Culprits or bystanders? Offshore jurisdictions and the global financial crisis

Questions have been raised regarding the role of low-tax offshore jurisdictions in the global financial crisis, based largely on evidence that many problematic asset-backed securities were issued from or listed in the Cayman Islands, Jersey, Ireland, and other ‘offshore’ sites. However, there has not been a systematic investigation of the offshore geography of crisis-implicated securitization. Here we fill this gap by constructing the first comprehensive jurisdictional map of the largest pre-crisis Asset-Backed Commercial Paper (ABCP) programs, and examining the rationale for and impacts of this geography in detail. We show that offshore jurisdictions were disproportionately involved in producing the most unstable ABCP classes. However, this is difficult to explain in terms of the traditional role of offshore banking centers as sites for direct avoidance of onshore regulation and transparency. Rather, we propose a Minskian model of pre-crisis offshore ABCP production, wherein these jurisdictions specialized in alleviating incidental institutional frictions (e.g. double taxation) hindering onshore financial innovation. In this context, they could sometimes be legitimately described as improving the institutional ‘efficiency’ of financial markets; however, by facilitating the endogenous evolutionary instability of these markets, this apparently innocuous service had profoundly negative effects. This normative disconnect poses a conundrum for offshore reform

Sticky Power

Modern civilization revolves around money. However, money is a paradox. It is nothing more than a representation of and medium for decentralized networks of social trust, but its production is controlled by highly centralized networks of firms, places, and governments, and there is never enough of it to go around. Moreover, given that the creation of money, as credit, is based on expectations, money is at its heart an instrument for human agency to change the future. At the same time, however, the financial systems that produce money are deeply rooted in the past, and perpetuate themselves through history. This book seeks to deepen our understanding of the paradox of money, by introducing a novel conceptual lens—that of Global Financial Networks—to cast new light on the geography, history, politics, and sociology of finance from the middle ages to the global financial crisis and beyond. It shows that the power of finance is inherently “sticky”; with what are generally assumed to be new innovations such as “offshore” finance actually dating back centuries, and the architecture of global financial networks more broadly adapting to the rise and fall of empires and new technologies while changing surprisingly little in their basic character; or at most changing very slowly. A recognition of the mechanics of this durability, it is argued, calls for a new approach to reforming finance which is less reactively focused on regulation, and more proactively focused on building new institutional systems with a long-term “sticky power” of their own

Sticky Power

Modern civilization revolves around money. However, money is a paradox. It is nothing more than a representation of and medium for decentralized networks of social trust, but its production is controlled by highly centralized networks of firms, places, and governments, and there is never enough of it to go around. Moreover, given that the creation of money, as credit, is based on expectations, money is at its heart an instrument for human agency to change the future. At the same time, however, the financial systems that produce money are deeply rooted in the past, and perpetuate themselves through history. This book seeks to deepen our understanding of the paradox of money, by introducing a novel conceptual lens—that of Global Financial Networks—to cast new light on the geography, history, politics, and sociology of finance from the middle ages to the global financial crisis and beyond. It shows that the power of finance is inherently “sticky”; with what are generally assumed to be new innovations such as “offshore” finance actually dating back centuries, and the architecture of global financial networks more broadly adapting to the rise and fall of empires and new technologies while changing surprisingly little in their basic character; or at most changing very slowly. A recognition of the mechanics of this durability, it is argued, calls for a new approach to reforming finance which is less reactively focused on regulation, and more proactively focused on building new institutional systems with a long-term “sticky power” of their own

Asset management as a digital platform industry: a global financial network perspective

While contemporary technological disruption is increasingly conceptualized in terms of the logic and paradoxes of the digital platform economy, discussions of “FinTech” have only engaged to a limited extent with these debates—particularly from an economic geographic standpoint. Here we fill this gap by proposing an adapted Global Financial Network (GFN) framework for conceptualizing the organizational and geographic logic of the digital platform economy in finance, and applying it to examine the impact of the digital platform model on asset management. As we will show, asset management is being profoundly disrupted by what we dub digital asset management platforms—or DAMPs—which encompass services including index fund and ETF provision, robo-advising, and analytics and trading support. Like other digital platforms, DAMPs do not so much leverage technology to enhance their competitiveness within markets, as to radically restructure the market itself. Also, like other platforms, their rise has produced a winner-take-all paradox of centralization through democratization that defies predictions of technology-enabled industry decentralization. However, the logic and implications of the rise of DAMPs diverges, in other respects, from non-financial digital platforms, as finance has long possessed an informational intensity and regulatory and organizational fluidity characteristic of the digital platform economy. Consequently, the digital platform model has mostly developed endogenously in asset management through incremental innovation by major financial firms—in a process that has reinforced the position of leading incumbent asset management centers, and above all New York—rather than being introduced from the outside by upstart technology firms and clusters

