2021Inside Job Soc 3handout PDF

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Study Sheet: Inside Job

S pr in g 20 21 Sociology 3 Professor David A. Smith This is the definitive film about the economic crisis of 2008/2009, and the role of Wall Street and high finance in our society. Obviously, it is integrally linked the topic of wealth and power in the United States – and, of course, the inordinate power of banks and financial institutions and their use of lending and debt to make super profits IS a crucial component to the contemporary global economy. The movie is an entertaining and well-made film (narrated by actor Matt Damon): in fact, it won the Academy Award (the Oscar) for Best Documentary in 2011. The movie is sweeping and non-partisan (though clearly “critical”) in its assessment of the financial crisis and current political and economic systems. It covers both the historical roots of the crisis and the way global financial regulation has changed over time and shines intense light on the major “players” who created this mess (and we learn that many of them either are -- or were – in high positions in the United States government). It provides a plethora of information about how our economy works, how big banks and bankers exert tremendous political power, the disquieting relationship of both political “regulators” and leading economists to the giant financial firms, etc. There are a lot of financial terms and acronyms discussed in the film: So you’ll be introduced to things like collateralized debt obligations (CDOs), credit default swaps (CDSs) and residential mortgage backed securities (RMBSs) – this sort of “stuff” may tend to make folks “eyes glaze over” (they seem very technical) – but they are critical components of the global “gambling casino” atmosphere in world financial markets and on Wall Street before the crisis (and, maybe, after, too!). This is truly, the “inside story” of a key part of the upper 1 percent of the top 1 percent – the targets of the recent “Occupy Wall Street” movement. Some of their risky, macho, arrogant behavior probably will shock you! But it is also important to keep in mind that the rest of us (the proverbial “99 percent”) ended up paying a very high price for all this profligate behavior (literally MILLIONS of people lost homes, jobs, life savings – and most of us ended up feeling at least some of the negative effects of an economic downturn that was almost as great as the Great Depression of the 1930s – and has been labeled “the Great Recession”). The movie is almost two hours long: that is why I initially wasn’t sure I would show it: but one of the great advantages of three hour class meetings in summer school is the possibility of screening movies like this! If “miss” it today in class the film may be available at the UCI Langson Library Multi-Media Center (or Amazon Prime, apparently for $1.49) – or I might even send out a link later (some folks might “want to see how it ends”). There are various “lessons” of the movie. An obvious one is that giant financial firms have an enormous impact not only on our economy and the U.S. government (they managed to ram through a $700 million bank “bailout” in 2008), but also on the entire world economy. This dynamic is a key part of the underlying causes of poverty and unemployment in the United States, the extremely uneven distribution of wealth and power in our country, the dysfunctions of “free markets,” and our society’s lack of real “democracy.” The underlying dynamics are at the root of the inequalities associated with “financialization” worldwide. There is a message in all this about the injustice inherent in the current distribution of wealth and power in our society and the corruption and greed that permeate the upper levels of the political and corporate world, to the detriment of all of “the little people.” Despite some humor in the film, this is definitely NOT a pretty picture: indeed, it may shock some of you – and perhaps help you understand the

