, it
is expensive. In the third instance, water is a neces104

its very nature.

So much for the contrast of mercury with water

and its implications. Mercury is also known as

'quicksilver'. Its name comes from the ancient
Greeks and Romans, and signifies speed and slipperiness.9 Like gold, it is valuable, but unlike gold,
its chemical properties are such that mercury requires careful treatment and management. Lurking
ever so close to the surface is the fact that mercury
is of great value and can inflict great harm if poorly


Of the issues raised above, two deserve special

emphasis. Whereas money and commodity circulation are intimately bound together, we must recognize that money, like mercury, is owned. It is more
than functional; it is valuable in its own right. For

those seeking to understand global finance, its

properties and its patterns of distribution, it is important to acknowledge the nature and topography
of ownership. So much of the flow of finance comes

from the Anglo-American world. It comes from

pension funds, insurance companies, banks and
corporations. Compared to the nation-state and related banking institutions inherited from the early
twentieth century, private institutions of finance

dominate global capital markets. This may be

shown by maps of finance. And it can be developed
in more detail by reference to competing economic
systems that either do not have these institutions
(such as funded pensions) or have developed models of corporate governance that tend to distribute

income and revenue for consumption and investment through the claims of stakeholders (as in Ger-

many and Japan; see Dore (2000) and Roe (1994)).

As money is owned, and as it is collected together in large financial institutions with global reach,
accountability is an ever-present issue. This is most
apparent in the recent debate over the causes and

consequences of the DOT.COM bubble. Failures of

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corporate governance, poor mechanisms of inter-

doubt that global finance 'runs together at speed',

nal scrutiny, and the hitherto lack of accountability

taking just seconds to circumnavigate the globe

of corporations to institutional investors, have

prompted heated debate over the legitimacy of the
modem corporation. Equally importantly, the large
financial institutions that collectively hold the majority of stakes in these firms on our behalf have
been forced to reconsider their own responsibilities

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-

nance (like mercury) may be poisonous for the

whole system of accumulation and especially for

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-

those charged with the responsibility of its manage-

tion and distribution takes place within well-de-

ment. Instead of passive index investment, finan-

fined networks; the efficiency of such networks is

a crucial determinate of the cost of money management. Finally, any failure to manage money and its
collection and distribution properly and efficiently
can have significant ramifications for those charged
with the responsibility of its management.

cial institutions with large claims on the integrity of

the financial system have been brought to the brink

of active engagement in corporate decision-making

(Clark and Hebb, 2004). Moreover, this has
prompted active consideration of the private rules
governing global investment (Hebb and Wojcik,

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

Embedded in this discussion are a couple of

'principles' regarding the nature and structure of
global finance. As we suggest elsewhere (Clark and
Thrift, 2004), the stocks and flows of global finance

are organized within and between markets with de-

liberation and care. While it is reasonably argued

that financial markets are prone to moments of ir-

phor is its suggestiveness rather than the precise re-

rational exuberance and pessimism (Shiller, 2000),

we should not impose this observation on the economic, geographical and social processes of managing money. To do so would be to miss an important fact about financial management as an organized bureaucratic process with internal and external
checks and balances designed to minimize the potential costs associated with handling huge

lationship between the allusion and its object. Indeed, a metaphor works because of the apparent

amounts of money. Furthermore, it is important to

acknowledge that global finance runs together, and

and (5) is poisonous in small and large doses if

poorly managed. I would contend that global finance has similar characteristics, even if we should

take care not to exaggerate commonalities between

mercury and money. After all, the value of a meta-

tensions between the allusion and its reference

does so in recognized and highly developed chan-

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

nels of communication. In this regard, it is neither

ubiquitous nor chaotic in its flows even if changing
market sentiment may precipitate a flood of money
along those channels into and out of favoured and
not so favoured jurisdictions.
When we add to this picture the fact that global
finance comes from various public and private institutions, we can see that as global finance runs together at speed it does so between well-defined origins and destinations. Indeed, for all the hyperbole
about the hyper-mobility of capital, it is apparent
that the pooling and channelling of finance is such
that the vast majority of financial assets stay within
the confines of their home jurisdictions. 'Home bias' (represented by the nation-state and its borders)
is a well-recognized attribute of global finance, and

