The 2008 global meltdown revealed the inability of experts to foresee such a situation and act on it. A new study has warned that the situation could well happen again

Professor Mark Stein, the award-winning academic from the University Of Leicester School Of Management, in his award-winning paper-A culture of mania: A psychoanalytic view of the incubation of the 2008 credit crisis-had argued that that the financial world was suffering from collective mania in the two decades running up to the event. The paper was published in the Sage journal Organization.

"Unless the manic nature of the response in the run up to 2008 is recognised, the same economic disaster could happen again," warns Professor Stein, who yesterday was awarded the iLab prize for innovative scholarship.

He adds that, "Observing-but not heeding-the warning signs from the collapse of the Japanese economy in 1991 and the 1998 crisis in south-east Asia, the financial world in the West went into an over-drive of denial, escalating its risky and dangerous lending and insurance practices in a manic response."

Professor Stein defines the manic culture in terms of the four characteristics-denial, omnipotence, triumphalism and over-activity. "A series of major ruptures in capitalist economies were observed and noted by those in positions of economic and political leadership in Western societies. These ruptures caused considerable anxiety among these leaders, but rather than heeding the lessons, they responded by manic, omnipotent and triumphant attempts to prove the superiority of their economies."

He explains that increase in credit derivative deals, industrializing credit default swaps and the removal of regulatory safety checks, such as the repeal in the United States of the landmark Glass-Steagall banking controls were a manic response to the financial crises within capitalism.

According to Professor Stein, this behaviour was also strengthened by 'triumphant' feelings in the West over the collapse of communism. "Witnessing the collapse of communism, those in power in the West developed the deluded idea that capitalist economies would do best if they eschew any resemblance to those communist economies, thereby justifying unfettered financial liberalization and the destruction of the regulatory apparatuses of capitalism. The consequences of this manic response have been catastrophic, with the on-going Eurozone crisis being-in many ways-a result of this."

He adds, "Whether one examines the actions of banks and hedge funds, or the limitations of ratings agencies, auditors, regulators and governments, a more worrying and deeper question emerges concerning why so many parties, more or less simultaneously, were implicated in such unprecedented and extreme risk-taking."