The waves of globalization and international finance are tightly interconnected. Sometimes international finance is the engine of globalization, at other times, international finance rode on a wave of globalization, or contrarily, a wild wave, such as currency crises in emerging countries swallowed it. Therefore, examining the history of international finance is useful in understanding the waves of globalization in a long-term historical perspective.
As international finance tends to concentrate on specific cities, throughout modern history, our perception of its rise and fall on the waves of globalization overlap with the rise and fall of such cities. However, empirical research by a financial historian (H.C.Reed, 1981) revealed that it was rare for important financial centres to disappear in the 20th century, except in cases of communist revolutions or civil wars. Rather, the coexistence of leading international financial centres was more general.
Accordingly, this session first focuses on the relationships between international financial centres in a long-term historical perspective. As frameworks for analysis, we use the competition – complementarity approach and the network analysis approach. The former idea is based on Schenk (2002) and Cassis (2009). The latter has already proved its effectiveness in clarifying a multi-layer structure of international financial centres, i.e. core, intermediate, and peripheral (Flandreau and Jobst, 2005). Using these two approaches, we can classify relationships between international financial centres into the following working hypotheses; the first is competitive within the same layer; the second is complementarity within the same layer; the third is competitive between different layers; and the last is complementarity between different layers.
Next, we focus on the functions of international financial centres as a complete network system. Particularly, how do the functions of an international financial centre network relate to the development of economic globalization?
With these new perspectives, this session will examine the following historical cases: foreign bond issues in London, Paris, and New York before World War I and in the 1920s; the relationship of China (Shanghai) with the London and New York markets in the 1930s; the relationship of Japan (Tokyo and Osaka) with London euro dollar markets and New York markets in the 1960s; the relationships between London and financial centres in Europe in the euro dollar markets in the 1970s; the competitive environment of London in the Big Bang of the 1980s; and relationships between Asian intermediate centres such as Hong Kong, Singapore, and Tokyo before and after the Asian financial crisis in 1997.
Studying these cases, we try to clarify how international financial centres, as a network, relate to the fluctuations in globalization waves, i.e., making waves, surfing them, or sinking beneath them.