Job, directed by Charles Ferguson, distributed by Sony Pictures Home
Entertainment
DVD version of the film Inside Job is released today (Monday June 13) in the UK.
There
is no shortage of books analysing the global financial crisis and, to some, it
may now seem like ancient history. So can a well made, 100 minute, Academy
Award winning work completed in 2010 add anything to our understanding of the
greatest economic and financial crisis since the Great Depression?
Yes.
For
those who have read widely about the crisis there are bound to be extra
revelations and anecdotes. For those who have not immersed themselves in the subject,
the film provides an accurate overview of what happened.
Inside
Job argues that the financial industry in the United States has become much too
large and used its wealth to permeate the political system to the disadvantage
of others in the economy and society. The deleted scenes section of the DVD
even contains a clip of Dominique Strauss-Kahn, who at the time of filming was the
managing director of the IMF, agreeing with this.
The
film is in five parts.
Part
one outlines the increasing deregulation of financial markets from the 1980s
and how this eventually contributed to excessive leverage and risk taking that
led to the crisis. As Simon Johnson, a former chief economist at the IMF notes
in a deleted scene, deregulation was a 20 year phenomenon. Much is made of the
failure to regulate the derivatives industry and the growth in the number of
people from the finance industry taking government posts. And then return to
well paid positions in finance at the end of their time in government.
Part
two explains the rise in house prices, the role played by CDS and CDOs and
credit ratings agencies in the build up to the crisis.
Part
three examines the crisis itself and the thinking, even miscalculation, behind
allowing Lehman Brothers to collapse. The lack of communication with other
countries is highlighted. In the film, Christine Lagarde, the French finance
minister, notes she heard of the decision only after it had been made. Her
reaction? “Holy cow.” (At least that’s what she was prepared to say to camera)
Part
four looks at accountability. High pay levels in the finance industry, the lack
of will to use regulatory powers appropriately and excessive lobbying of
politicians by financiers are highlighted. Dismay is expressed that, post
crisis, banks are now “bigger and more concentrated” than ever – a point also
made by the FCIC review of the crisis – and the lack of reform being proposed by the Obama
administration.
For
economists, this section is most uncomfortable. The claim is made (from the 79th
to 89th minute) that the
finance industry “corrupted the study of economics itself.” It is not the support many economists have given to
deregulation that jars most. That could have been made in good faith on
available knowledge at the time. The probing questions to several high profile
academics about why the titles of papers on CVs have been changed since the
crisis to make them appear more accurate, why payments from financial companies
to write reports have not been disclosed, and the mystified looks and angered
responses of some when asked about this, are disturbing. Perhaps, George
DeMartino’s recommendation in his book The Economists' Oath that the economics profession needs to consider a code of
ethics is onto something.
Part
five finishes the film, noting the increase inequality of wealth in the US that
has developed over the past few decades and bemoans how little has changed in
the political and financial landscape.
The
film has its faults. It implies, but does not state, that regulation of financial
markets and banks in Europe and Asia has been superior to that in the US; and it
could outline more fully how the financial system and regulation should be
reformed. The swipes at globalisation in part five are also questionable.
It
is not just the anecdotes and the story line that makes the film worthwhile, however. It
is the visual effect of seeing people try to justify their actions when their
case is weak, the compactness of the story and the underlying anger of the film
that makes it compelling and relevant even today. It keeps the story alive.
And
it is necessary to keep the story alive. In one of the deleted scenes sections
Satyajit Das notes that many specialist financiers are already asking “What’s
the problem? Things will go back to normal.” In the UK we have the chairman of
Barclays arguing that the time for remorse from bankers should be over. Meanwhile,
unemployment in many countries remains very high and growth disappointing. This
is not an acceptable “normal”.
Films
impart information in a way that allows a story to be kept alive more easily
than books. Films are more accessible to the general population.
I
suspect some consider film inferior to articles and books and even anti-intellectual.
They may argue that depth is sacrificed for catchy phrases and visual gimmickry. This
can happen but it can also occur in books and articles. It has not happened
with Inside Job. There are no Michael Moore type distractions. The story line
is clear. The main conclusions of the film may be disputed but so too can those
of any book or article.
Economists
must get used to presenting information in a more accessible manner. Video is
playing a growing part in this. YouTube and TED already provide much useful
economic information and the Khan Academy provides a rich source of tutorials.
Inside Job adds to the list.
Ian
Bright
I
am writing in a personal capacity
