The Intellectual Origins of the Global Financial Crisis

The Intellectual Origins of the Global Financial Crisis

Edited by Roger Berkowitz
Taun N. Toay
Copyright Date: 2012
Published by: Fordham University Press
Pages: 225
https://www.jstor.org/stable/j.ctt13x01sz
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  • Book Info
    The Intellectual Origins of the Global Financial Crisis
    Book Description:

    Commentary on the financial crisis has offered technical analysis, political finger pointing, and myriad economic and political solutions. But rarely do these investigations reach beyond the economic and political causes of the crisis to explore their underlying intellectual grounds. The essays in this volume delve deeper into the cultural and intellectual foundations, philosophical ideas, political traditions, and economic movements that underlie the greatest financial crisis in nearly a century. Moving beyond traditional economic and political science approaches, these essays engage thinkers from Hannah Arendt to Max Weber and Adam Smith to Michel Foucault. With Arendt as a catalyst, the authors probe the philosophical as well as the cultural origins of the great recession. Orienting the volume is Arendt's argument that past financial crises and also totalitarianism are rooted, at least in part, in the tendency for capital to expand its reach globally without regard to political and moral borders or limits. That politics is made subservient to economics names a cultural transformation that, in the spirit of Arendt, guides these essays in making sense of our present world. Including articles, interviews, and commentary from leading scholars and business executives, this volume offers views that are as diverse as they are timely. By reaching beyond "how" the crisis happened to "why" the crisis happened, the authors re-imagine the recent financial crisis and thus provide fresh thinking about how to respond.

    eISBN: 978-0-8232-5040-0
    Subjects: Economics

Table of Contents

  1. Front Matter
    (pp. i-iv)
  2. Table of Contents
    (pp. v-vi)
  3. Preface
    (pp. vii-xii)
    Roger Berkowitz and Taun N. Toay
  4. INTRODUCTION: The Burden of Our Times
    (pp. 1-14)
    ROGER BERKOWITZ

    An accomplished businessman, one deeply involved in the housing industry, wrote me when I solicited his views on the intellectual causes of the financial crisis. The cause of the crisis is really quite simple he said: Cheap money—the combination of low interest rates, lax regulation, financial innovation, and excess leverage—led to unprecedented speculation.

    From an economic point of view, the cheap money hypothesis is unassailable. But in a volume on theintellectualorigins of the financial crisis, we need to go further. For starters, we might ask: What is cheap money? money means money that can be

    Cheap...

  5. PART I. HANNAH ARENDT AND THE BURDEN OF OUR TIMES
    • ONE Can Arendt’s Discussion of Imperialism Help Us Understand the Current Financial Crisis?
      (pp. 17-24)
      TRACY B. STRONG

      In 1898, William Jennings Bryan had been protesting the imperialism of the U.S. annexation of the Philippines. Theodore Roosevelt responded in this manner: “If you were not opposed to the taking of California, you cannot be opposed to the taking of the Philippines.” This is imperialism based not so much on the acquisition of resources—though those may come too—but on the desire for universal expansion. In this the United States was already not like earlier imperialisms—it was the expansion of an idea, an expansion of a way of life, an expansion that knew no natural limits. We...

    • TWO “No Revolution Required”
      (pp. 25-38)
      JEROME KOHN

      In the moment between sleep and waking one sometimes sees, not unconsciously as in a dream but prior to the actual consciousness of thinking, images of intense clarity. After Roger Berkowitz invited me to say a few words about the relevance of Hannah Arendt’s analysis of late nineteenth-century imperialism to an economic event in the twenty-first century—which struck me as both intriguing and slightly daunting, since Arendt was wary of looking at the present through the prism of the past—I saw such an image. In it Arendt and Karl Marx were together in heaven, and she., gazing down...

    • THREE Judging the Financial Crisis
      (pp. 39-48)
      ANTONIA GRUNENBERG

      When Hannah Arendt published her book on totalitarianism in England, she gave it the titleThe Burden of Our Time. More than fifty years later, this title sounds like a metaphor for the current world crisis. A fundamental fragility of the financial system seems to be the “burden of our time.” Behind that surface, the interrelations between economy and politics as well as between politics and financial interest are at stake. Ever and ever again questions come up: How much power and control do governments have? How much influence can they exert on pro cesses that run beyond the boundaries...

  6. PART II. BUSINESS VALUES AND THE FINANCIAL CRISIS
    • FOUR Capitalism, Ethics, and the Financial Crash
      (pp. 51-60)
      DAVID CALLAHAN

      In the wake of financial crashes, most postmortems tend to focus on poorly designed economic or regulatory systems. Explanations of the great crash of 2008 have been no exception, and we are all now familiar with such causes of the meltdown as cheap money, lax government watchdogs, and shady financial engineering. Inevitably, as well, there is a fair bit of moralizing that follows periods of greed and speculation, and this time around has been no different. Wall Street figures such as Richard Fuld have been demonized, and the investment bank Goldman Sachs has been cast as something of an evil...

