‘Global finance as the weapon of choice’ (By Gordon L Clark, Oxford University)

The following is a transcript of the lecture given by Professor Gordon Clark (Professorial Fellow at St Edmund Hall, University of Oxford) at the FinGeo sponsored plenary session on 7th June 2022. This was held during the 6th Global Conference on Economic Geography in Dublin, Ireland.

Thank you for your kind introduction. I am very pleased to be here. Let me extend my gratitude to the organisers of the conference for the opportunity to open the event with my colleague Professor Richard Baldwin.

It is remarkable that the Global Conference on Economic Geography has developed and prospered such that we have today about 1,000 registered participants. Standing here, I can almost see every one of the participants. It is a formidable sight.

Let me also thank the local organising committee of the conference and their willingness and diligence in undertaking such a large project. They have produced a veritable feast of ideas, speakers, and research projects. It is a testament to their ambition and the vitality of economic geography as a discipline.


In my presentation today, I consider various manifestations of finance as an industry and as an economic instrument or weapon of choice in affecting global economic and political prospects. This blog is a slightly revised version my presentation in June 2022.

My presentation has four parts. In the first instance, I begin with my early research on finance and corporate restructuring.

In the second instance, I focus upon the growth and significance of the ESG movement in the global investment management industry and its application to global climate change. In both cases, at issue is the legitimacy of global finance.

In the third instance, I discuss how finance has been weaponised in the war in the Ukraine against Putin and Russia. At one level, the war in the Ukraine is a tragedy of global significance whose costs have been imposed on the Ukrainian people as well as on Europe more generally.

At another level, it is telling that the immediate response to the invasion was to mobilise financial institutions and markets against Russia. Over the longer term, the consequences of the war will reach every corner of the world. The first instalment of which will be felt through the northern winter to come and food scarcity in Africa and beyond.  More generally, the costs and consequences of the war could last a generation.

In conclusion, I raise a rhetorical question about our prospects over the coming 3-5 years and suggest that economic geography as an academic project and as a lens through which to understand the world of finance and financial markets will be more important than ever before.

Setting the scene

Let me begin with my interest in finance. During the 1980s and early 1990s, my research was focused on the economic geography of corporate restructuring. American industry was being turned upside down and inside out by private equity companies seeking to realise a profit from rationalising companies and industries in the face of accelerating globalisation (see Clark 1993).

Much has been written about this era. At one level, commentaries have focused upon the use of ‘cheap’ finance to remake industries and corporations in ways that maximised shareholder value. At another level, recent commentaries have emphasised the significance of corporate raiders and specific individuals who represented these agents of change (see recent books on General Electric, its financial arm, and its charismatic CEO (Jack Welch) (Gelles 2022; Gryta and Mann 2020).

Finance-led corporate restructuring was a zero-sum game – private equity firms and shareholders (in order) benefited at the expense of workers and communities. Perhaps more insidious and recognised in research published in economic geography and beyond corporate restructuring created a new landscape of US industrial production. Major companies relocated production facilities to local labour markets they could dominate – a strategy facilitated, even applauded, by the finance industry (Neumark et al. 2008).

In this world, the strategic role of finance in corporate restructuring was legitimated by reference to shareholder value. This notion was attributed centre stage in academic research, in public policy, and in the use of finance as an instrument or weapon for reshaping the economic geography of US industry (Peck 2002).

The premium attributed to shareholder value excluded any other consideration—social, environmental, and/or strategic (as in the virtues of globalisation). Thirty years later, the costs of the strategy are to be found in geographical patterns of voting, global trade imbalances, and the vulnerability of key corporations and industries to spatially-extensive supply chains.

ESG movement

Around the year 2000, in the UK and the US (in particular) questions were asked about the theory and practice of corporate governance in relation to shareholder value and public expectations of good governance as opposed to governance that benefited a select few.

Critics argued that many corporate boards had lost touch with shareholders and stakeholders. They were more like self-referencing country clubs than strategic agents focused upon driving long-term value for the benefit of economy and society. These criticisms were raised by a variety of establishment figures on both sides of the Atlantic including Robert Monks (a Reagan Republican) and Paul Myners (UK and City grandee).

In London, fledgling investment firms were established to focus on long-term value instead of corporate re-engineering for short-term profit. So, for example, Generation Investment Management was founded about this time with a mandate to invest, in part, with respect to global climate change: their investment portfolios seek to take advantage of carbon-sensitive emerging industries and companies while discriminating against those that are trapped in the fossil fuel economy of the 19th and 20th centuries.

To do so, these types of portfolio investors needed data – data that could allow them to discriminate between companies based on their environmental, social, and governance (ESG) performance. Not just once, but over time and space – enabling investment companies to realise value from investing in well-governed companies that score well and improve their scores on social and environmental factors at home and abroad.