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-

tics noted above describes important attributes of

the flow of money around the world. There is little
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can be explained by reference to the economic advantages of remaining within large pools of finance,
whether those be institutions or national markets.12

Of course, there are many other explanations of

'home bias,' including lack of adequate knowledge
of 'external' opportunities, poor access to efficient
channels of communication and transfer, and local
commitments whether personal or professional.
The point is when we combine knowledge of the origins of global finance with the imperatives behind
pooling and running together at speed, we end up
with a highly differentiated map of global financial

Why does finance run together? Why does it

pool together? Why does it re-form in pools if disturbed? Here, we need a better appreciation of the

pervasive influence of information asymmetries

and the scale economies of managing money than
can be captured in a metaphor. These issues are
considered in detail elsewhere (Clark, 2000), but
may be summarized in the following fashion. Take
the issue of finance running together - it does so in

order to take advantage of common knowledge and

information about market conditions, costs and opportunities that are available only through the trans-

action process. Running together as opposed to

apart allows economic agents to explore one another's market expectations and sentiments, recognizing that financial transactions take place in an environment of risk and uncertainty. Indeed, it is arguable that the enormous volume of financial trans-

actions which occur everyday in markets around

the world is driven, in part, by sequential sets of
trades aimed at determining in an anonymous manner the distribution of market prices for different
bundles of financial assets. To be isolated from such
information would be to run the risk of higher execution costs and lower rates of return (Clark and
Thrift, 2004).13
Running together as opposed to apart also allows
financial institutions to exploit the capacity of existing channels and networks of communication,

using sophisticated software to tag and identify

ownership of managed funds is a way of exploiting
the enormously expensive custodian systems needed to ensure the integrity of the money-management process. Scale economies drive the cost structure of the industry, being an essential component
determining the competitiveness of each and every
firm. Not surprisingly, sophisticated consumers of
global financial services are equally attuned to the
cost efficiency (as well as the rate of return) of com-

peting service providers.

For each transaction that fulfils a specific order
or set of orders, that transaction comes out of a pool
of funds, and its consequences are returned to that

and other funds. As we know, over the past decade

the optimal scale of money management has been
increasing as investment in global electronic systems has exploded and as the volume of capital
available for global transfer has greatly increased.
In effect, finance has been concentrated into fewer
financial institutions so as to take advantage of the
scale of economies and the richness of knowledge
available in those institutions. This has had enor-

mous implications for industry competition as well

as for the prospects of sustaining the competitiveness of nation-state 'champions'. Further concentration in the industry around global financial institutions seems inevitable. They are increasingly like

giant vacuum cleaners sucking up geographically

dispersed money into concentrated pools of finance, distributing that money through transactions around the world and into the coffers of other
institutions, and then back down to ground level (to

consumers). This is the world of global finance.

Prospects for global finance

The metaphor can also help us in understanding
three systemic tendencies in global financial markets.14 In 'running together', global finance is vulnerable to the whims and fancies of shared infor-

mation and expectations. It is widely acknowl-

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

In the vernacular of the industry, financial institu-

each issue according to the underlying fundamentals. Again, the recent experience of the DOT.COM
bubble has been a salutary lesson for those other-

tions bundle together transactions, uniting other

people's money into common flows and networks
of transaction. Given the cost of individual transactions, client-dependent financial institutions (especially in the wholesale sector) bundle together in
order to spread the fixed costs of trading across
their client base. Likewise, pooling financial assets

playing follow-the-leader rather than assessing

wise convinced of the rationality of economic

agents. Not only does 'running together' rely on
shared expectations; escalation is bred out of the incremental decisions embodied in each successive

trade. Not surprisingly, unanticipated events that

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shift market expectations can add up over time to

capital flight from previously favoured stocks,
countries and currencies.

