A Zizekian look at the GFC

21/01/2014 § 3 Comments

A bit gauche, perhaps, but I’m going to point you to an article I had published at the end of last year. It is my attempt to grapple with economics and the global financial crisis. Because of the nature of the explanation, it appeared in the International Journal of Zizek Studies.

The content will be familiar to regular readers of this blog — Zizekian philosophy and Lacanian psychoanalysis can help explain the economy. Given that it’s an article and not a post, it works through the arguments more fully and with better references.

The work started with two things I couldn’t understand:

  1. why were reputable economists and economics commentators spouting nonsense about the GFC? I don’t mean different interpretations of facts, or bringing different sets of values/preferences to bear on the evidence. I mean relying ‘evidence’ that was not true, developing explanations based on falsehoods
  2. why weren’t more economists concerned about the fraud revealed by investigations into the GFC? It seemed like the central players in the economy were cheating, brought down the economy, and then imposed the costs on other people.

A brief bit from the article:

In the response to the GFC, mainstream economic theory has acted as a prop or a magician’s wand, to be waved around as a distraction. What happened in the actual economy represented a turning away from standard, textbook capitalism, based on the idea of capital as a factor of production. Owners of capital should receive returns – get paid – because they own that capital. In addition, the more they take risks with that capital, the more they should be rewarded when they are successful. First, the fundamental principles of ownership and contract were replaced by a focus on smooth functioning of bureaucratic process. Secondly, the financial sector was able to decouple risk from reward; reward for taking risks no longer describes the origin of returns to capital.

Let me know what you think.

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§ 3 Responses to A Zizekian look at the GFC

  • Andrew says:

    Reblogged this on othersideofweightloss and commented:
    Link here to a great article on the GFC from a psychoanalytic perspective by my friend Bill. Well worth a read! Great stuff Bill.

  • Grant Taylor says:

    This is a very interesting discussion in your paper, Bill. Thank you for sharing it with us.

    One of two things that I have always struggled with (naively – I am no economist) is the assumption that things having integral value (the other is the ‘creation of wealth’ – but that is probably a separate topic).

    Apart from the sources of satisfaction of very basic needs (where the maintenance and propagation of life conveys some absolute value to basic food, shelter, and companionship), it has always seemed to me that ‘value’ (like other components of economic systems such as the capitalist linkage between risk and reward) is more-or-less a social contract – an agreed narrative framework that, like any custom, slows the tendency to maximum entropy and enables people to live together with some sort of harmony. So long as everyone believes in the story, the story can continue. Whether clad or naked, the Emperor can go about his business and all will remain well in the Kingdom.

    Significant disruption of the belief structure used to assign value constitutes a serious threat to our individual need for necessary ‘supplies’ from others, which causes all the usual behavioural and emotional responses to perceived threats – pain, fear, anger, and a bunch of ‘defense mechanisms’ to shift our perceptions back to a more tolerable narrative. Which is what I think you are referring to in your article as ‘symptoms’ of the GFC.

    But none of us are psychologically invulnerable and our defenses are very important to us – neurotic functioning is generally superior to decompensation. Denial may be a primitive way of coping, but sometimes it is the only way of coping – at least until the threat can be ameliorated sufficiently for ‘reality’ to be addressed more directly. Someone shut that little boy up and the Imperial Parade can continue to everyone’s pleasure and satisfaction.

    If The Masters Of The Universe in the financial capitals of the world had kept their heads, honoured the responsibilities that are attendant on their power, and let us all down gradually, might the GFC perhaps not have occurred?

    • I like how you’ve expressed that, that value is a social construction. It’s something that economists don’t remember enough.

      But I’d never thought about the implications for psychological defences — that’s a very interesting way to think about how people respond to value and changes in it. There is the well-known financial issue of people holding on to shares too long as they fall in value, rather than cutting their losses. That behaviour is likely rooted in the sort of defences you discuss.

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