The Political Bubble

The financial and economic crisis has made the term “financial bubble” a household word, but bubbles have always existed since investment in assets began. The sheer volume of financial transactions has enormously increased their impact and notoriety in recent years 

 

The formation of bubbles is linked to the emotional as opposed to the rational component of human behavior, and occurs when there are self-fulfilling expectations about rising prices of assets. Investors find it attractive to jump into the buying game of homes, stocks, bonds and thus further contribute to asset inflation. A self-feeding euphoric process comes into being, deluding almost everybody into believing that asset prices will rise for ever. So the financial market starts behaving independently from the real world. In fact, it is living under a bubble, and a ballooning one at that. Until some market player starts selling and inverts the trend, throwing the majority into fear and disarray, and thus bursting the bubble. In the selling game, almost everybody loses.

 

However, for their very emotional nature, the bubble phenomenon can be extended to all those sectors where people are guided more by emotional factors than rational ones: see, for instance, the success of marketing campaigns that promote consumerism by appealing to emotions. The consumption of goods and services is less and less dictated by rational needs, and more and more by the emotions it engenders. This emotional mode of purchasing, consciously promoted by an advertising industry that peddles illusory models of well-being, makes people feel good, because it provides a distorted image of themselves that suppresses any unpleasant associations.

 

This mode of communication has also successfully colonized political communication, whether arising out of parties or governments; politicians have learned to appeal to the desires of voters, rather than proposing policies which they believe are right for the common good. So voters end up choosing candidates that tell them what they want to hear, but not necessarily the truth, which might be painful and thus best avoided. This way, akin to financial bubbles, political support grows and grows based on illusory, unrealistic expectations, in a self-feeding process.

 

As in financial bubbles, however, the risk is always there that the gap between promises and reality widens to the point a political bubble is created, separating those who govern from those governed. Beyond a certain threshold, reality drowns empty promises and people are forced to scale down their expectations and politicians their promises. Already Tocqueville noted the danger of a kind of political power able to penetrate inside the minds of individuals to direct their actions, orienting their choice and weakening their will.

 

The risk of such events in a historical phase like our marked by great uncertainty and confusion should make people refrain from grandstanding or excessive behavior, in order to promote constructive dialogue and discussion. This crisis has economic causes, but finds its origins in deeper reasons, namely the growing acceptance of selfish individualism and escalating inequality. Thus more shared, collaborative behavior is to be encourage in order to foster the search for a common good that is not only named, but also attained.