    • FIVE An Interview with Paul Levy
      (pp. 61-72)
      ROGER BERKOWITZ and PAUL LEVY

      ROGER BERKOWITZ: Tell us a bit about yourself and your background in business.

      PAUL LEVY: I’m Paul Levy. I run a firm in New York City that is in the leveraged buyout business, something that has been much in the press recently—it’s also called private equity. I’ve been in the business now since 1983, and I had the exciting experience of working at Drexel-Burnham from 1983 to ’88. Drexel is a much-maligned, or was a much-maligned, institution when it was alive. I think my experience there has really informed a lot of what I’ve done since then, so again...

    • SIX An Interview with Vincent Mai
      (pp. 73-82)
      ROGER BERKOWITZ and VINCENT MAI

      ROGER BERKOWITZ: When you heard from a friend that the Arendt Center was organizing this conference, you made it known you had strong opinions about the intellectual origins of the financial crisis. I appreciate your making time for this discussion. First, I’d like to start just by having you tell me a little bit about your background in business and how that affects your perspective on the financial crisis that we’ve just been going through.

      VINCENT MAI: I grew up in South Africa on a farm in the Eastern Cape, a far cry from the financial community in New York....

    • SEVEN Brazil as a Model?
      (pp. 83-88)
      ALEXANDER R. BAZELOW

      The subject of these brief remarks is the filmTwelve Hours to Midnight—How Brazil Has Responded to the Global Financial Crisis(October 2009)—a film that premiered at “The Burden of Our Times: The Intellectual Origins of the Global Financial Crisis,” the conference sponsored by the Hannah Arendt Center for Politics and the Humanities at Bard College and from which this volume emerged. The film came about after a visit to the Arendt Center by the directors, Ms. Simone Matthaei and Dr. Wolfgang Heuer, in June 2008. This visit was partly at my invitation, to speak to a group...

    • EIGHT An Interview with Raymundo Magliano Filho
      (pp. 89-92)
      CLÁUDIA PERRONE-MOISÉS and RAYMUNDO MAGLIANO FILHO

      CLÁUDIA PERRONE-MOISÉS: Can you talk a little about the importance of Hannah Arendt for your life and work? In particular, are there one or two ideas that have played a particularly important role in the evolution of your own thinking and subsequent career?

      RAYMUNDO MAGLIANO FILHO: I was introduced to the ideas of Hannah Arendt in a class I took with Professor Tércio Sampaio Ferraz of the School of Law at the University of São Paulo. It came about this way. By the time I had finished my studies I was already working in my father’s brokerage business.¹ One day,...

    • NINE Round Table: THE BURDEN OF OUR TIMES
      (pp. 93-102)
      RAYMOND BAKER, REBECCA BERLOW, JACK BLUM, ZACHARY KARABEL, THOMAS SCANLON and TAUN N. TOAY

      TOAY: Let me begin with a broad question: How “free” is the free market?

      KARABEL: Markets have never been “free” of government intervention. Markets aren’t natural phenomena. They are created by rules among their participants, and that usually entails some form of government. In the United States and Europe, “free markets” would be impossible without contract law and the willingness of government to enforce it. Although there are varying degrees of government intervention—and although some intervention can inhibit rather than facilitate the free flow of goods and capital—the notion that there are free markets entirely distinct from laws...

  7. PART III. THE CRISIS OF ECONOMICS
    • TEN The Roots of the Crisis
      (pp. 105-110)
      SANJAY G. REDDY

      The financial crisis itself has made it possible to have a new kind of conversation across the trenches of disciplines—the kind that is taking place in this volume. I do not think it would have been possible to have this sort of conversation five or ten years ago. There is a sense of shock that accompanies an unexpected event of this magnitude, and a searching for answers. This has rightly undermined previous disciplinary prerogatives and created a more welcoming atmosphere for new approaches.

      Academics in various disciplines, as well as ordinary citizens, quite legitimately want to know what exactly...

    • ELEVEN Where Keynes Went Wrong
      (pp. 111-122)
      HUNTER LEWIS

      I would like to begin with a few words for the students who were attending when I first offered these remarks.

      I will be focusing on John Maynard Keynes. He died in 1946—it might seem long ago. But he remains immensely influential. I would argue that he is the most influential person of the last century, with Winston Churchill, another Englishman, perhaps a close second.

      Virtually all world governments today may be described as Keynesian in their approach to managing economies. In particular, almost all the responses to the Crash of 2008 have come out of Keynes’s playbook. One...

    • TWELVE Managed Money, the “Great Recession,” and Beyond
      (pp. 123-132)
      DIMITRI B. PAPADIMITRIOU

      The worst economic crisis since the 1930s afflicting most developed economies began in 2007 and is still not over. Financial and economic statistics in the United States and around the globe represent a troubling state of affairs. The United States and many other nations’ expansionary aims in fiscal policy (through relaxed taxation) and monetary policy (through low interest rates) have been insufficient to restore economic health. To be sure, the emerging market economies of Brazil, Russia, India, and China (the so-called BRICs) and a few others seem to have weathered the storm much better and recovered, showing significant growth rates....

