Nostalgia for Quiet Passions

The economic crisis has revealed a unique change of emotions in contemporary capitalism. The function that liberalism assigned to passions and interest has been modified. Seventeenth century capitalism saw greed as a useful passion that could provide the strength both to maintain the will to win and to limit the self-destructive passions. Economic self-interest would be a hybrid of passion and reason, a mediator between greed and calculability. The idea of turning private vices into public virtues, as expressed in Mandeville's Fable of the Bees, is based on this economic usage of passions. Greed would become socially useful because it maintains the will to win over and above the comfortable satisfaction of material needs. When greed is linked to economic self-interest and its potential to excite is limited, it finally becomes what David Hume called a "quiet passion" with a clear economic and social use.

                So then, do things really work like that in the current finance-fixated economy? Is it maintained by the drive of quiet passions that become generally useful or by a greed that is not so much the property of individuals but part of the dynamics of the systems? Greed is a driving force of the economy, but we also know that it can be an unlimited desire whose pleasure is to be found not so much in the gratification as in the expectation. What we are seeing is that in the present-day finance markets, greed is less and less able to carry out that useful function that it was assigned by classical liberalism and which has set expectations sky-high, turning them into the real driving force of the economy. Why is this?

                Financial markets have allowed the expectation of greater and riskier profits to be continually stimulated. The greater the willingness to run risks, the greater the possible profits and the less sense of responsibility there is. This is true basically for deals that take place in the financial arena, but it also occurs in the investment departments of banks, which want to take on the same risks and obtain the same profits. The banks can hardly set systemic limits within the financial markets in such a way that they do not limit the increase in profits of speculative investments.

                Inasmuch as banks operate in the business of credit, in the financing of companies or in the administration of private holdings, what we have are economic activities which, in their objective dimension, are connected with economic activities with aims and objectives; in their timescale they extend over long periods and do not depend on events or decisions; in their social dimension, such economic activities are linked with long-lasting social relationships, which in turn are the basis of stability and confidence.

                However, everything is very different when the main business of the banks consists of speculating in the financial markets. In this case there is no investment, but only bets which are not identified with the objects of the gamble and are nothing more than self-reference. The speculator does not try to avoid those moments of uncertainty which any investor with his own capital attempts to exclude as far as possible. And he does not do it because those moments of uncertainty are precisely what he wants to take advantage of with his economic gambles; he sees them as the kind of excitement he would like to experience again and again.

                The temporal dimensions of the financial markets contribute to the continual emotional turbulence that results from the rapid sequence of expectation and disappointment, euphoria and depression, greed and fear. The extremely short time-line during which brokers and investment managers act, excites the expectation of greater profits in shorter and shorter periods of time.

                The rhythms of the financial markets, with extremely short cadences, lead to a widespread mistrust in the ability to control the future, the excessive exploitation of the present, the economisation of the smallest units of time and, finally, ruinous competition around the "last minute", which gives the decisive advantage to those who compete for the greatest profits. The greed of the investment banks is not a quality that is derived from people but rather a structural principle of their behaviour. Greed necessarily accompanies a type of competition in which the criterion of always taking advantage of the opportunity of even better results rules. In this way, a few months before the crisis broke, we were in a situation similar to that of a race with cars heading full-speed towards a wall, in which the winner is the one who brakes last. Since no one is prepared to put their brakes on because the next car  will brake a little later, they eventually all smash into the wall. The risk of harmful passions is clear in this collective onward rush, which is both imitative and stupid.

                In the financial crisis of 2008, the belief that risks could be calculated, insured and sold on to others incited dealers to take on even more risks. At the same time, various bodies contributed to creating the illusion that things were under control: the mathematics of finance considered that risks were calculable and the dominating economic science stated, via the "theory of effective markets", that it was able to demonstrate the complete rationality of price setting in the financial markets. The alleged protection against risks that these bodies and mechanisms promised institutionalised in the financial markets the potential of gaining even more, which is common in all kinds of greed.

                Certain procedures have been set up over  financial markets and within banks, which act in exactly the opposite way to that of the neutralisation of harmful passions, as sought by classical liberalism. If the calculation of economic interests turns out to be an illusion, then there can be no mediation between passion and reason in financial markets. Greed cannot become a quiet passion until the potential for the excitement of fancy finance by investment banks and derivative products, until the profession of banker is once again - as Paul Krugman recommended - a boring matter. Capitalism cannot renounce its ambition to earn more, which is as old as money itself, but we should be able to reduce the gratification which greed is awarded in the financial markets of this emotional capitalism. The function of what we call global financial governance would have to be a kind of return to the quiet emotions, to those that are missed in the current financial whirlwind of destructive passions.