Many people had their say on the Wall Street fraud (it would be indulgent to merely call it a crisis or crash, when a bank is mis-selling mortgages which it knows are trash and will fail, but is also insuring itself against such failure). This documentary says a lot, very clearly and comprehensively (see for example the New York Times review). So what is there to add 5 months after the film’s debut and 29 months after the collapse? And what is there to say from a country not included in the critique to the extent it might justifiably have been by virtue of its considerable financial muscle and its own spectacular bank failures?
Sometimes the most pivotal or revealing aspects take time to see. Fiction can often communicate more freely and effectively than fact, unfettered by detail and reservation. But fact is stranger than fiction, and for an issue that needs to be nailed, facts are ultimately more convincing. In the audience with which I saw this film, the gasps at the enormity of the revelations and the derision of the outrageous posturing by the interviewed apologists for the fraud far outstripped any I have ever heard occurring in response to movie car-crashes or virtual tsunamis.
I went to the film knowing pretty much that it would be an expose of greed and the folly of deregulation and Wall Street, but was not prepared for how deep and substantiated a critique it would be of the conspiracy to subvert and to corrupt academia and Washington (both all too corruptible, it seems); or for the scandal of how little has changed and how few have been held to account. Shameful though I feel to admit this, the City of London and the last Government of the UK should have received more of a broadside than they did, for failings entirely parallel to those in the U.S. and in the colorful little hot spot of Iceland.
The closing moments of the film show a fly-by shot of the Statue of Liberty and succinctly and unsentimentally pose the question of values that our societies represent, and project the hope that some of those values can be re-found and promoted. As I write we see protests from millions in the Arab world wishing to cast off oppressive and inefficient governments. What can we offer Arab countries that is better than what they have had? Let us cling to what we can; we still have good models for Citizens’ Advice Bureaux (remain vigilant, there!), and we are not being tortured for exercising the right of free speech. Ferguson was allowed to make, and to a limited extent to distribute this film, although, as with Al Gore’s An Inconvenient Truth, the people who really need to see it probably will not.
As is well known from economic history, one main cause of the French Revolution was the inefficiency of concentration of great wealth in the hands of a very small aristocracy arbitrarily selected not by merit but by accident of birth, coupled with the restriction of economic spin-off to a few producers of luxury goods and vice supplying them. The sharp steepening of the socioeconomic gradients of income and capital in western countries in the last 30 years is efficient only in the eyes of the top few percent who define efficiency in terms of their own growth of capital income.
Of course there are problems with excessively flat income distributions, with excessively large public sectors and with perverse incentives in welfare programmes but these are mostly departed extremes of a fairly remote past. Our populations have been sold an opiate of the people, about deregulated markets as the efficient alternative. If the people who commandeer such a high proportion of national wealth are smart (and many are quite smart), then it is not impossible that their efforts may be on driver of efficiency. But we rightly call fraud a crime and, pointing at mafia-ridden societies we say, rightly, that crime is not efficient. It is an arbitrary qualification for the aristocracy.
Enough people in the finance industry were smart that their defense (no-one saw the crisis coming) does not stand up. The bankers threatened the regulators with the spectre of a crisis if they were regulated, so when it inevitably came, it was bigger than the blip it might have been. There was enough quantitative obfuscation (by academics whom we can now see as possibly corrupt), that a few in the finance industry and many ordinary politicians might honestly claim they really thought that complex derivatives could spread risk, although these people will now look a little foolish. Spreading is not the same as reducing risk. A good deal has at least two parties to it for whom it is advantageous and even efficient to do business by making the deal. We see in the many foreclosures and in the unemployment statistics just how widely the risk was spread.
The questions raised by Inside Job roll on, and many of them are much more profound than technical issues about complex derivatives:
Who competent and non-corrupt can be recruited to do government finance and regulation jobs? And will taxpayers foot the small bill to have enough of them to avoid the stock- and mortgage-holder and taxpayer from being defrauded again? Will Europe succeed in implementing some form of appropriate regulation and will the lower risk lead to an inflow of funds and financial business? Will Harvard and Columbia take any steps to regain academic credibility or just bluff it out? Has the self-seeking fashion-obsessed society produced an inability to say or to hear that the Emperor has no clothes? Is there any way to reverse the social pathology of this great distraction from the real issues of industrial decline, geopolitics and global warming? Can any large-scale citizen lobby energized by this film turn pressure on elected representatives to take some action? Watch this space, but shudder as you remember how slow and modest were the effects of the critical documentaries by Michael Moore and Al Gore.