This film “cost $20,000,000,000,000 to make” – a reference to the economic losses, so far, from the global crisis
‘Inside Job’, the oscar-winning documentary, could just have well have been called ‘Demolition Job’ for the way it crushes the reputations of top Wall Street institutions and the government figures who protect and serve them.
The film’s tagline, that it “cost $20,000,000,000,000 to make”, is a reference to the massive economic losses, so far, from the global capitalist crisis that began when the US housing bubble burst in 2006. This triggered the worst recession since the 1930s and only narrowly missed a global financial collapse, a threat that still exists because, as this film shows, nothing fundamentally has changed. The recession has cost millions of jobs worldwide – around 10 million in China – plus six million home foreclosures in the US and countless other miseries borne by working class populations, while the bankers who created the crisis have actually gotten richer!
The film shows with meticulous documentation and interview footage how the big banks and financial institutions mould government policies in their favour, dismantling regulatory controls and freeing them to create and speculate in financial products such as ‘credit default swaps’ that few if any understand. Unfortunately, the film never once uses the word ‘capitalism’, which leaves a gaping hole in its argumentation. It speaks about the ‘finance industry’ as the source of these ills, and while this is indisputable, the financialisation of modern capitalism is a symptom rather than cause of the disease afflicting the entire profit system. The same crisis of profitability that causes capitalist companies to shift production to low-wage economies, while selling mostly to high-wage economies, also explains the increased dependence on Wall Street’s financial ‘steroids’ to boost profits. A well-known statistic, not mentioned in the film, is that prior to the banking crash, the financial sector accounted for 40 percent of total corporate profits in the US.
Narrated by Matt Damon, the film starts with footage of Iceland’s banking crash. To images of Iceland’s startling volcanic landscape, we hear how a country with a GDP of just $13bn incurred bank losses of $100bn after its government privatised the banks a decade ago. “Finance took over, and wrecked the place,” says an Icelandic professor. Global banks and governments in other countries all encouraged the deranged lending binge of the Icelandic banks, which were given ‘AAA’ credit ratings by US-based ratings agencies such as Moody’s and Standard & Poor’s. Just days before I watched this film, the Icelandic people for a second time defied their government and political establishment to reject a rotten deal brokered by the EU and IMF that saddles them – ordinary citizens – with the $420 million debts of one of the failed private banks, Icesave.
One of the film’s strengths is the simple, unlaboured way it explains the nature of derivatives such as collateralised debt obligations (CDO) and other so-called securities. Viewers, even those who are not avid followers of economic trends, are left in no doubt that the entire derivatives ‘market’ (worth a nominal $700 trillion) is crazy. A host of Wall Street luminaries and government ‘advisors’, many made to squirm in front of the camera, are questioned on their role in crafting the policies that led to the crisis. Key figures and partisans of financial deregulation like Alan Greenspan (former central bank chief), Larry Summers (Bill Clinton’s Treasury Secretary and former chief economic advisor to Barack Obama) and Timothy Geithner (current Treasury Secretary and former chairman of the New York Federal Reserve Bank) all refused to be interviewed for this film. Several others must surely regret their decision to take part.
Professor Frederic Mishkin, an “expert” and former governor of the Federal Reserve Board (US central bank), probably steals the show with a breathtakingly bumbling performance attempting to justify the neo-liberal capitalist policies that led to the crisis. He is grilled about his authorship of a 2006 report entitled “Financial Stability In Iceland”, in which he makes a ringing endorsement of the island’s hedge-fund economy. When asked how he got it so wrong, he can only say he believed what the Icelandic central bank told him, as central banks are “credible institutions”. It’s revealed that Iceland’s financial industry paid Mishkin $124,000 for the report. His embarrassment deepens when it is then pointed out that the name of his wildly misleading report has been changed – retroactively – in Mishkin’s CV to “Financial Instability In Iceland”. Mishkin excuses this as a “typo”.
‘Inside Job’ exposes the criminal culture of Wall Street, a culture of lies, trickery, corruption and widespread abuse of cocaine and prostitutes. A psychological counsellor for Wall Street bankers tells us these practises “go right to the very top”. It shows the incestuous links between the top banks and governments of both major US parties. Institutions like Goldman Sachs and Morgan Stanley exercise enormous influence over government and use this to shield their interests and kill any political initiatives that threaten their profits. Goldman Sachs has provided Treasury Secretaries for the last three US governments (Timothy Geithner, Hank Paulson and Robert Rubin). Both Paulson and Geithner, former Goldman chief executives, were central figures behind the government’s 2008 bailout of AIG (which collapsed within days of Lehman Brothers, facing catastrophic payouts having written out $500bn worth of ‘credit default swaps’ for which it had no provision) and yet Goldman Sachs was the main beneficiary of that bailout, receiving $40bn of the $130bn in taxpayer funding thanks to the generous terms for AIG bondholders inserted by Geithner and Paulson. Clearly, the US political establishment is a world leader also in the field of corruption.
To make his case against Wall Street, the film’s writer and director Charles Ferguson relies on bourgeois economists such as Nouriel Roubini and Martin Wolf of the Financial Times. These make some telling points, but at no time in 100 minutes of footage do we hear a solution. A number of these ‘critical’ establishment figures and commentators are let off far too lightly and should have been grilled more in the manner of Mishkin.
IMF president Dominique Strauss-Kahn is a case in point. He makes some often heard criticisms that the US financial sector was “out of control” – incontestable in retrospect – but he is not pressed on his organisation’s role before the crisis or for example on Iceland, where the IMF is using financial blackmail to get the Icelandic government and people to swallow the ‘Icesave’ deal. The IMF is playing a similar role across Europe, after decades of practise in the neo-colonial world, with loan conditions designed to protect the banks and pass on the pain to ordinary citizens.
Similarly, Christine Lagarde, the horrendously right-wing finance minister of France, is allowed to represent the film’s ‘prosecution’ side, passing judgement on the misdeeds of US banks and politicians, without any examination of her own record of attacking labour rights, pensions and public sector jobs. This is true not only in France but across Europe through her pivotal role in the EU’s financial structures and its poisonous ‘bailouts’ (launched together with Strauss-Kahn and the IMF) in Greece, Ireland and Portugal. Lagarde infamously announced the economic crisis was “over” at the end of 2008 – a statement that itself should have disqualified her from appearing as an “expert” in this film.
Ferguson’s research team needed to spend more time and attention on European developments from below instead of from above, to balance an overly upbeat – actually naive – view of that continent’s banking rules and politicians. ‘Inside Job’ shows very clearly that Obama is continuing the policies of his predecessors and has resisted any significant moves to clip the claws of the banking sector. Economist Robert Gnaizda ridicules the measures taken by the Obama- Geithner administration: “How can it reform – it’s a Wall Street government!”
But the film then applauds a largely cosmetic initiative from the governments of Italy, Sweden and other EU countries to introduce tighter bank regulation in Europe. As the debt crisis in Ireland, Portugal and other “peripheral” European economies shows, and the withering programme of social cuts and unemployment this has unleashed, capitalist governments on the opposite side of the Atlantic are equally slavish towards the finance capitalists and incapable of offering solutions.
The film’s conclusion is that none of the ‘reforms’ implemented since 2008 will prevent a rerun of the financial crash. The institutions that caused the crisis have grown even more powerful thanks to gigantic bailouts with few strings attached. Socialists can agree on this, only instead of waiting helplessly for the next round of the crisis we know we need to prepare, organise and build the vital socialist alternative.