Adam Dixon and I have a paper that charts development of the ESG industry from fledgling companies led by entrepreneurs to major investment companies that separately and together have shaped the burgeoning market for ESG data and metrics of performance (Clark and Dixon 2022). We explain how and why these start-ups were incorporated into global data providers that have not only made a market for this data but have made it a ‘mainstream’ investment factor. One estimate suggests that by 2035 it will be a recognised component in US$50 trillion of assets under management.

I would like to make three points about the incorporation of ESG metrics into mainstream portfolio investment. The first is obvious – conventional measures of shareholder value have been augmented indeed transformed by ESG metrics.

Second, it is not just about current ESG performance it is also about expected performance – that is, future value is framed, in part, by corporate strategies that favour ESG metrics and investing.

Third, portfolio investors claim that they are currently, or will soon, discriminate against companies that are ESG laggards! Especially those that remain hostile to COP 26 commitments! In effect, the global market for ESG metrics has challenged incumbent corporate managers to focus on these issues and thereby meet the expectations of mainstream investors who were hitherto hostile to anything that smacked of “social” investing.

In large part, the formation and growth of the ESG industry was not required or prompted by government policy. Indeed, in some jurisdictions, governments have seen the ESG metrics movement as an unwanted incursion into mutually beneficial political relationships between themselves and fossil fuel companies.

In other jurisdictions, the development of the ESG market has allowed governments to be bystanders – deliberately, or by default, finance has become the weapon of choice in driving listed corporations in Anglo-American countries towards long-term sustainability. This has been done in the name of maximising shareholder value albeit now framed in terms of long-term value! Only recently have governments seen political advantage in joining the ESG movement (albeit often ill-informed and partial in effect).

In doing so, finance or more specifically portfolio investment companies, have cloaked their claims for legitimacy in the language of sustainability and corporate social responsibility. For various reasons, the costs and consequences of market instability and the long shadows cast by the 2008-2012 global financial crisis have been discounted by appeals to ESG investing and virtue.

In making their claims, finance has sought to discount critics who argue that sustainable finance is just another way of obscuring a zero-sum game wherein select groups succeed and society loses. The success of the ESG movement in the investment management industry may, nonetheless, involve driving whole industries, corporations, and communities out of the market in favour of the common good.  As the ESG movement has gathered momentum, those industries and communities ‘in the frame’ and dependent upon their longevity have cried foul. The politics of ESG investing remains a potent force in contemporary debate.

War in the Ukraine

I have no doubt that many of us in this room and in the conference at large are horrified at the war in the Ukraine. The 24-hour news cycle brings to each one of us images and stories about peaceful coexistence put asunder by the Russian ground war, strikes and counter-strikes, and immense suffering and hardship.

Who would have thought that peaceful coexistence notwithstanding the conflict in the Donbas region could have been shattered in such a dramatic and merciless way? Its’ geopolitical consequences are likely to be far-reaching.

It is important to pause for a moment and acknowledge the role that finance has played, and will play, in the war and, quite possibly, in 21st-century geopolitics. In doing so, I have selected three specific instances that illustrate my more general argument.

In the first instance, the US, the UK, and the EU immediately imposed sanctions on Russian oligarchs. While the range of sanctions is broad and impossible to summarise in a moment, it is apparent that sanctions have sought to discount, even expropriate, oligarchs’ assets. A good example, and close to home, was the forced ‘sale’ of Chelsea football club to a consortium led by the owners of the LA Dodgers.

Just as visible has been the confiscation of oligarchs’ yachts around the world. And safe havens for ‘secret’ bank accounts have been ‘lent’ upon to freeze access to those accounts. European countries that cultivated relationships with the oligarchs have had to impose sanctions as a means of demonstrating collective commitment to the Ukraine. Finance has been used to punish those close to Putin.

In the second instance, governments and public opinion have, in effect, forced western businesses to abandon Russia. In doing so, the employment and earned income prospects of many Russian citizens have been dealt harsh blows that are unlikely to be redeemed even if, against all odds, peace was to break out in the next year or so. In effect, the urban middle class of major Russian cities have been or will be impoverished for a generation.

To illustrate, quick trips by well-off Russians to Cyprus to check on their hard-currency bank deposits are now out of the question. These accounts are likely to be frozen for a decade or more if not expropriated to pay for war reparations. In the frame is the status and prospects of financial centres that have specialised in secrecy (see Haberly and Wójcik 2022 on ‘sticky power of finance’).

In the third instance, foreign transactions and the channels that sustain inter-jurisdictional transactions involving Russian or related counterparties have been frozen.[1] Systems such as SWIFT have been closed to Russian banks and related commercial institutions, thereby derailing or stymying trade with the world, limiting access to ‘hard’ currency amongst elites, and the use of foreign earnings.

