By Slavoj Žižek, from First as Tragedy, Then as Farce.
"The only truly surprising thing about the 2008 financial meltdown is how easily the idea was accepted that its happening was unpredictable. Recall the demonstrations that throughout the last decade regularly accompanied meetings of the International Monetary Fund and the World Bank: the protesters’ complaints encompassed not only the usual antiglobalization motifs (the growing exploitation of Third World countries, etc.) but also how the banks were creating the illusion of growth by playing with fictional money and how this would all have to end in a crash. It was not only economists such as Paul Krugman and Joseph Stiglitz who warned of the dangers ahead and made it clear that those who promised continuous growth did not really understand what was going on under their noses. In Washington in 2000, so many people demonstrated about the danger of a financial collapse that the city had to mobilize 3,500 local policemen. What ensued was tear–gassing, clubbing, and mass arrests. The police were used to stifle the truth.
After this sustained period of willful ignorance, it is no wonder that, when the crisis did finally break out, as more than one observer put it, “No one really knew what to do.” The reason being that expectations are part of the game: how the market will react depends not only on how much people trust this or that intervention but even more on how much they think others trust them—one cannot take into account the effects of one’s own choices. Long ago, John Maynard Keynes rendered this self-referentiality nicely when he compared the stock market to a silly competition in which the participants have to pick several pretty girls from a hundred photographs, the winner being the one who chooses girls closest to the average opinion: “It is not a case of choosing those which, to the best of one’s judgment, are really the prettiest, nor even those which average opinion genuinely thinks the prettiest. We have reached the third degree where we devote our intelligences to anticipating what average opinion expects the average opinion to be.” So we must choose without the knowledge that would enable a qualified choice, or, as John Gray put it: “We are forced to live as if we were free.“
At the height of the crisis, Joseph Stiglitz wrote that, in spite of the growing consensus among economists that any bailout based on Treasury Secretary Henry Paulson’s plan would not work, “it is impossible for politicians to do nothing in such a crisis. So we may have to pray that an agreement crafted with the toxic mix of special interests, misguided economics, and right-wing ideologies that produced the crisis can somehow produce a rescue plan that works—or whose failure doesn’t do too much damage.” He is correct, since markets are effectively based on beliefs (even beliefs about other people’s beliefs), so when the media worry about “how the markets will react” to the bailout, it is a question not only about its real consequences but about the belief of the markets in the plan’s efficacy. This is why the bailout may work even if it is economically wrong-headed.
The pressure to “do something” is like the superstitious compulsion to make some gesture when we are observing a process over which we have no real influence. Are not our acts often such gestures? The old saying “Don’t just talk, do something!” is one of the stupidest things one can say, even measured by the low standards of common sense. Perhaps the problem lately has been that we have been doing too much, such as intervening in nature, destroying the environment, and so forth. Perhaps it is time to step back, think, and say the right thing. True, we often talk about something instead of doing it; but sometimes we also do things in order to avoid talking and thinking about them. Such as throwing $700 billion at a problem instead of reflecting on how it arose in the first place.
On July 15, 2008, Republican Senator Jim Bunning attacked Federal Reserve Chairman Ben Bernanke, claiming Bernanke’s proposal showed that “socialism is alive and well in America”: “Now the Fed wants to be the systemic risk regulator. But the Fed is the systemic risk. Giving the Fed more power is like giving the neighborhood kid who broke your window playing baseball in the street a bigger bat and thinking that will fix the problem.” On September 23, Bunning struck again: “Someone must take those losses. We can either let the people who made bad decisions bear the consequences of their actions, or we can spread that pain to others. And that is exactly what the secretary proposes to do—take Wall Street’s pain and spread it to the taxpayers. . . . This massive bailout is not the solution; it is financial socialism, and it is un-American.” Bunning was the first to outline publicly the reasoning behind the Republican Party’s revolt against the bailout plan, which climaxed in the House’s rejection of Paulson’s proposal on September 29.
Note how Republican resistance to the bailout project was formulated in “class warfare” terms: Wall Street versus Main Street. Why should we help those on “Wall Street” responsible for the crisis while asking ordinary mortgage-holders on “Main Street” to pay the price? Is this not a clear case of what economic theory calls “moral hazard.” If I am insured against fire, say, will I take fewer fire precautions (or, in extremis, even set fire to my fully insured but loss-generating premises)? The same goes for the big banks: are they not protected against big losses and able to keep their profits?
