May 6, 2026

Collapse Finance, Part 4: Psychic Life of Collapse

Jamieson Webster

Till Wittwer, Trump Plaza Atlantic City Demolition, 20 Seconds in, 2021/2025.

Continued from Parts 1, 2, and 3

Looking at this series of articles on our new financial realities, I began to hear echoes of a categorical collapse in psychoanalytic thinking, traceable to the fragility of our diagnostic system. Diagnosis is a science born of new social-economic realities, war, and systems of categorization developed somewhere between burgeoning ideas of public health, the management of death, and fantasies of prediction that were seen as ameliorating uncertainty. The closeness between something like catastrophe bonds, the undoing of stable pensions in favor of an individual’s taste for risky investments, founder mentality betting on immortality, and the destabilizing and self-destructive telos of capitalism more generally, mirror the contradictory attempt to shore up and make good our psychic life and yet bet against us by pointing to more and more problems with no solutions and with no markers of social responsibility.

Psychiatric “difficulty” is increasingly a problem for the individual alone. This system is based on the unfulfilled promise of biological-genetic certainty, whose cure is left to pharmacological developments or the carceral system. One could certainly diagnose “diagnosis” as governing through collapse, with its own contradictory narratives about the future that it controls and monetizes. But more important than debunking contemporary psychiatric categories and labels is understanding what this is a symptom of. Here we are following Aris Komporozos-Athanasiou’s opening gambit: “The present moment is defined by escalating crises that have begun to overwhelm even the systems designed to contain them.” Following the thread of epistemological collapse across financial and diagnostic categories is a way of putting “capitalism on the couch.” The interrogation of this flattening of categories amidst increasing inconsistency presents a picture of a world in crisis that is taken to be inevitable rather than manufactured—which is the case with most psychic breakdowns.

Freud had six diagnostic categories: hysteria, obsession, phobia or anxiety neurosis, melancholia-mania, paranoia, and schizophrenia. Some argue that neurasthenia (often thought of as burnout and generalized malaise) should be added to the list, while others include neurasthenia within anxiety neurosis. These Freudian diagnoses are not discreet entities or disorders but rather structures that were universal, where one could take precedence over others—what Freud sometimes called the “choice of neurosis.” This means that these structures are present in every individual and there is mobility between them. However, as structures, Freud sharply divided them between two shores that he called neurosis and psychosis, or transference neuroses (capable of forming a tie to an object) and narcissistic neuroses (the self is the only object). One was curable, the other only stabilizable. One was in touch with at least some portion of reality despite forces of defense and denial, while the other had mostly lost touch with reality, and defense systems were somewhat absolute.

The dividing line between neurosis and psychosis was placed at the helm of anxiety neurosis, which acted as a tipping point. Neurosis was the result of being part of civilization, which must repress some portion of our psychic life and relieve of us of anxiety. Neurosis was fed back into civilization while psychosis beckoned to those who fell outside its confines and structures—and there was much to learn from psychosis about what a society can’t contain. Anxiety, interestingly, was a category that Freud spoke about as a sign of collapse in civilization: anxiety was what civilization, and its structures and institutions were meant to contain. Excess and prolonged anxiety would lead to physical degeneration and worsening psychological difficulties. This would eventually lead to psychotic breakdowns and ultimately war.

Over the last half century, a large swath of psychoanalysts have begun bemoaning Freud’s strict division between neurosis and psychosis. In the period following the sexual revolution, psychoanalysts lamented that the old categories no longer made any sense—structures appeared to be collapsing. More and more, patients were declared to be subtly psychotic, unstructured by the repressive forces of language and other systems of representation, the apprehension of reality, and the construction of fantasy in the typical neurotic ways. Patients were becoming unknotted and unhinged and generally unstable and unstabilizable.

Enter the varieties of depression, attention disorders, and bipolar I, II, and III as the diseases of emotional regulation and clinging to fantasies of omnipotent control. There were also the proliferation of personality disorders, like borderline and narcissistic disorders, as either sociopathic deformations of character (that are common) or conditions affecting people who seem normal but have severe pockets of psychotic un-integration. This is to say nothing of the new spectrum of diagnoses that encompass autism and neurodivergence, which claim a new kind of asociality and refuse language for interpersonal communication. What is going on? If we aren’t refining our scientific instrument through this creation of lists—especially since these diagnoses remains largely speculative and descriptive—how can we understand the breakdown of our classic categories?

Freud’s system is ultimately about what can and cannot be contained by civilization. His diagnostic categories were markers of these effects as sedimented throughout history. Moreover, his categories spoke to the construction of human civilization: Freud famously aligned hysteria with the arts, obsession with education and religion, phobia with founding myths and their breakdown, paranoia with the law, and psychosis more generally with science. Were these old categories as stable as they were made out to be? Was this a myth, and perhaps a productive one, or one about a more productive society, meaning productive of sociality? Has the explosion of these older categories prophesied something of our current social crisis?

Around the 1920s, following World War I—and only twenty-five years after the birth of this new science—Freud started to complain that interpretations weren’t working. Something had already become expected and easily defended against, while negative forms of enjoyment had reared their head and required deeper methods of working through. But Freud never changed his diagnostic perspective, only his technical methods. He realized that the kind of care or cure psychoanalysis offered took time; and furthermore, that it needed to be offered to patients more widely, as he notes in his paper “Lines of Advance in Psychoanalytic Therapy” (1918), where he says our work must be adapted to the poor, perhaps even subsidized by society. His last works were more sociological in focus, from Civilization and Its Discontents (1930) to Why War? (1933) and Moses and Monotheism (1939).

Freud’s final clinical paper was “The Splitting of the Ego in the Processes of Defense” (1938). In it, he states with more force than ever that the ego could take two completely contradictory positions at the same time, pointing to a splitting of a subject that went further than he expected. It wasn’t about pockets of repression, but a split that increased anxiety, requiring greater and greater defenses against it. Everyone was potentially hypocritical, subject to processes of doing and undoing, knowing and not knowing—especially not knowing about the reality of death. Some part of us could always move to the side of omnipotent delusion. Rather than taking this to mean that we are all “crazier” than we thought, I think we need to hear this as Freud positing a fundamental problem that society was responsible for ameliorating and buttressing against. This requires care, education, structured social relations, and systems that do not exacerbate splitting. 

Recently, I read an article that investigated a subreddit thread asking if anyone had lost their partner to ChatGPT. People spoke of partners that had become psychotic speaking with the AI technology, which reinforced a delusion that they were discovering the secrets of the universe. Some believed that they had encountered a sentient version of AI and were transcending reality. As we know, a mother is currently suing Open AI for causing the suicide of her sixteen-year-old son after he fell in love with his chatbot. ChatGPT realized that these delusions started to take place when a code was created to make the AI more sycophantic and thus relatable, but whose unintended effect was to pull some people into a delusional orbit. I don’t think it’s a stretch to say that the AI and the internet more broadly split our world in two (actual and virtual) and thus easily prey on our capacity for splitting.

We are, and always have been, a fragile and destructive species. Freud had hope that civilization would structure and thus contain more and more diversity in concordance with the diversity that is nature. But he also said that he didn’t know if the darker forces would gain the upper hand. Only time could tell. We should never underestimate the destructiveness of our species. The glimmer of hope I hear in these short essays circles around the idea that something has been unveiled. We cannot deny, even as our systems do, the brute forces of splitting that are driving us, as Melinda Cooper says, to the brink of collapse. While we try to absorb this collapse into our already contradictory systems, we might begin to better note our collective needs—more consciously, more realistically, and with greater care, for our earth and for one another.