Geography Reference
In-Depth Information
services is offshore banking (Gorostriaga 1984 ; Bowe 1998 ; Cobb 1998 ; Warf
2002 ). Roberts ( 1994 ) identified five major world clusters of offshore finance,
including the Caribbean (e.g., the Cayman Islands, Bahamas, Panama); Europe (the
Isle of Man, Jersey, and microstates on the Continent); the Middle East (Cyprus,
Lebanon, and particularly Bahrain); Southeast Asia (Hong Kong, Singapore); and
the south Pacific (Vanuatu, Nauru). Such places provide commercial investment
services (i.e., loans and advice), foreign currency trades, asset protection (insur-
ance), investment consulting, international tax planning, and trade finance (e.g.,
letters of credit). Employment in offshore banking is relatively capital-intensive
when compared to the labor-intensive headquarters in global cities: for example, in
the Cayman Islands, the world's largest center of offshore finance, Roberts ( 1995 )
notes that 1,000 foreign banks employ only 538 people; most are ''brass plate'' or
shell banks. The high degree of capital intensity in this case speaks to the hybrid
nature of offshore banks, which combine computers, software, buildings and an
occasional worker to form actor-networks that vary from place to place.
Conventional geographic preoccupations with proximity mean little in this case,
for the topologies of global finance are formed and deformed in ways that the
language of location theory cannot capture. Rather, it is the political economy of
actor-networks in question that are central to the evolving spatial distribution of
this segment of the global service economy. Offshore centers are the ''black holes''
in the global topography of financial regulation, a status that emanates directly
from the enhanced ability of large financial institutions to shift funds electronically
to take advantage of lax regulations, freedom from taxes and currency controls,
and other restrictions to be found on the periphery of the global financial system.
As the technological barriers to moving money have fallen, allowing digital money
to circulate at will, legal and regulatory ones have increased in importance.
Globalization does not eliminate local differences, it accentuates them. Even
relatively minor differences in regulations concerning corporate taxes or repatri-
ated profits may attract or repel large quantities of capital to enter, or exit,
particular places. Thus, Hudson ( 2000 ) argues that the phenomenon of offshore
banking is redefining national sovereignty, uncoupling political and financial
control from the territories that long held sway over financial institutions.
Offshore banking centers have long suffered from the cloud of suspicion that they
constitute little more than havens for tax evasion and money laundering of illicitly
obtained funds (Hampton and Christensen 1999 ). As electronic money has come to
dominate global finance, the use of offshore banking centers for illegitimate pur-
poses has grown apace. Indeed, just as large corporations can use the Internet and
fiber optics to move funds from place to place, so can actors in the ''dark side'' of the
global economy, including tax evaders, drug cartels, arms traffickers, terrorists, and
corrupt government officials. Given that they often occupy the boundary between
''legitimate'' and ''illegitimate'' financial activity, a key issue in the success or
failure of offshore banking centers is the degree of confidentiality that investors feel
they can obtain. Indeed, the quality of offshore banking centers is often judged by the
quality of laws protecting the privacy of investors. The use of shell companies,
including holding corporations and increasingly, foundations, blurs legal lines of
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