The Inside Job and Money Never Sleeps: How much is too much?

Lawrence Serewicz on how Americans need to reconsider how they became ruled by love of gain which is less than love of wisdom or at least love of wisdom as practices by political men - and how reform is desperately needed within the education system.

Gold Plated Car

The documentary film Inside Job and the studio movie Money Never Sleeps (the sequel to Wall Street) tried to teach us lessons about the danger of excessive gain. Yet, they both failed in their main educative goal. Instead of showing us the folly of an excessive appetite, the desire for more profit to the point of destruction, they showed us that it works.  The main players within the various scandals have succeeded.  They have kept their fortunes, avoided prison, and continue to run their firms. To be sure, Lehman Brothers went bankrupt. Yet, as others involved in the crisis, Richard Fuld Jr., the CEO, and his cohort remain free to retain their personal fortunes gained before the collapse.

Oliver Stone was concerned that his first film, Wall Street, glamourized when it sought to moralize. Instead of Gordon Gecko being understood as a villain, he became the movie’s hero.  Gecko was lionized in the eyes of viewers, in particular those destined to work on Wall Street, so that even 25 years later and two stock market crashes later, viewer still remember Gordon Gecko.  He has come to epitomize the tantalizing potential of investment banking. Charles Ferguson, by contrast, had a more direct goal. He wanted to explain “the systemic corruption of the United States by the financial services industry and the consequences of that systemic corruption.”  In this, he partially succeeded, yet the final lesson, though, appears to be that if you are big enough, financially or politically you can get away with it.  However, this piece is not a movie review or a complaint about capitalism.

The piece looks at the lessons from the movies and draws political philosophical conclusions.  The conclusions reflect what the current financial crisis means for the American economy and, most importantly, what it might mean for the American regime. In particular, Inside Job raised troubling questions for the education system because of the economists working for corporate sponsors.  Yet, the deeper question from this surface lesson was whether the American educational system, especially at its elite universities (the source of many of the Wall Street MBA), have failed the American regime. The movies suggest that reform is needed although it is uncertain whether that reform.  Indeed, what is left unresolved is the crisis of the regime to which Money Never Sleeps alludes and Inside Job points.

Inside Job

Indeed, what is left unresolved is the crisis of the regime to which Money Never Sleeps alludes and Inside Job points.

Gain is good but greed is bad.

To start to understand the crisis and its effect on the regime, we need to put the question into a political philosophical context.  I use on Plato’s dialogue, Hipparchus or the profiteer, for an insight.[1]  Although the surface description of the dialogue appears to provide enough analysis, we need to move deeper.  We could stay on the surface and express our indignation that excessive gain has been made by Wall Street investment houses and banks. We could look at that gain as shameful, excessive, and potentially fraudulent. Yet, that would only leave us on the surface without an understanding of the deeper issue.

If we remain on the surface and argue that all gain is bad, we miss the deeper connection between a love of gain that drives the pursuit of money and the love of gain that drives the pursuit of wisdom.  At a crude level, the two loves of gain are connected.  Yet, we need to move beyond that crude level.  The love of gain is necessary for markets and for life to succeed.  In that sense, gain is good, although greed, its perversion, is not. We have to understand what is good about gain and what can make it bad.  What Plato’s dialogue helps us to consider is that the gain pursued on Wall Street is a crude, or low, form of gain and what is needed is a higher form of gain.  As Plato’s Socrates intimates in the dialogue, philosophy is a love of gain.  What distinguishes them, though, are the ends to which the gain serves. What the movies appear to tell us is that the love of gain has become distorted and because it has been distorted, the regime is in danger.  Yet, what is the source of the crisis?

McDonalds GCSE

"The regime is only in trouble to the extent that our young are educated to pursue gain as love of money, a lower form of safety and comfort, rather than higher, noble, goals in public service."

Education: has the love of knowledge become the love of corporate sponsorship?

The regime is only in trouble to the extent that our young are educated to pursue gain as love of money, a lower form of safety and comfort, rather than higher, noble, goals in public service.  To the extent that the educational establishment has encouraged our best and brightest to go to Wall Street, to pursue private gain, rather than Washington, a public service, then it has failed the regime. We are in danger of having a generation that is no longer being educated to the good or failing that the noble.  Instead, they are being educated to a lower goal, the pursuit of profit to achieve safety and comfort.  In themselves, these goals are not problematic.  They become problematic because they have replaced the higher, nobler goals, for a republic, that would serve the public good.  Instead, we appear to be taught that serving the public good is best done by serving our private goods.  We see this in Money Never Sleeps when the Louis Zabel tells Jake Moore to leave Wall Street and follow his dream and to hold on to it.  However, the problem as Charles Ferguson suggests, is that the corruption has become systemic.  We may save individuals but the system appears corrupt.

We can see the debasement of our educational system, by this crude pursuit of gain, in the Inside Job as corporate sponsors now dominate the educational system.   The educators who appear seem quite willing to accept the money and write what their corporate sponsors ask.  When confronted the academics within the film reveal the contradictions between their academic commitment to the pursuit of knowledge and writing for corporate sponsors.  Their rationalizations and explanations seem to suggest that academia’s resistance to power has not become much better in the last 2500 years as witnessed by Heidegger’s Rectoral Address or earlier Plato’s Seventh Epistle. In both senses, the authors have shown a certain indignation to protect their reputation despite the context.

