Is a Financial Crisis a Trauma?

The term "traumatic" has no other sense than an economic one.

Sigmund Freud, Introductory Lectures on Psychoanalysis

Is a financial crisis a trauma? More hangs on this question than might at first appear, for if, as I hope to demonstrate, the answer is yes, then profound implications follow for issues of major importance in critical thought, including the power of symbolic systems to shape experience and material conditions, the challenge of representing disastrous events, and the status of the much-vaunted "return of the Real." To acknowledge a financial crisis as being a trauma, in the particular sense I articulate in this essay, is to overturn conventional assumptions about the relationship between the material and the immaterial in social life.

It is common, of course, for media commentators to refer to financial crises—from the Great Crash of 1929 to the Black Monday crash of 1987 to the "credit crunch" of recent years—as traumas. Academic experts in individual and collective trauma—psychologists, psychoanalysts, social scientists, historians—also frequently analyze financial upheavals in these terms. In National Trauma and Collective Memory (1998), for example, the sociologist Arthur G. Neal observes that "the initial jolt to the economic system [that] came with the stock market crash of October 24, 1929" meant that "the initial trauma of the Great Depression fell disproportionately upon the more privileged members of society who had overextended themselves in the financial markets" (42). Writing in 2009, the psychoanalyst Robert D. Stolorow, author of Trauma and Human Existence (2007), defines "our current economic crisis" as a "collective trauma" (par. 1). Researchers have also assembled empirical evidence to the effect that deaths from illnesses known to be more prevalent among individuals exposed to traumatic stress rise in societies undergoing systemic financial crises (see James, 137). Fatal cases of heart disease and cancer, for example, increased markedly in New York City (where investors in the stock market were disproportionately located) between 1929 and 1932. As Harold James comments, "It is clear that the financial panic was accompanied by a rise in physiological stress, which was a reaction to the sense that the future consisted literally and psychically of loss and renunciation" (137-38). In a survey gauging reactions to the 1987 Black Monday crash, symptoms associated with traumatic stress, such as difficulty concentrating, sweaty palms, tightness in the chest, and rapid pulse, were reported by over 20 percent of the individual investors who responded and by more than 40 percent of the institutional investors (Shiller, 11).

These studies invite further investigation into the distribution across different professions, classes, genders, ethnicities, and regions of the traumatic symptoms identified, and they prompt comparison between the prevalence and severity of these symptoms and those generated by other forms of social dislocation. They raise questions, too, over whether the traumatic effects of specifically financial crises can be distinguished from those stemming from the wider economic problems (bankruptcy, unemployment, foreclosure, etc.) that often follow stock market crashes and bank insolvencies. Important as they are, these secondary issues, however, assert themselves so readily only if the question with which I began is interpreted as asking something like, "are the effects of financial crises consistent with prevailing clinical diagnostic and social scientific definitions of trauma?" Other, more formal and philosophical issues come to the fore if, instead, it is understood that the question at stake is whether a financial crisis constitutes a trauma in the distinct and precise sense theorized by Jacques Lacan: an encounter with the Real.¹

Lacan offers this theorization in The Four Fundamental Concepts of Psychoanalysis, his seminar of 1964. There, he introduces the concept of the tuché, which he borrows from Aristotle on accidental causality and "translates" as "the encounter with the real" (1981, 53, emphasis in original). In psychoanalysis, Lacan explains, "the function of the tuché, of the real as encounter," finds its privileged form in "the trauma" (55). Because, for Lacan, the Real is fundamentally incompatible with, and therefore cannot be punctually assimilated to, the symbolic codes that structure subjectivity, the traumatic encounter is "essentially the missed encounter" (55); yet the effects of this encounter...