Inside Job, Review
Finally, as promised a review of Inside Job. Made in 2010 and narrated by Matt Damon, Charles Ferguson’s documentary about the financial crisis covers a lot of ground. One can quibble about the details but his take on the big overarching themes was spot on, in my opinion.
- The New Deal legislation on financial regulation kept the financial sector in check after World War II
- Unraveling the regulatory regime for banks and other financial institutions from the late 1970s onwards led to larger and larger crises since the 1980s, culminating in the biggest crisis since the Great Depression in 2008
- The people responsible for the crisis got away without any criminal charges this time, unlike the Savings Loan Crisis of the 80s when people actually went to jail.
- There is an unholy nexus between some faculty members of economics and finance departments of elite universities and the banking sector. They are the Inside Men, who bear the ultimate responsibility for the biggest bank heist ever.
Watch his interviews with Fredrick Mishkin and Glenn Hubbard, of Columbia University which make point four, crystal clear. Unfortunately for us the roots of this problem go even deeper than what Ferguson covered in Inside Job. The problem goes far beyond a handful of professors and their cozy and borderline unethical relationships with banks and the like. The conflicts of interest run deeper than just the speaking and consulting fees. The very tenets of the prevailing wisdom need to be questioned after such a spectacular failure.
The conventional thinking in economics right now owes its influence to Milton Friedman and his University of Chicago colleagues. Underlying many of the policy changes since the seventies is the thinking that free markets are the epitome of freedom and that they are self correcting. Government intervention of any kind is bad for the markets and in turn bad for the polity and the society at large. Friedman and his colleagues managed to change the postwar, mostly Keynsian consensus about economics to the policies that favor the 1%. Though many of the original Chicago economists are dead or retired, their intellectual spawn have cloned themselves many times over in academia. Even the financial catastrophe of 2008-09 has changed little as the subsequent debates about austerity highlight. We have every reason to be suspicious when they blithely lecture us about how austerity is necessary.In the words of Turgidson , a commenter from Balloon Juice:
And somehow, like a bunch of indestructible cockroaches, they keep surviving what should have long ago (but especially from 2008 on) been a complete discrediting of their ideas and maintain an astonishing amount of influence over policy and the debate in general
Getting rid of the cockroaches that can survive an economic Armageddon is easier said than done.
Coming back to the movie, watching Glenn Hubbard have a meltdown in front of the camera over Ferguson’s polite but persistent questioning is the highlight of the movie. Watch Inside Job, it gets the big picture of the financial meltdown right. It leaves you feeling both enraged and frustrated at the same time. A must see documentary.
Grade: A-, because some of the details about the actual mechanics behind the credit derivatives were fuzzy and unclear.
Photograph: Linda Nylind for the Guardian
Stay tuned for the upcoming blog sequel, Inside Men.