Omnipotence, retreat from reality and finance: psychoanalytic reflections on the 2008 financial crisis

Abstract

AbstractA crisis of vast proportions struck the global financial sector in 2008 and as the world watched in disbelief venerable financial institutions, thought to be “too big to fail,” collapsed and governments struggled to salvage what they could, individuals, the media and public authorities asked why it happened. As the crisis unfolded and its seriousness became undeniable disbelief turned into anger and need to find and punish the culprits. Public opprobrium fell on governments, regulatory authorities but first and foremost on bankers. Collective responsibility did not seem to enter public awareness.This paper argues that an important psychological factor underpinning the crisis was the collective need to escape the reality of an increasingly complex and vulnerable global world and find an illusory refuge in the ownership of money and property. On the trail of a favorable economic cycle, financial operators, regulatory authorities and the public colluded in the illusion, which eventually developed into something akin to a psychic retreat, that financial markets would provide effortless and everlasting wealth and home ownership to an increasing number of people. The paper considers how omnipotence, illusion and the absence of the father/authority figure as the psychic representative of reality fostered a manic wave of rampant optimism, greed and overconfident investors. The crisis happened when reality eventually shattered the illusion, the ensuing chasm revealing the world in all its vulnerability. Copyright © 2010 John Wiley & Sons, Ltd.