On more economics and quantitative analysis in financial geography? A cautionary comment

Interest in the geographies of money and finance goes back a considerable time, but it was not until the 1970s and 1980s that David Harvey brought the issue of finance capital to the geographical fore in his writings on urban development under capitalism (e.g., Harvey, 1982). Then, in the 1990s, economic geographers began to discuss the geographies of money and finance in more detail (Corbridge et al., 1994; Martin, 1999). Over the past two decades or so, this interest has widened and deepened, in no small way super-charged by the global financial crisis of 2008, and an identifiable research field or programme of ‘financial geography’ has developed (e.g., Wójcik, 2021a, 2021b, 2022), which Dariusz Wójcik and William Bratton prefer to call ‘financial geographies’. The focus of their article (Wójcik and Bratton, 2024) is to look back over the field since 2001, celebrating what has been achieved, ¹ but also raising a number of concerns over the direction that research has taken, and arguing for a partial redirection or rebalancing.

Specifically, they highlight three main ‘interrelated’ issues: the dominance of ‘financialisation’ as the leading ‘theory’ in financial geography, the progressive shift of financial geography away from economics (and especially financial economics), and a decline in quantitative research approaches. They also regret a lack of longitudinal studies. These issues are seen as problematic, in that they pose challenges to the role of explanatory theory, understood as ‘analytical robustness’ in explaining empirical outcomes. The authors’ solution is to urge greater engagement of financial geographers with varieties of economics, to undertake wider theoretical development, and more quantification. These are important and provocative arguments that require discussion and debate. Space limitations here prevent all but a few comments.

While I agree with the authors that much of the work in financial geography has over-utilised the notion or concept of financialisation to analyze and explain a range of geographical financial phenomena, I demur from the view that financialisation is a theory. It is not a theory but an historical process (Epstein, 2005; Sawyer, 2013), constituting a new historical phase of capitalism that itself requires theorisation (Javidanrad et al., 2024; Lapavitsas, 2011). Geographers have rightly been concerned to study the spatialities of the economic transformations and reconfigurations wrought by financialisation in its various forms. By so doing, they can potentially contribute to its theorisation. While there are several economic theories of financialisation, and of finance itself, out there (Neoclassical, New Keynesian, Endogenous Credit Money, Post-Keynesian, Marxist, etc.), none give geography any significant explanatory role, if at all. So the ‘closer engagement’ with (financial) economics, called for by the authors, requires not simply using these different economic theories and attempting to draw out their spatial implications (if any – the monetary neutrality assumption of the Neoclassical approach seems to me to render geography irrelevant), but also demonstrating how ‘spatialising’ such economic theories can improve their explanatory reach.

In terms of theory development in financial geography, although some financial economists, especially of a heterodox political economy orientation, may be persuaded to give greater recognition of the role of geography in the operation of financial systems and processes, it does not automatically follow that they would be receptive to actually collaborating with financial geographers. Economists, both mainstream and heterodox, have past form in this context. Witness the experience of economic geographers and the emergence of the new breed of ‘spatial economists’ (proponents of the ‘New Economic Geography’) over the past three decades or so. Despite overlapping interests between the two groups, the new spatial economists have largely ploughed their own furrow without any significant interest in collaborating directly with economic geographers, or even citing their work (Martin, 2011). Or again, consider the case of evolutionary economic geography and evolutionary economics. Despite the rapid growth of work in evolutionary economic geography over the past two decades or so, evolutionary economists have all but ignored the work of evolutionary economic geographers (Martin and Sunley, 2023). Closer engagement between financial geographers and financial economists will not be easy. Financial geographers may have more success in engaging with those business scholars and economic historians who study financial institutions and financial systems.

