Introduction
This paper analyzes the award-winning documentary, the Inside Job, by Ferguson (2013). The documentary describes the causes of the 2007/2008 global financial crisis and how financial impropriety, coupled with unabated corporate crime, led to a widespread collapse of the global financial system (Mitchell & Moore, 2012). This paper analyzes the documentary from a criminologist perspective and argues that the global financial crisis was a product of systemic corruption that hindered the efficient operations of the American financial system. This study also explores how changes in the policy environment affected the American financial system and helped corrupt bank officials to fuel the 2007/2008 financial crisis. However, before delving into the details of this paper, it is, first, important to highlight the thesis of the 2010 documentary.
What is the Thesis of the Film?
Ferguson (2013) strived to show his audience that federal officials and corporate managers orchestrated the 2007/2008 global financial crisis. He showed how corporate crime eluded legal restrictions and public scrutiny. Here, he said that these officials betrayed public trust and failed to respect the social values of integrity that held the American society together. Ferguson (2013) also lamented that the perpetrators of the corporate crimes largely went unpunished. Overall, although the film started as a calm representation of America’s financial system, it was openly punitive to the antagonists (Ferguson, 2013).
Was it persuasive, why and why not?
The Inside Job had persuasive arguments about the causes of the 2007/2008 financial crisis because, unlike other documentaries that present their arguments from a satirical perspective, Ferguson (2013) narrated the Inside Job as an authentic representation of people’s experiences and knowledge of a crime. By explaining the role of each official in the financial crisis, easily, the audience could understand the criminal responsibility of the main antagonists in the financial crisis. This narration escapes the ambiguous representations of similar cases of financial fraud, which fail to identify a specific culprit of a crime. Indeed, criminology prefers specifics, and Ferguson (2013) shows us who is responsible for the collapse of the financial system and for what crime. For example, he shows how the managers of Lehman Brothers (a financial firm) contributed to the financial crisis by participating in risky investments (Tryon, 2013). He also describes the role of Federal Reserve officials in the financial crisis by explaining how they abdicated their regulatory role. In the same regard, he says, almost like a coalition of sorts, they allowed American corporate bodies to corrupt the financial system (Tryon, 2013). For example, they allowed the banks to lend out significantly large amounts of money that could not only cripple the American economy, but the global economy at large (Tryon, 2013). In this regard, Ferguson (2013) shows the audience how regulatory negligence endangered the lives of many innocent citizens. In the same analytical lens, he helps the audience to understand how the financial crisis was a crime by corporate and government officials. Ferguson (2013) is not alone in making such persuasive arguments because other authors who have explored the same issues have also helped their audiences to retrace the steps that led to the financial crisis and presented compelling arguments to make them understand how the financial crisis was a corporate crime (Tryon, 2013; Peltzman, 2010).
What Theory characterized the Film?
Economic Theory of Deregulation
Ferguson (2013) used the economic theory of deregulation to explain the financial crimes that caused the 2007/2008 financial crisis. This theory highlights the influence of deregulation in the financial system and the ease it gave to corrupt and insensitive government and company officials to manipulate financial systems. Peltzman (2010) says this theory started in 1971 through George Stigler’s investigations of the causes of financial impropriety in America. He argued that most politicians are greedy individuals who manipulate the financial system to maximize their self-interests (Peltzman, 2010). The researcher presented this argument within the wider body of economic analysis. Similar to the views of George Stigler about the 2007 financial crisis, Peltzman (2010) says, the above statement means that “interest groups can influence the outcome of the regulatory process by providing financial, or other support, to politicians and regulators” (p. 1).
Strain Theory
The strain theory characterizes the crimes highlighted in the Inside Job. This theory suggests that social strains cause crime. In detail, the theory argues that the society often sets socially acceptable and attainable goals, but fails to show people how to attain them. Therefore, people engage in criminal behavior as a means of attaining these goals (Peltzman, 2010).
Rational Choice Theory
The rational choice theory also explains the actions of investment bankers and other corporate officials in creating the 2007 financial crisis. This theory suggests that such people take part in financial impropriety because of their selfish interests. They also say, the motive to commit crime depends on people’s perceptions of the repercussion of crime (Peltzman, 2010). Collectively, the economic theory of deregulation, the strain theory, and the rational choice theory explain the events that characterized the 2007/2008 global financial crisis.