Just as importantly, however, 'running together'

in one place or in one market may be self-defeating.
If dominated by stable expectations, rates of return

may decline and fall below that which is available

through passive index-based investment strategies.
In effect, stability and shared expectations tend to
exploit whatever value exists in any market such
that rates of return are a function of long-term mar-

about other places and other times as it is about

shared expectations in local markets (Clark and
Wojcik, 2005).
Unlike mercury, financial institutions develop
and execute market strategies. They do so in the
context of other agents' strategies, market opportunities and prospects. Recognizing that following
the path set by shared expectations may be self-defeating, and that market value must be assessed in
the light of growth prospects, financial institutions
have an interest in finding other opportunities not

ket trends mediated by unplanned market position

(positive and negative) in relation to small events

fully priced within the existing set of shared expec-

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).

unlikely nooks and crannies for added value not

otherwise factored into market expectations. Not
surprisingly, given high levels of competition and
the threat of market entry by potential competitors,

'running together' may lead to mutually destructive competition. Inevitably, opportunities outside
the existing market framework, and hitherto untold

prospects for wealth may come to dominate the

competitive process. Witness the current run-up in
value attributed to China for Western clients and in-

vestment service providers alike.

Financial markets oscillate between 'value'

(measured by economic fundamentals) and

'growth' (measured by market momentum). In the

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-

tively high demographic and economic potential

may be more favoured than those companies in the
same sector located in other countries with much

lower growth potential. Global finance is as much

tations. This does not mean that scale economies

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-

plore market opportunities.

So far, so good. However, we must take care not
to become so enchanted by the metaphor that we
miss some obvious points of qualification. As noted

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

agents they wish to regulate. And yet it would be

wrong to characterize global finance as a frontier
land of undisciplined behaviour.
The largest global financial institutions are

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themselves highly regulated in terms of their inter-

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

to the twenty-four-hour global trading system

(Clark and Thrift, 2004). These systems are, in effect, managerial hierarchies linking together trades
in one market with trades in other markets so as to

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

financial agents from the developed world are to

take advantage of the opportunities of emerging
markets, their assets must be protected from expropriation. Indeed, recent research has suggested that
leading Western financial institutions have played
a crucial role in driving up standards of transparency and accountability among many emerging mar-

kets (Hebb and Wojcik, 2005). The production of

financial standards could be understood as endogenous to global finance and not just imposed from
without financial institutions and their systems of


ing built out of argument and commentary (see

Tickell, 1995, 2000). Even so, if we are to develop
a distinctive approach to global finance we need
conceptual tools that allow us to map its origins and
destinations, assets and liabilities, and its flows in

time and space. Here, I suggest one way of proceeding through a metaphor: 'money flows like mercury'. I am open to alternatives.

This metaphor has a certain physical essence,

suggesting that money has a number of properties
or characteristics consistent with the element mer-

cury. Just in case this sounds a bit far-fetched, we

should recognize that flows of money around the
world are intimately connected with flows of infor-

mation within and between economic agents and

markets. Whereas much of the popular press and
some academic commentators believe that infor-

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-

side of the equation, market agents may be misled

by imperfect information and the strategic use of
information by those who would take advantage of

the willing and the gullible. As has been shown

elsewhere (Clark and O'Connor, 1997), financial
products have distinctive information characteristics just as their production may have a distinctive
geography. If information was ubiquitous, so money would be ubiquitous; that this is not the case is
one reason why the mercury metaphor works so

What is clear from any reading of the related lit-

erature in economics, sociology and comparative

literature is that there are many social scientists
who are uneasy about global finance. Too often analysts identify it as the 'devil's handiwork' or
worse. For some, it is part and parcel of the neoliberal agenda redefining the role and status of the

