The Markets – Economic language is obscuring the real culprits of the crisis

We’re tip-toeing into the abyss of mounting debt, economic stagnation and eroding confidence. But instead of questioning the decisions of banks and governments, we freeze in fear: “The Market” has struck again!


In March of 2010, no planes or clouds disturbed the penetrating blue of the midday sky above Berlin. The ash cloud from the Icelandic volcano Eyjafjallajökull had thinly spread across much of Northern Europe and had prompted authorities to close the entire airspace preemptively. It was a bizarre situation: Under a cloudless sky, airlines lost millions of Euros per day, while travelers were stranded at airports for days. No ash was in sight anywhere.

In 2011, the evolving debt crisis provided the backdrop for many political debates across Europe. Here, too, enormous amounts of money were at stake while Europe trembled and lamented a danger that could not be seen by the naked eye. Nothing seemed able to stop the markets from sliding and losing confidence. Government attempts at corrective action seemed ill suited and insufficient.

The characterizing feature of the debt crisis are not the increasingly complex financial tools that are proposed by governments, analysts and investors as potential cures to the ills of mounting debt. Instead, the crisis is fueled by the distrust of “the markets” and the psychological pressures that result from it. When money is at stake, there is little room for trans-European friendship.

Yet the erratic behavior of markets and irrational fears about a Greek default don’t correspond well to our image of bankers or investors as cool, calm, and carefully calculating market actors. To the contrary: For years, they closed their eyes to mounting levels of state debt. Governments as well as banks were willfully blind to the issue until interest payments became overwhelmingly large. And when the house of cards began to collapse, Europe found itself unprepared to address the underlying problems. Last-minute rescue efforts were brokered in nightly crisis summits, elected governments fell and were replaced by technocrats, new fiscal tricks were invented to keep the Euro afloat. The Sword of Damocles hung over the Eurozone: As long as the markets remained nervous, there was no escaping.

A propos: “Markets” – what a concept! Instead of acknowledging the psychological components of economic behavior (and thus, by extension, the human element in the functioning of the global economic system), we abstract from the real world. The rhetoric of the market transfigures the individual decisions of individual bankers as the result of abstract market-forces.

Markets, a word that is intangible and oddly faceless. A word that marginalizes the role of people in the spiral of mounting debt. By drawing on the rhetoric of the market logic, we tend to forget that the current crisis was partially caused by a lack of proportionality and reason: As long as the music played, investors danced. As long as there was money to be made, they cashed in and ignored the mounting dangers they helped to create.

The volcanic eruption 2010 was rightly described as a force of nature. But it would be wrong to apply the same analogy to the debt crisis. Governments and newspapers err in framing markets as natural, uncontrollable forces. Markets have been very profitable to a small minority of financial actors – and their decisions will carry great weight in 2012 as the future of the Euro hangs in the balance.

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