This article first appeared as a guest blog on Dr Alf’s Blog.
Moral Defects in the Financial Machine
The movement against war is sound. I pray for its success. But I cannot help the gnawing fear that the movement will fail if it does not touch the root of all evil – human greed.
The story of the Financial Crisis is not simply a tale of the misdeeds of a few greedy bankers.
It is the story of how, for forty years, neoliberalism provided psychopaths and people with narcissistic disorders with the smokescreen they needed to rise to positions of influence in global financial organisations, to loot those financial institutions with the support of governments, and ultimately to bankrupt the Western financial system.
Neoliberalism as Ideology
History has many examples in which ideology has played a crucial role in helping pathological groups rise to power. To be effective for this purpose, an ideology must resonate powerfully both with the mass of psychologically normal people as well as with the personality-disordered minority. Neoliberalism was such an ideology. Its messages of individual freedom and economic growth resonated both with pathological elites, and with many ordinary citizens around the world.
It presented all governments –including democratic governments – as a threat to individual liberty.
It promised that the triumph of free markets over governments would strengthen freedom and democracy.
It insisted that the triumph of markets over governments was inevitable and that there was no alternative.
It claimed that neoliberal economies were self-regulating and were best left untouched, and
It claimed that the alchemy of neoliberalism would transform greed into gold for all.
Like all powerful ideologies, neoliberalism was based on partial truths. It resonated with ordinary people because it promised prosperity, democracy and freedom. It resonated with working people’s dreams of becoming rich and escaping economic hardship. It also resonated powerfully, however, with those with dangerous personality disorders for whom greed and exploitation are the core of their nature.
Snakes in Suits
According to Robert Hare, psychopaths make up around 1 per cent of the population. This proportion is such that most of us will come across at least one psychopath during a typical day. Those with narcissistic personality disorders make up a similar percentage of the general population. Although always present, the influence of this minority waxes and wanes as the environment encourages or deters their emergence. The amoral culture cultivated within the global financial system actively encouraged their emergence.
Psychopaths and narcissists exhibit tremendous energy and push extremely hard to get what they want. They are profoundly competitive, are adept at self-promotion and have a talent for seeking the limelight. They thrive on their confident, aggressive delivery style which more than makes up for their lack of substance. Financial institutions found these confident, assertive personalities extremely attractive. One study of 200 high-potential executives found that 3.5 per cent fitted the profile of the psychopath – three and a half times higher than in the general population. All of the individuals identified in the study had traits of the manipulative psychopath: grandiose, deceitful, irresponsible, lacking remorse and devoid of empathy.
Cultures of Deceit
In the absence of psychological testing, it is impossible to say that any particular individual suffers from psychopathy or narcissistic personality disorder. It is possible however to say that a culture is pathological, and the evidence shows that a critical number of psychopathic personalities were at work in shaping that culture. In ECONned Yves Smith summarised the environment that evolved within financial institutions as one characterised by weak or absent regulation; where supervision is inherently difficult because high levels of responsibility are devolved to even relatively junior employees; where huge incentives fuel a highly aggressive competition for promotion; and where hiring and pay practices incentivise short-term focus, rule-bending and aggression.
The pathological culture in financial institutions has been graphically described by many former employees. Former Morgan Stanley employee Frank Portnoy relates how the aggressive environment he worked in made him ‘crave the sensation of ripping someone’s face off’. He recounts one colleague as saying, ‘You have to be a criminal to be good at this business.’ Former Goldman Sachs director Nomi Prins has admitted, ‘To retain supremacy, banks had to prey upon their existing and emerging corporate clients…’ And former CEO of Morgan Stanley John Mack was known for his mantra, ‘There’s blood in the water, let’s go kill someone.’ One employee of derivatives trading firm Bankers Trust was caught on tape saying that the firm’s objective was ‘to lure people into the calm and then just totally fuck ’em.‘ This aggressive, predatory, greed-without-consequences culture was the perfect environment for pathological individuals to thrive.
Little Has Changed
The crisis has changed little. Following bailouts costing billions of taxpayers’ money, there is little evidence that the predator culture in the financial industry has altered. In 2010 New York Judge Jack B. Weinstein declared during a trial involving financial fraud that the evidence presented ‘laid bare the pernicious and pervasive culture of corruption in the financial services industry… Supervision is seriously negligent; greed and short-term gain are so enormous that fraud and arrogant disregard of others’ rights and of ethics almost encourage criminal activities…’ In 2012 Goldman Sachs executive director Greg Smith resigned publicly in a letter to the New York Times stating that the environment in the firm was as toxic and as destructive as he had ever seen it. He described a culture in which management encouraged employees to rip off the firm’s clients, who they regularly referred to as ‘muppets’. ‘Today, if you make enough money for the firm (and are not currently an axe murderer),’ Smith wrote, ‘you will be promoted into a position of influence.’
Economist David Harvey has written that a new global economic order is urgently required, based on a nobler concept of freedom and a worthier system of governance than those that currently underpin financial capitalism. The development of a fair and ethical global economic system, capable of addressing the needs of the majority of humanity, will clearly not emerge, however, as long as narcissists and psychopaths continue to write the rules.
 Manfred Steger, ‘Globalisation and Ideology’ in The Blackwell Companion to Globalisation, 2007
 Paul Babiak and Robert D. Hare, Snakes in Suits: When psychopaths go to work, Harper, 2007:193
 Yves Smith, Econned: How unenlightened self-interest undermined democracy and corrupted capitalism, Palgrave Macmillan, 2010:171
 Quoted in Yves Smith, Econned: How unenlightened self-interest undermined democracy and corrupted capitalism, Palgrave Macmillan, 2010:135
 Quoted in Paul Mason, Meltdown: The end of the age of greed, Verso, 2009:4
 Greg Smith, Why I am leaving Goldman Sachs, New York Times, 14 March 2012
 David Harvey, A Brief History of Neoliberalism, Oxford University Press, 2011:206