In this paper, my strategy has been twofold, first, to

nation-state in favour of the interests of private fi-

convince the reader to take seriously the emerging

interdisciplinary research programme concerning
the geography of finance, and second, to provide a
different conceptualization of global finance from
that which dominates the (sometimes) arcane
world of financial theory and mathematical models. For too long, much of social science has, at

nancial institutions and multi-lateral organizations

buttressed by Anglo-American liberal ideology. If
only it were so simple. Many of us are implicated
in the process of global institutional transformation whether as participants in funded pension
plans, as purchasers of mutual fund investment

best, ignored finance and its institutions and, at

worst, prefers a world view based on twentiethcentury industrial capitalism rather than twentyeconomic geography, although this is changing as

brought to the metropolitan core from the margins

of the global economy. Whatever the role and significance of nation-state institutions in regulating
global finance, many of the institutions essential to
our everyday life have a stake in a fully functional

the basis for a long-term research programme is be-

financial system. Those institutions are also con-

first century financial capitalism. This is also true of


products, or as the consumers of commodities

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sumers of financial services from the local to the

global in ways that are now so deeply embedded in

our lives that we no longer notice their pervasive

mation and varying degrees of transparency must

be factored into any explanation of global financial crises.

This is hardly a recipe for isolation. Quite the


Still, there are those who persist with claims to

contrary. It is the lack of financial integration par-

the effect that the nation-state inherited from the

ticularly between the poorest countries and the

Second World War can be the bedrock institution

most advanced of the world that is a threat to the

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

former's development potential and the latter's pro-

about to retire over the next ten to twenty years de-

spective economic growth and stability.

pends a great deal upon the integration of the global


financial system with the requisite institutions of

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

much to agree with in the related arguments by

Shiller (2003) and Stiglitz (2002) recognizing that
the institutions and regulatory framework necessary to sustain such an ambitious goal hardly exist
except in the most rudimentary form. On the other
hand, it is already clear that the financial integration

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-

stitutions. It bears the imprint of conversations with

John Barron, Simon Ford, Giles Keating, Robert

Hirst and Erica Schoenberger, comments from
Trevor Bames, Linda McDowell and Susan Smith,
as well as research collaboration with Terry Babcock-Lumish, Tessa Hebb, John Marshall, Nigel
Thrift, Adam Tickell, Emiko Wakasugi and Dariusz
Wojcik. It also benefited from the comments and
criticisms of three referees. Versions of the paper
were given at the Centenary Annual Meeting of the
Association of American Geographers, the University of Birmingham, the University of Cambridge,

and the University of Melbourne. None of the

above should be held responsible for the views expressed herein or the failure on my part to develop
the argument as suggested by readers.
1. I concede that the 'retreat of the state' thesis is contentious,

especially amongst those who defend continental European

traditions against the incursions of Anglo-American financial institutions. And it is beyond the scope of this paper to
defend my argument; for more details and worked through
implications for the funding of urban economic development see Clark (2000).
2. This is not the occasion to comment on the significance of
neoliberalism in general and its relationship to finance in

particular. For related comments see Peck and Tickell

(2002) and Tickell and Peck (2004). Their stance on the
multivalent nature of neoliberalism is no more sympathetic
to Jameson's ruminations about the hyper-mobility and tyr-

anny of global finance than my own arguments expressed


3. Note the comments made by Chief Justice John Appleton of

the Supreme Judicial Court of Maine in Opinion of the Justices 58 Me 590, 592 (1871) where the theory of capitalism
was expounded as follows. 'Capital naturally gravitates to
the best investment. If a particular place or a special kind of
manufacture promises large returns, the capitalist will be little likely to hesitate in selecting the place and in determining upon the manufacturing. But whatever is done ... it is
done with the hope and expectation with which the farmer

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plows his fields and sows his grain, - the anticipated returns.' See also Hovenkamp (1991) for related commentary.

