SocialismToday Socialist Party magazine | |
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. As this film shows, nothing fundamentally has changed. The
recession has cost millions of jobs worldwide, 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. 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% of total corporate
profits in the US. Narrated by Matt Damon, Inside Job 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 $13 billion
incurred bank losses of $100 billion 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. 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 ordinary citizens with the 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
$700tr) 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
Federal Reserve 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) – refused to be interviewed. Several others must
surely regret their decision to take part. Professor Frederic Mishkin, an ‘expert’ and former
governor of the Federal Reserve Board, 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, 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 that he
believed what the Icelandic central bank told him, as central banks are
"credible institutions". It is revealed that Iceland’s financial industry
paid Mishkin $124,000 for the report. His embarrassment deepens when it
is 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 (Geithner, Hank Paulson and Robert Rubin).
Paulson and Geithner, former Goldman chief executives, were central
figures behind the government’s 2008 bailout of AIG. AIG had collapsed
within days of Lehman Brothers, facing catastrophic payouts having
written out $500 billion worth of credit default swaps for which it had
no provision. Yet Goldman Sachs was the main beneficiary of that
bailout, receiving $40 billion of the $130 billion in taxpayer funding
thanks to the generous terms for AIG bondholders inserted by Geithner
and Paulson. Clearly, the US political establishment is also a world
leader 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 judgment 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 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
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 naïve, 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. |
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