In effect, the dollar, the Euro, and other ‘hard’ currencies have been withdrawn from trade in Russian oil and gas. The Russian threat of terminating trade in oil and gas with Europe if it continues to oppose the war in Ukraine has been exposed as another version of hostage-taking. But note, avoiding Russian energy will be paid for by global inflation and unemployment which will be highly uneven in its geographical impact. Over the northern winter to come, there looms a toxic combination of freezing temperatures, energy shortages, and unemployment and inflation.

Finance has been a weapon used to expropriate assets, impoverish the urban middle class, and punish the Russian state and its citizens. A financial wall has been constructed around Russia – to the west. To the east, China offers financial help in exchange for access to Russian oil and gas. This will come at a price. It could result in Russia becoming a client-state of China – hostage to its erstwhile partner in geopolitical intrigue.

Again, finance has claimed centre-stage, being an instrument of geopolitics on behalf of western governments. Its legitimacy has been burnished by its ESG commitments and disinvestment from the global fossil fuel industry and has allied itself with the geopolitical strategies of the west.


Over the past year, I have been listening to asset managers as they explain recent movements (declines) in the value of investment portfolios held by clients.

One argument is made time and again: stay the course, and do not change asset allocations in response to the war in the Ukraine.

Another argument is that it is just a blip: the threat of stagflation in Europe and the US will be resolved by judicious policymaking by central banks.

Alternatively, it is argued that the fundamentals remain in place: the tech revolution, the ESG and climate change tilt in investment portfolios, and globalisation will return as the drivers of value for the global economy over the foreseeable future.

Reinforcing the presumption in favour of ‘the future is another version of the past’ are confident statements by central banks that inflation will peak next year at about 9% and then decline and unemployment will remain (remarkably) low due to shortfalls in labour supply.

Apparently, central banks think current macroeconomic trends are short-term, not longer-term in nature. Some commentators are worried, though!

Jamie Dimon (2022), CEO of JP Morgan Chase, warned of an “economic hurricane” on the horizon, which is “coming our way” even if he was unable to say whether it would be ameliorated by “bright clouds” given the war in the Ukraine and systemic disruptions to global trade.[2]

Looking forward, I would make three simple, even obvious points.

The past is not, ever, the future. Imagining economies and markets will return to a pre-COVID and pre-Ukraine war steady state is wishful thinking at best. At worst, it is a failure of imagination and a form of complacency whose costs will be borne by ordinary people and the clients of investment providers.

Some regions and countries will benefit from the economic and financial disruption of the coming 2-5 years, and others will not. What will the map of stagflation and economic and financial vulnerability look like? For that matter, which countries and regions will be the winners?

What role will financial markets and institutions play in fashioning a ‘new’ regime of 21st century growth and accumulation? Will it be a carbon neutral version of the past 20 years excluding Russia or will finance-led innovation in alternative energy generation and supply usher in a new global regime of accumulation?

We must simultaneously cope with the present and near future while holding fast to a future that is not just carbon-neutral but leveraged against carbon in ways that favour a new global regime of climate-sensitive accumulation.


Clark, G. L. (1993). Pensions and Corporate Restructuring in American Industry: A Crisis of Regulation. Baltimore: John Hopkins University Press.

Clark, G.L. and Dixon, A. (2022). The ESG movement and the legitimacy of finance. Draft. Oxford.

Dimon, J. (2022). https://fortune.com/2022/06/01/jamie-dimon-economy-hurricane-storm-clouds-recession/

Gelles, D. (2022). The Man Who Broke Capitalism. London: Simon and Schuster.

Gryta, T. and Mann, T. (2020). Lights Out: Pride, Delusion and the Fall of General Electric. Boston: Houghton Mifflin Harcourt.

Haberly, D. and Wójcik, D. (2022). Sticky Power: Global Financial Networks in the World Economy. Oxford: Oxford University Press.

Neumark, D., Zhang, J., and Ciccarella, S. (2008). The effects of Wal-Mart on local labor markets. Journal of Urban Economics 63 (2): 405-430.

Peck, P. (2002). Labor, zapped/growth, restored? Three moments of neoliberal restructuring in the American labor market, Journal of Economic Geography 2(2): 179–220.

[1]/.  See also http://www.fingeo.net/wordpress/wp-content/uploads/2019/02/FinGeoWP22_Doerry_Robinson_Derudder_SwiftGPN.pdf

[2]/. https://www.cnbc.com/2022/06/01/jamie-dimon-says-brace-yourself-for-an-economic-hurricane-caused-by-the-fed-and-ukraine-war.html

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