Offshore and the Political and Legal Geography of Finance: 1066-2020 AD

Abstract

Economic geographers have long defined themselves in opposition to the abstract theoretical universe of economics, rather emphasizing the specificity of economic activities in the “real world.” To a large extent, this emphasis also characterizes the subfield of financial geography, which has tended to focus on the human and material apparatus of financial centers. This focus has allowed the field to provide key insights into the organization and operation of the world economy that have been overlooked by researchers in other fields. However, it also often led to less emphasis being paid to the abstract vehicles and constructs that constitute finance itself—as opposed to the financial system.

Crucially, the fact that these abstract constructs and vehicles do not inhabit the physical world, does not mean that they do not have a geography. Rather, their geographic footprint defines what is broadly referred to as the “offshore” financial system. A quick review of almost any international economics statistics underscores the rather alarming centrality of this system to the organization of the world economy—with roughly two thirds of the world’s stock of FDI, for example, either in or from shell company jurisdictions where it is unlikely to have a local attachment to substantive activity . However, notwithstanding a significant body of work in economic geography (e.g. Cobb 1998; Haberly and Wojcik 2015; Roberts 1994; Toepfer and Hall 2018; Hudson 2000; Wainwright 2011; Warf 2000), the offshore system continues to be mostly treated as a footnote in analyses of the world economy.

As will be demonstrated in this chapter, attempting to construct a model of the “real” economy or financial system that simply ignores or strips away the “fictions” of the offshore system is somewhat analogous to stripping away the operating system of a computer in order to try to get a clearer view of the hardware. In other words, rather than being regarded some veil of illusions that obscures our view of the economy, the offshore system needs to be regarded as an integral and critical component of its operational fabric (Coe et. al 2014; Maurer 2008; Palan et al. 2010; Seabrooke and Wigan 2014). Furthermore, far from being some novel feature of the modern world, offshore has deep historical roots. Specially, as will be shown, the unbundling of the state as an institution into what can be described as onshore and offshore spheres has been, since the middle ages in Europe, a persistent outcome of fundamental political tensions that surround the role of the state in capitalism. Indeed, capitalism was in many respects born offshore, and offshore is where capital, to a large extent, continues to live.