A key complaint of Dariusz Wójcik's and William Bratton's paper is that financial geographers have retreated from quantitative analysis and that there needs to be more work of this sort, and less emphasis on qualitative case studies. I would concur in part with this sentiment, but only up to a point. Of course, financial geographers should utilise and analyse quantitative financial data wherever possible to provide empirical rigour to their enquiries. But there can be no simple presumption that quantitative methods provide better ‘causal explanations’. Quantitative techniques – such as regression analysis (the lack of which in financial geography is regretted by the authors) – may yield valuable insight into patterns and statistical associations, but they typically abstract from or only superficially capture local context, which remains crucial even in this age of globalised finance. The availability of ever more data (some in real time) and readily accessible ‘off-the-shelf’ quantitative modelling software may make large-scale quantitative analysis (including regression) potentially seductive, but variable-oriented research cannot substitute for careful, interrogative case-oriented approaches using narrative and qualitative methods (such as qualitative comparative analysis and process tracing). Case-oriented studies can and should have a quantitative dimension, using appropriate statistical data. But they also have the key advantage of being able to delve into the actual actions of agents and their agendas that underpin but typically remain unobservable in quantitative data and stylised facts.

Two examples demonstrate to me just how powerful interrogative narrative studies can be. One is Davies's (2022) Bankruptcy, Bubbles and Bailouts: The Inside History of the Treasury since 1976. This provides a highly compelling account of how over recent decades the personalities and ideologies of those who have run the UK Treasury have profoundly shaped the nation's most powerful financial institution, and through it the whole economy and its regional inequalities. Similarly, Shaxson's (2018) The Finance Curse: How Global Money Has Made Us All Poorer gives an invaluable lens into the way key agents in London's financial nexus (especially HM Treasury, the Bank of England, and the Stock Exchange) both fuelled and used the pro-neoliberal policy turn in the UK from the early-1980s onwards to the City's own benefit and advantage, again at the expense of the rest of the country. Both studies are based on in-depth interviews, and investigation of official and unofficial memoranda and correspondence, and demonstrate the chains of consequences engendered by the behaviours and actions of those involved in London's financial institutions. To be sure, these are not geographical studies as such, but they nevertheless provide highly valuable understanding of a specific financial centre – the City of London. They demonstrate the explanatory power of the ‘close dialogue’ highlighted by Clark (1998) in his essay on methodology in economic geography, and in financial geography in particular.

The authors are correct to argue for more longitudinal studies in financial geography. The evolution of financial and banking systems has always been inextricably spatial in nature and consequences. Dow (1999) has argued that as banking and financial systems have developed and evolved over the past couple of centuries, they have become increasingly spatially and institutionally centralised, with adverse implications for economic growth and development in ‘peripheral’ regions. The UK, for example, provides a clear instance of Dow's model. In the nineteenth century, the UK's financial and banking systems were regional: there were some 22 local stock markets across the country (Campbell et al., 2016) and 250 regional and local public and private banks (Braggion et al., 2022). This decentralised system played an important role in fostering local economic and industrial development. By the early-1920s, the financial system had become organisationally concentrated and increasingly centralised in London, a process that continued further over the twentieth century. This hugely benefitted London's financial nexus but disadvantaged the country's other regions. Then with deregulation in the 1980s, London led financial globalisation (Shaxson, 2018) and pulled ahead of other UK regions economically.

Thus far in financial geography there has been a lack of historical studies of the evolution of national financial systems and how this has been a major factor shaping the process and pattern of (uneven) regional economic development over time. Dow suggested that there are stages in the historical evolution of financial systems, and corresponding stages or phases of uneven regional development. We are, arguably, in the beginning of just one such stage or phase, of ‘green finance’ and ‘fintech’ (with London a global centre for the latter), both of which promise to change the world of finance and its geographical impacts once more. In this context, financial geography should surely be striving to help inform national and regional policies to ensure these transformations are spatially just and inclusive.

It is right to review the ‘state of the art’ of an area of research or research programme periodically, particularly when its subject matter – as with the world of finance – has been and is undergoing momentous change. In this respect, the intervention by Dariusz Wójcik and William Bratton is both timely and thought-provoking. Hopefully, it will stimulate a lively and constructive debate on how financial geography should develop over the next two decades.