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22 October 2010
The bankers who brought the global economy to its knees two years ago may have enjoyed the sensation, according to a Lecturer at the School of English, Communication and Philosophy.
In an article published in Angelaki: Journal of the Theoretical Humanities, Dr Paul Crosthwaite claims that the willingness of banks to deal in "sub-prime" loans and related derivatives can only be understood if the bankers unconsciously desired the destruction of their own institutions.
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Dr Crosthwaite: Blood on the trading floor
The article, Blood on the Trading Floor: Waste, Sacrifice, and Death in Financial Crises, coincides with the second anniversary of the emergency moves to nationalize stricken banks in the UK, US, and Europe. Dr Crosthwaite argues that financial crises, such as the "Black Monday" crash of 19 October 1987, the bursting of the "dot-com" bubble in the spring of 2000, and the credit crunch, are expressions of the innate urge for self-destruction that Sigmund Freud termed the "death drive."
Dr Crosthwaite, a Lecturer in Literature and Critical and Cultural Theory, draws on anthropological studies of investor behaviour and an analysis of novels by and about financial professionals. He points to evidence that there is an element of masochistic satisfaction in the experience of running up losses, and that a full-blown crash is a source of euphoria as much as despair.
Dr Crosthwaite’s research challenges conventional economic thinking, which assumes that investors are wholly rational, and always pursue the course of action most likely to increase their own wealth. This assumption has underpinned the free-market, light-regulation economic policies favoured by British and American governments since the early 1980s.
Dr Crosthwaite said: "Economists and financial policymakers must recognize that investor psychology is far more complex than their models have allowed up to now. They need to take much greater account of psychological factors such as emotion and desire, which affect how market actors behave in profound ways.
"To avoid a repeat of the ‘great recession,’ it’s vital that policymakers and regulators limit the capacity of financial professionals to engage in excessive practices by curbing the disproportionate levels of risk that we’ve seen in the financial sector in recent years," Dr Crosthwaite said.
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