fact, language is neither. We work backwards and forwards

from argument to meaning recognising the multiplicity of

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

possible interpretation. This does not mean that shared mean-

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

one such technique. It is neither especially privileged nor

dangerous to reasoned communication (Williams, 2002).
5. Metaphors are often used in economic geography. For example, Massey (1984) used a metaphor drawn from physical
geography (geomorphology) to explain how and why the
social relations of a locality may have long histories, being
laid-down over time by each phase of accumulation. See
also Bames (1994) for a more general treatment of the topic.
6. For further information on the element mercury, there are
many textbooks and encyclopaedia. Nearer to hand are web
sites such as and that summarise the basic properties of mercury
and provide useful commentaries on the historical significance of mercury. The historical sense of mercury as 'quicksilver' is captured in the contemporary world through consumer product brand names on outboard motors, autos and

the like. Interestingly, do a good business

in online sales of all kinds of items labelled as mercury including alabaster busts of the god himself. The semiotics of
mercury is indeed a very interesting topic.

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-

sonous qualities eschewed in favour of the promise of

wealth and fortune. In this sense, mercury is not only dangerous, but also promises extraordinary riches.

8. The issue of the 'stickiness' (of information and practical

knowledge) is also addressed by management theorists including von Hippel (1994) as well as economic geographers
such as Gertler (2001). Von Hippel uses this term to address
similar issues, even if he draws somewhat different implications than mine regarding the significance of the local as opposed to the global.
9. It is widely recognized that mercury (Mercurius) was known
as the god of circulation, being closely identified with commerce including trade and the movement of goods and people. In some stories, Mercury was not to be trusted 'since he
moves on the boundaries and in the intervening space' (Hornblower and Spawforth, 2003, 962). Commentaries on the ancient gods suggest a close affinity with Hermes, the messenger god known for speed and beneficence. Hermes is also the
name of the UK pension fund management company whose
principal client and owner is the BT pension fund.
10. See Brown (1987, 98) for a related view. In emphasizing the
significance of metaphor for imagination, he noted that
'[m]etaphor is our fundamental way of noting similarity and
difference and of providing new slants on the primary object

of interest by illuminating it through a secondary one...

phenomena become objects of scientific discourse by virtue
of the metaphor that makes them accessible to cognition.'
11. Typically, these are moments of performance and argument,


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

the institutional structure of financial stocks and flows (see

Carhart, 2003 and compare with Winkelmann, 2003). National geopolitical interest sustained home bias over the
twentieth century; for example, until recently restrictions
imposed by European nation-states on cross-border asset allocation effectively balkanised institutional capital asset allocations. Over the long-term, however, such rigid geographies may be proven to be both inefficient and self-destructive given the prospects for higher long-term rates of return

in other regions of the world (Clark, 2003a).

13. Note, however, I do not mean to imply that financial markets need have a concrete presence like Wall St. to be effective. Granted national regulations remain a most effective

and significant force determining the geographical scope

and boundaries of markets. But agents can trade into and out
of markets from remote locations and non-national jurisdic-

tions. Moreover, it seems likely that as markets merge

across jurisdictions they may become more like 'virtual'
electronic platforms than real places (as seems likely in Eu-

rope). See Laulajainen (2001).

14. Related themes have been suggested by readers of previous
drafts. Susan Smith has noted another important property of
mercury - its capacity to change 'state' from liquid to vapour with just a modest application of energy. Likewise,
money can be transformed in seconds from its simplest (local) form into (global) finance through organisational and
communication networks. Another reader of the paper noted
that mercury often leaves a poisonous residue, contaminating its host sites whether a building or soil etc. Terry Babcock-Lumish's point is that as money is transformed into finance it leaves behind its original locations to fend for
themselves with often disastrous consequences for all involved. As Linda McDowell notes, if money flows like mercury, labour moves at a snail's pace. More can be made of
the metaphor than I can reasonably develop in this paper.

Gordon L Clark,

School of Geography and the Environment,

and Said Business School,
University of Oxford,

Mansfield Rd.,
Oxford OX] 3TB,
United Kingdom
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