Worldwide Economic Collapse a Result of Shared Manic Behavior
Bankers, economists and politicians displayed the same kind of manic behavior as psychologically disturbed individuals in the years running up to the 2008 financial collapse, according to a new study. And the study warns it could happen again.
While bankers in the West saw the warning signs from the collapse of the Japanese economy in 1991 and the 1998 crisis in Southeast Asia, they didn’t heed the warnings, according to Dr. Mark Stein, an award-winning scholar from the University of Leicester School of Management. Instead, there was a “shared manic culture,” with those responsible for the financial collapse going into an overdrive of denial, escalating risky and dangerous lending and insurance practices, he said.
Stein, who was just awarded the iLab prize for innovative scholarship, has studied group dynamics from a psychoanalytic perspective at the renowned Tavistock Institute. He described this manic behavior in the 20-year runup to the credit crisis in a paper published in the Sage journal Organization.
Stein argues that the financial world was suffering from a kind of collective mania in the two decades running up to the events.
“Unless the manic nature of the response in the run up to 2008 is recognized, the same economic disaster could happen again,” he said.
According to Stein, four characteristics define the manic culture: denial, omnipotence, triumphalism, and overactivity.
“A series of major ruptures in capitalist economies were observed and noted by those in positions of economic and political leadership in Western societies,” he said. “These ruptures caused considerable anxiety among these leaders, but rather than heeding the lessons, they responded by manic, omnipotent and triumphant attempts to prove the superiority of their economies.”
The massive increase in credit derivative deals, industrializing credit default swaps and the removal of regulatory safety checks, such as the repeal in the United States of the landmark Glass-Steagall banking controls, were a manic response to the financial crises within capitalism, he says.
He says that this behavior was also strengthened by “triumphant” feelings in the West over the collapse of Communism.
“Witnessing the collapse of Communism, those in power in the West developed the deluded idea that capitalist economies would do best if they eschew any resemblance to those Communist economies, thereby justifying unfettered financial liberalization and the destruction of the regulatory apparatuses of capitalism,” he said.
“The consequences of this manic response have been catastrophic, with the ongoing Eurozone crisis being — in many ways — a result of this.”
Source: University of Leicester
Wood, J. (2012). Worldwide Economic Collapse a Result of Shared Manic Behavior. Psych Central. Retrieved on November 26, 2015, from http://psychcentral.com/news/2012/06/10/worldwide-economic-collapse-a-result-of-shared-manic-behavior/39870.html