How the Theories Explain the Collapse of the Global Financial System
Economic Theory of Deregulation
In light of the incidents that surrounded the 2007/2008 financial crisis, Peltzman (2010) says that deregulation was a response to peculiar macroeconomic conditions that characterized the political conditions of 1970. Mainly, during this time, people were concerned about the possible consequences of inflation in the macroeconomic environment and the purpose of government intervention in the country’s financial systems (Clarke et al., 2014). Although the above analogy explains how the economic theory interacted with the country’s financial system, it is important to understand that this theory stems from proponents of capitalism who say the market works efficiently when there is less government involvement (deregulation) (Peltzman, 2010). In the same regard, proponents of capitalism argue, through the economic theory of deregulation that most countries with excessive market regulations are bound to perform dismally, compared to countries that have fewer regulatory practices (Peltzman, 2010). For a long time, economists have used the economic deregulation theory to explain the financial prosperity of America (Clarke et al., 2014). They often say that America is a wealthy and financially sound nation because it is economically liberal. However, contrary to these principles, Ferguson (2013) questions the validity of this theory because he argues that deregulation was the biggest undoing of the American financial system, which eventually led to its collapse in 2007. For example, in his documentary, Ferguson (2013) questioned how policymakers structured the financial system to encourage its employees to loot their corporations. This outcome also questions the validity of deregulation and economic theory, as explained by most proponents of capitalism. For example, Peltzman (2010) says heavy deregulation occurred a decade before the financial crisis happened. Behind this move was a group of well-connected government and corporate officials who manipulated the financial system to make a profit (Keeton & Scheckner, 2013).
Comprehensively, the economic theory of regulation is at the center of the activities of the corporate officers and the inaction by federal officials to regulate the activities of these corporate officers. Particularly, the theory explains how financial greed pushed the officials to participate in risky investments, thereby putting the savings of American families in the hands of dubious investors (Peltzman, 2010). For example, Keeton and Scheckner (2013) highlighted the activities of speculators who bought several credit default swaps and bet them against collateral debt obligations that they did not own. Such risky investment activities stemmed from a wave of deregulation that characterized the American financial system, from the mid 1970s to present-day society. Many western economies adopted it because they believed it would allow the financial system to work efficiently. While most people believe in the power of deregulation, Ferguson (2013) opposes this argument by saying that corrupt state and corporate officers thrive under a deregulated environment. Particularly, he draws our attention to the extent of criminal activities that could occur if there are no controls to regulate the activities of these officials.
Rational Choice Theory
This paper has already shown that white-collar crime occurs because of selfish interests. Ferguson (2013) says that the investment bankers who were responsible for the 2007 financial crisis took part in the financial crime because there was no legislative hindrance that prevented them from doing so. Therefore, they did not see any potential risk of engaging in financial impropriety (Clarke, Dean, and Egan, 2014). For example, Ferguson (2013) implicates the heads of credit rating agencies, insurance companies (AIG) and investment banks in fueling the corporate scandal that became the 2007/2008 financial crisis. These officials colluded with government agencies to defraud American taxpayers by bailing out companies that caused the global financial collapse in the first place. The entire system was a web of criminal activities by heads of America’s biggest companies because, although evidences showed they were guilty of financial impropriety and negligence, officials allowed them to resign and take home huge retirement packages (Ferguson, 2013). These events occurred even after experts revealed the extent of devastation that the financial collapse inflicted on American families and other workers (from around the world) who depended on American businesses to feed their families. Ironically, the same people who caused the problem went home with huge financial benefits, as investment banks lost their clients’ money. This outcome meant that the “criminals” who caused the financial crisis reaped huge rewards from the collapse of the financial system, while the victims suffered huge losses in the hands of the same people.
Strain Theory
This paper has shown that the strain theory attributes the occurrence of crime to social pressures. Ferguson (2013) highlights this fact when he shows how greedy CEOs and investment bank managers fleeced companies to live flashy lifestyles, buying yachts, mansions, and expensive cars. These material possessions are part of the social expectations that society places on individuals. Officials who are unable to conform to these pressures take part in financial impropriety, as seen in the 2007/2008 global financial crisis.
Summary
This paper shows that the economic theory of regulation is at the center of the Inside Job. The documentary highlights the extent of economic crimes that could happen in a deregulated financial environment. The thesis of the documentary is persuasive in highlighting this fact because it shows how a deregulated corporate environment could allow corporate crimes to elude public scrutiny. Based on this analogy, it is important to acknowledge how the Inside Job makes us understand the criminal responsibility of state and government officials in the 2007/2008 financial crisis.
References
Clarke, F., Dean, G., & Egan, M. (2014). The Unaccountable, Ungovernable Corporation: Companies’ Use-by-dates Close in. London, UK: Routledge.
Ferguson, C. (2013). Inside Job: The Financiers Who Pulled Off the Heist of the Century. New York, NY: Oneworld Publications.
Keeton, P., & Scheckner, P. (2013). American War Cinema and Media since Vietnam: Politics, Ideology, and Class. New York, NY: Palgrave Macmillan.
Mitchell, R., & Moore, S. (2012). Citizenship in the Classroom and Community. New York, NY: Springer Science & Business Media.
Peltzman, S. (2010). The Economic Theory of Regulation after a Decade of Deregulation. Chicago, IL: University of Chicago.
Tryon, C. (2013). On-Demand Culture: Digital Delivery and the Future of Movies. New Jersey, NJ: Rutgers University Press.