    • THIRTEEN Turning the Economy into a Casino
      (pp. 133-142)
      DAVID B. MATIAS and SOPHIA V. BURRESS

      The events of 2008 are unprecedented in the history of civilization. Never before have so many people been affected so dramatically and has so much economic wealth been destroyed in a matter of weeks, days, and even minutes. Yet today, years after these events, we still have an incomplete understanding of the causes and an even lesser understanding of the impact. The underlying currents of neglect and greed, amoral—if not immoral—bankers, and political corruption are easy targets in the aftermath of the collapse. It seems as if culpability is so widespread and runs so deep that placing blame...

  8. PART IV. THE ORIGINS OF THE FINANCIAL CRISIS FROM NATIONALISM TO NEOLIBERALISM
    • FOURTEEN Capitalism: NEITHER PROBLEM NOR SOLUTION—BUT TEMPORARY VICTIM OF THE FINANCIAL CRISIS
      (pp. 145-152)
      LIAH GREENFELD

      I want to respond to the provocative question raised by the editors with regard to the recent financial crisis: “Is capitalism the problem or the solution?” It is neither the problem nor the solution. Instead, capitalism is the temporary victim—in academic discussion, in the United States and some European countries. It is held to be responsible by those who don’t know whom to blame. If we are looking for the origin, or the solution, to the financial crisis, we should turn from capitalism to nationalism. Nationalism, not capitalism, is both the creator of the problem and the provider of...

    • FIFTEEN Retrieving Chance: NEOLIBERALISM, FINANCE CAPITALISM, AND THE ANTINOMIES OF GOVERNMENTAL REASON
      (pp. 153-166)
      ROBYN MARASCO

      Let me begin with a reference to that familiar speech from a fictional icon of American cinema, Mr. Gordon Gekko, played by Michael Douglas in Oliver Stone’s 1987 film,Wall Street. The infamous scene, no doubt screened for scores of first-year MBA students over the past two decades, features Gekko addressing a group of shareholders in the Teldar Corporation, a paper company he intends to “liberate” from its management executives—“ bureaucrats with their steak lunches, their hunting and fishing trips, their corporate jets and golden parachutes.” The shareholders, Gekko insists, are the real owners of Teldar, those with an...

    • SIXTEEN The End of Neoliberalism?
      (pp. 167-176)
      MIGUEL DE BEISTEGUI

      In this essay I want to ask several questions and examine one way of framing the discussion regarding the possible intellectual origins of the current crisis. Those questions and my attempt to frame recent economic events are all a way of asking the following: To what extent is the set of facts that led to the quasi collapse of the financial system and its rescue by governments a crisis? And, if it is a crisis, what sort of crisis is it?

      In order to answer those questions we need to know what counts as a crisis. My first question, then,...

    • SEVENTEEN Short-Term Thinking
      (pp. 177-190)
      OLIVIA CUSTER

      I would like to start by considering a couple of the accounts of the origin of the financial crisis that have been offered to us in the public sphere. First, let us listen to Alan Greenspan testifying to Congress in October 2008:

      We are in the midst of a once-in-a century credit tsunami…. Those of us who have looked to the self-interest of lending institutions to protect shareholder’s equity (myself especially) are in a state of shocked disbelief. Such counterparty surveillance is a central pillar of our financial markets’ state of shocked disbelief. Such counterparty surveillance is a central pillar...

    • EIGHTEEN Can There Be a People’s Commons? THE SIGNIFICANCE OF ROSA LUXEMBURG’S ACCUMULATION OF CAPITAL
      (pp. 191-198)
      DRUCILLA CORNELL

      InThe Origins of Totalitarianism, Hannah Arendt argues that imperialism, as it arose in the late nineteenth century, had its immediate economic origin in the depression of the 1860s and 1870s. As the economic motor of production and accumulation slowed down in Europe, the imperialists realized that the “motor of accumulation” had to be kept in motion. If that accumulation could not come from inside the nation, it had to be sought elsewhere, which led to the imperialist search for new countries with new markets to be opened to capitalist supply and demand. To keep the process of accumulation going,...

    • NINETEEN An Economic Epilogue
      (pp. 199-204)
      TAUN N. TOAY

      For many, the Great Recession was characterized by a series of acronyms, marked by intentionally opaque jargon: ABSs—asset-backed securities; CDOs—collateralized debt obligations; and the now infamous CDSs—credit default swaps. Even for industry insiders, these structured products were “innovations” in finance. A more efficient means of risk sharing had been born, or so it was argued, and further testament to the superiority ofAmerican(read “jungle”) capitalism.

      Although the buildup to the recession characterized structured products (a euphemistic catchall term for the aforementioned acronyms) as a means to facilitate efficiency, the crash painted such products in a far...

  9. Notes
    (pp. 205-212)
  10. List of Contributors
    (pp. 213-214)
  11. Index
    (pp. 215-220)