This unexpected overlapping of the left’s views with those of conservative Republicans should give us pause. What the two perspectives share is their contempt for the big speculators and corporate managers who profit from risky decisions but are protected from failure by “golden parachutes.” Recall the cruel joke from Ernst Lubitsch’s To Be or Not to Be: when asked about the German concentration camps in occupied Poland, the Nazi officer known as Concentration Camp Erhardt snaps back: “We do the concentrating, and the Poles do the camping.” Does the same not hold for the Enron bankruptcy scandal of November 2001, which can be interpreted as a kind of ironic commentary on the notion of the risk society? Thousands of employees who lost their jobs and savings were certainly exposed to risk, but without having had any real choice in the matter—the risk appeared to them as blind fate. On the contrary, those who did have some insight into the risks involved, as well as the power to intervene in the situation (namely, the top managers), minimized their risks by cashing in their stocks and options before the bankruptcy. We do indeed live in a society of risky choices but one in which some do the choosing while others do the risking.
Is the bailout then really a “socialist” measure? If it is, it takes a very peculiar form: a “socialist” measure whose primary aim is to help not the poor but the rich, not those who borrow but those who lend. In a supreme irony, “socializing” the banking system is acceptable when it serves to save capitalism. Socialism is bad—except when it serves to stabilize capitalism. (Note the symmetry with China today: in the same way, the Communist Party uses capitalism to enforce their “socialist” regime.)
But what if “moral hazard” is inscribed into the very structure of capitalism? That is to say, There is no way to separate the two: in the capitalist system, welfare on Main Street depends on a thriving Wall Street. So, while Republican populists who resist the bailout are doing the wrong thing for the right reasons, the proponents of the bailout are doing the right thing for the wrong reasons. The relationship is nontransitive: while what is good for Wall Street is not necessarily good for Main Street, Main Street cannot thrive if Wall Street is feeling sickly, and this asymmetry gives an a priori advantage to Wall Street.
Recall the standard “trickle-down” argument against egalitarian redistribution: instead of making the poor richer, it only makes the rich poorer. Far from being simply anti-interventionist, this attitude actually displays a very accurate grasp of economic state intervention: although we all want the poor to become richer, it is counterproductive to help them directly, since they are not the dynamic and productive element in society. The only kind of intervention needed is that which helps the rich get richer; the profits will then automatically diffuse among the poor. Today, this notion is alive in the belief that if we throw enough money at Wall Street it will eventually trickle down to Main Street, helping ordinary workers. So if you want people to have money to buy homes, do not give it directly to them but to those who will in turn lend them the cash. This is the only way to foster genuine prosperity. Otherwise, the state will just distribute funds to the needy at the expense of the real wealth–creators.
Whereas financial meltdowns are obvious reminders that the circulation of capital is not a self-sustaining closed loop—that it presupposes an absent reality where actual goods that satisfy people’s needs are produced and sold—their more subtle lesson is that there can be no return to this reality, _pace _all the rhetoric of “let us return from the virtual space of financial speculation to real people who produce and consume.” The paradox of capitalism is that you cannot throw out the dirty water of financial speculation while keeping the healthy baby of a “real” economy.
There is no such thing as a neutral market: in every particular situation, market configurations are regulated by political decisions. The true dilemma is thus not “Should the state intervene?” but “What kind of state intervention is necessary?” And this is a matter for real politics: namely, the struggle to define the basic “apolitical” coordinates of our lives. All political issues are in a way nonpartisan; they concern the question “What is our country?” So the debate about the bailout is precisely true politics, to the extent that it deals with decisions about the fundamental features of our social and economic life, and even, in the process, mobilizes the ghosts of class struggle. There is no “objective,” expert position simply waiting to be applied here; one just has to take one side or the other, politically.
There is a real possibility that the primary victim of the ongoing crisis will not be capitalism but the left itself, insofar as its inability to offer a viable global alternative was again made visible to everyone. It was the left that was effectively caught out, as if recent events were staged with a calculated risk in order to demonstrate that, even at a time of shattering crisis, there is no viable alternative to capitalism. Immanuel Kant countered the conservative motto “Don’t think, obey!” not with the injunction “Don’t obey, think!” but rather “Obey, but think!” When we are transfixed by something like the bailout, we should bear in mind that since it is actually a form of blackmail, we must resist the populist temptation to act out our anger and thus wound ourselves. Instead of such impotent acting-out, we should control our fury and transform it into an icy determination to think—to think things through in a really radical way, and to ask what kind of a society renders such blackmail possible."