Earth incorporated: centralization and variegation in the global company network

Over the past 20 years, a widening gulf has appeared between the increasingly internationalized financing arrangements of the world’s leading corporations, and the persistence of nationally compartmentalized approaches to the study of corporate control. In lieu of direct empirical evidence on corporate control at the global level, the most widespread assumption is that the globalization of ownership has taken the form of an expansion of arms-length, market-based arrangements traditionally prevailing in the Anglo-American economies. Here, however, we challenge this assumption, both empirically and conceptually. Empirically, we show that three quarters of the world’s 205 largest firms by sales are linked to a single global company network of concentrated (5%) ownership ties. This network has a hierarchically centralized organization, with a dominant “global network core” of US fund managers ringed by a more geographically diverse “state capitalist periphery.” Conceptually, we argue that the this architecture can be broadly explained through a Polanyian “variegated capitalist” model of contradictory market institutionalization, with the formation of the global company network actually a counterintuitive product of global financial marketization. In order to understand this process of network formation, however, it is necessary to extend Polanyi’s model of a double movement mediated through political interventions in the market, to incorporate Veblenian processes of evolutionary institutional change mediated through the market

Parallel Odor Processing by Two Anatomically Distinct Olfactory Bulb Target Structures

The olfactory cortex encompasses several anatomically distinct regions each hypothesized to provide differential representation and processing of specific odors. Studies exploring whether or not the diversity of olfactory bulb input to olfactory cortices has functional meaning, however, are lacking. Here we tested whether two anatomically major olfactory cortical structures, the olfactory tubercle (OT) and piriform cortex (PCX), differ in their neural representation and processing dynamics of a small set of diverse odors by performing in vivo extracellular recordings from the OT and PCX of anesthetized mice. We found a wealth of similarities between structures, including odor-evoked response magnitudes, breadth of odor tuning, and odor-evoked firing latencies. In contrast, only few differences between structures were found, including spontaneous activity rates and odor signal-to-noise ratios. These results suggest that despite major anatomical differences in innervation by olfactory bulb mitral/tufted cells, the basic features of odor representation and processing, at least within this limited odor set, are similar within the OT and PCX. We predict that the olfactory code follows a distributed processing stream in transmitting behaviorally and perceptually-relevant information from low-level stations

Globalization, uneven development and the North-South ‘big switch’

An apparent ‘big switch’ in attitudes towards and discourse over economic globalization has occurred since the turn of the Millennium. Economic globalization was formerly widely identified as being orchestrated in the interests of the global North. Sceptics, mostly left - leaning, expressed particular concern for its impacts in the global South. However, a recent backlash against globalization has emerged within the global North from the political right, while support for globalization has been expressed within the global South. This ‘big switch’ defies many theoretical predictions, and can be situated in relation to a shifting geography of global uneven developmen

Inverse Current Source Density Method in Two Dimensions: Inferring Neural Activation from Multielectrode Recordings

The recent development of large multielectrode recording arrays has made it affordable for an increasing number of laboratories to record from multiple brain regions simultaneously. The development of analytical tools for array data, however, lags behind these technological advances in hardware. In this paper, we present a method based on forward modeling for estimating current source density from electrophysiological signals recorded on a two-dimensional grid using multi-electrode rectangular arrays. This new method, which we call two-dimensional inverse Current Source Density (iCSD 2D), is based upon and extends our previous one- and three-dimensional techniques. We test several variants of our method, both on surrogate data generated from a collection of Gaussian sources, and on model data from a population of layer 5 neocortical pyramidal neurons. We also apply the method to experimental data from the rat subiculum. The main advantages of the proposed method are the explicit specification of its assumptions, the possibility to include system-specific information as it becomes available, the ability to estimate CSD at the grid boundaries, and lower reconstruction errors when compared to the traditional approach. These features make iCSD 2D a substantial improvement over the approaches used so far and a powerful new tool for the analysis of multielectrode array data. We also provide a free GUI-based MATLAB toolbox to analyze and visualize our test data as well as user datasets