The best of both worlds: scale economies and discriminatory policies in London's global financial centre

Photis Lysandrou, Anastasia Nesvetailova, Ronen Palan
2017 Economy and Society  
This is the accepted version of the paper. This version of the publication may differ from the final published version. Permanent repository link: http://openaccess.city.ac.uk/18442/ Link to published version: http://dx. Abstract: From the early 1960s onwards London has managed to vie with New York for the top spot as an international financial centre. Ever since then, London has reigned as a leading global financial hub, despite not having behind it anything like the political or economic
more » ... ng enjoyed by New York. This paper seeks to explain this phenomenon by building on Kindleberger's classic analysis of financial centres as international hubs that arise due to economic, geographic and infrastructural advantages, and more recent theories of specialised financial centres that suggest that financial centres deploy discriminatory business practices in order to compete with the scale economy-based centres. Our central claim here is that London's continuing financial supremacy can be traced to the way that the opposing 'economic' and 'political' sets of criteria necessary for a financial centre are here inextricably fused together in a mutually reinforcing dynamic. Three case studies are used to support this claim. Key words: City of London; bank lending, capital markets, foreign exchange, OTC derivatives, liquidity, collateral, asset management, offshore financial centre. financial markets in 1957, known as the Euromarkets (Burn, 2005; Altman 1969; Hanzawa 1991). Within a short space of time, British jurisdictions such as the Channel Islands, Caymans and Bermuda, as well as former colonies including Hong Kong, Singapore, Cyprus and Dubai, have evolved into ancillary offshore financial centres (OFCs) with close links to the London money markets. London's success since then has been due largely to its highly permissive regulatory environment and the established links with the network of former colonies turned financial havens (Palan 2010; Palan 2016).
doi:10.1080/03085147.2017.1359915 fatcat:xtsw4nxdingxhawnjbqcr4c4aq