The Intellectual Origins of the Global Financial Crisis

By Roger Berkowitz; Taun N. Toay | Go to book overview

Preface

As world markets crumbled in the fall of 2008, I was teaching a seminar on Hannah Arendt’s book The Origins of Totalitarianism. The second main section of Arendt’s exploration of twentieth-century totalitarianism is called “Imperialism.” In it, Arendt shows how the imperialist insistence that political power expands infinitely is one of the root causes of totalitarian governance. Arendt describes imperialism as the importing of the economic principle of unlimited growth into the realm of politics. She argues, convincingly, that while growth may be an important principle of economics, politics demands limits. A state requires borders, and a citizenry depends on a sense of themselves as sharing a common sense of right and wrong. In short, politics requires judgment and limitation, both of which are overwhelmed by the economic and imperialist imperatives for infinite expansion.

Arendt’s insight into the political implications of the subordination of political to economic thinking struck me as deeply relevant to the emerging financial crisis. Although the financial crisis has many economic, political, and psychological causes, it is, in important ways that Arendt makes visible, a result of a crisis in political judgment. In our globalized world, political limits fall prey to economic rationality. Tax havens and rent seeking allow global corporations to evade national regulation; nations are set into competition for business; a growing economy becomes the foundation of national security; and the free market—the absence of government—is seen as the epitome of good governance. In the frenzy for growth and the confidence in the invisible hand, governmental institutions around the world ceded their authority to regulate, set limits, and to govern. In Arendtian terms, the financial crisis emerged from our elevation of the economic rationality of infinite growth over the necessarily limited practice of political judgment.

Arendt’s book made cogent the fact that the financial crisis shared with totalitarianism a rootedness in the elevation of economic over political modes of governance. The rise of economic thinking is central to

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