tremendous popular anger and frustration shared by BOTH the Tea Partiers (later Trump’s “MAGA red hats”) and supporters of progressives like Bernie Sanders and “the Squad” about this unfairness. 1. Two major concepts raised in the readings this week are “capitalism” and “democracy.” Supposedly, American society can be characterized as “democratic capitalism.” But, after watching this film, you may wonder if our economy is so “free market” oriented as many folks think – and it also calls into question the degree to which our country is truly “democratic.” Can an economy that is dominated by giant “too big to fail” financial firms really be “competitive” and maximize value for everyone? Is it possible to have “democracy” in a meaningful sense given the role of money in political campaigns? How does this “bias” the entire political system in this country? How can ordinary people get their voices heard and their interests met under this set-up? What would need to change to make the economy and polity more responsive to everyone? As we consider the divided US polity today, how much or how little has changed since this film was made: is the United States just as “corporate run” today as it was a decade ago? 2. How does economic clout and wealth translate into political power? This is one of the key insights that emerges from this film. Are the Wall Street operatives “in touch” with the lives and values of ordinary US citizens? Or do these corporate leaders have inordinate political power, but end up being decision-makers that are isolated and out-of-touch with ordinary citizens? The image we see is one of enormous wealth and power, which overlap and reinforce one another. The film focuses on investment banking not big companies in general, but they raise the issue about giant firms in general. Is it possible that giant multinational firms have an interest that may be inconsistent with the welfare of US workers and consumers? Why do super-wealthy business executives focus so much energy on reducing workers wages and bargaining power? Does this help explain the almost record low rates of unionization in US workplaces today? What’s the “solution” to this problem? Are Trump’s recent policies to “make America great again” that include anti-migration policies, trade restrictions and tariffs on imports the answer? Where do politicians like Joe Biden fit in? The film also contains an intriguing expose of how the top academic economists – who have consistently pushed “free market reform” and “de-regulation” in their writing (and also serve as major advisors for the US government – including serving as the chief economic advisors to not only President George W. Bush but also to President Barack Obama. Given the large “consulting fees” paid to these economists, is it surprising that they “advocate” for the banks and wealthy corporations? 3. The multi-million dollar “bail out” of the giant banks (engineered by President G.W. Bush and his administration, but supported by President Obama and the Democratic leaders in Congress) was wildly unpopular among U.S. citizens (it was condemned by everyone from leftists to people who were right-wing “Tea Partiers” and now, are presumably ardent Trump supporters) – but it passed anyway. Why did this happen and how can we link this to discussions about problems with the American political system? Is this a “partisan” issue, linked to just the Republican or Democratic Party? Or is there something more fundamentally wrong with the entire electoral system in the United States? In 2010, the U.S, Supreme Court ruled in a case call “Citizen’s United” that the corporations can make unlimited campaign contributions, based on the idea that companies and wealthy individuals have an absolute right to “free speech.” How will this influence our democracy in the future? 4. There are many “bad guys” in this movie – and as the various interviews proceed, many of them become increasingly reluctant to talk on camera about their behavior. It raises some interesting questions about how society looks at “criminal behavior.” We tend to see “white collar” or “corporate” malfeasance as much less “serious” than offences like robbery or burglary. But which of these truly hurt more people and damages society more? We recently had another big election – and the Republican candidates favor massive tax cuts for big businesses and the wealthy, and more “de-regulation” of the economy. Yet it is also interesting that after his 2008 newly elected Democratic President Obama selected leading Wall Street insiders (like Larry Summers or Timothy Geithner, who both “star” in this film) to fill key advisory posts. How different are the two political parties on these issues? Why are real critics of the status quo (like Senators Bernie Sanders or Alexandria Ocasio-Cortez) depicted by the media as “radicals,” not to be taken very seriously and of dubious “electability” (as opposed to a moderate like Joe Biden)? 5. The movie ends with Matt Damon urging the viewer to “fight” against the sort of financial corruption depicted in the film. But how can ordinary citizens take on bankers, top government officials, economists at prestigious Ivy League colleges, etc? It is really just “too technical” for ordinary people to understand? Is it

a good idea to have giant institutions – like the huge bank/investment firms – that are “too big to fail”? Are some of the necessary changes political as well as economic? Can we every have real democracy with Super PACs and unlimited donations to campaigns? Finally, how does all this relate to “globalization”? 6. The 2008-09 recession was rather different from the current Covid-19 crash, which is also leading to a very deep economic crisis in the US, characterized by enormous job loss and unemployment, fears of business failures, home foreclosures, etc. What are the similarities and differences between the two time periods (2008-09 and 2020-21)? What “lessons” might be learned from the film about how things were handled 12 years ago? Have today’s politicians responded to the economic crisis differently – or are we seeing more of the same? Is it possible that they are making things worse by ignoring the lessons of the past?...