What the Inside Job suggests is that academia has become an industry. The institutions have succumbed to the pursuit of the lower gain.  The pursuit of knowledge and truth has been rationalised in the pursuit of financial gain. For some schools, the pursuit of sports championships distorts its core educative mission, for others, it appears to be the pursuit of corporate sponsorships. In both instances, the low has been satisfied at the expense of the higher.  However, the problem is deeper than corporate sponsorships, corporate endowments, or sports championships. The elite universities appear to be failing to teach our young to pursue noble goods and shape their souls to seek a higher gain. To be sure, there are teachers within academia who work against the academia’s seduction by money and talk of a new citizenship.  However, they remain a minority. They appear to be retained almost as a salve for the soul. In much the same way that ethics courses become mandatory in MBA programmes after a crisis.  In a certain sense, academia has failed the souls of students, as Allan Bloom argued. They are listened to and retained almost as a salve for the soul. In some ways, one could argue that the Inside Job came about from the students Bloom worried about grew up, got a job, and went to Wall Street.

Having been left almost empty of the noble and the good, their understanding is such that the high is only now understood and pursued in terms of the low. The brightest minds are attracted to money, status, and celebrity rather than fame through service, and duty to the republic.  The characters on Wall Street seem to have forgotten moderation of an education in republican virtue. They have been seduced, because their teachers have been indoctrinated in it, by a Machiavellian immoderation that replaces virtue with a tyrannical virtu. Instead of a healthy thymos needed to sustain the republic freedom, we see an immoderate pursuit of glory and profit without regard to the public consequences. The students of this teaching have been sent into the world of politics and business.

Curruption

The financial crisis revealed a pursuit of profit has become shockingly immoderate on Wall Street.

Wall Street’s excess where bad gain has replaced good gain

The pursuit of profit and private goods is nothing new to Wall Street.  For the most part, Wall Street has been a sub-culture that existed without an immediate impact on the regime.  Yet, what has become apparent is that Wall Street has changed.  Although the pursuit of gain has always existed, it remained relatively contained.  The financial crisis revealed a pursuit of profit has become shockingly immoderate on Wall Street.  For the firms operating within the financial system, there is no deal too big, there is no profit too large, there is no financial instrument too complex to pursue. One can see the immoderate ethos expressed in the use of Collateral Debt Obligations (CDOs) and associated financial instruments. The instruments were designed on Wall Street for Wall Street because of the need to deal with risk, which was problematic in it, and for the deeper reason, to protect one’s profit.  To paraphrase Bloom’s analysis in the Hipparchus, the underlying reason for the instruments was to create something, a compact between financial houses to avoid suffering loss (an injustice),yet, the parties involved did not believe in justice (explaining the risks) and thus give a decent veneer to what could be called plainly a swindle.  In this, the parties were involved not to gain, or to show their clients the best gain and how it was achieved, but to avoid loss and insulate themselves from any loss that may be inflicted upon themselves even though they knew that someone, preferably someone else, would have to take the loss (suffer the injustice).

The problem is more than the issue of moral hazard.  Moral Hazard focuses on the responsibility of the agents, Wall Street, and what they do with the assets of the principals, Main Street, but the agents puts their own interest before the principal’s interest.  The moral hazard is a concern, but the moral hazard, the flaws within the relationship does not come from the relationship. Instead, they exist before the relationship.  The flaw is what the financial instruments reveal about that Wall Street’s pursuit of gain.  The pursuit of gain is inferior because it does not reflect true, lasting, gain. The worth of what is being pursued is lost. Wall Street is trapped in an inferior pursuit of future gain, power, without understanding why the gain is worthwhile.  In emphasizing the conventional or perceived gain, the natural worth of gain, the noble goals are lost from view. The future gain blocks what would give meaning and value to the pursuit of profit. We can see this underlying message within Money Never Sleeps.  We can see the message in the contrast between Jake Moore’s dream (goal) the green energy and Bretton James’ goal of simply wanting more.  The message is driven home as Moore survives to pursue his dream, while James is facing uncertain future with prison a likely destination.

Gold Luxury

As Montesquieu warned, Republics fail when they become gorged on luxury and consumption in which status is related to celebrity and measured by wealth.

How much is too much for the stability of democracy? 

The question haunts America because the financial crisis is not simply about unemployment, jobs, or economic growth. The financial crisis reveals a crisis of legitimacy within the regime. The low gain, the one pursued by Wall Street can no longer be separated from the political health of the regime. The ethos that has infused Wall Street has influenced the political regime.  In this, the nexus provided by the educational system within universities becomes important.  Students appear to be focused on the goals of safety and comfort and the few that pursue the life of service and duty seem almost alien.  Americans seem to have forgotten the fate of republics that lose their attachment to republican virtue.  As Montesquieu warned, Republics fail when they become gorged on luxury and consumption in which status is related to celebrity and measured by wealth.

The gains on Wall Street are illusory because they have come at the price of the economic stability of the regime.  In a certain sense, we already know this problem. We have to look deeper to see the source of the problem.  The problem is within the American regime.  The American regime has become skewed by the pursuit of gain. The republic principles have been undermined.  The love of gain has been diverted from the ends of the regime.  The issue is more than going beyond the pursuit of happiness.  It is that the regime’s definition of happiness has been corrupted. The love of gain has become an end in itself. The higher end of virtue or the health of the regime has been lost because gain no longer corresponds to it.  We can see this dramatically in the Inside Job.  We are shows graphically and directly that Wall Street’s risk has been externalized into the regime.  The regime has to absorb the losses and it cannot wean itself, from the political and economic dependency.

The challenge is not about protecting Main Street from Wall Street’s excesses through increased regulation.  Such an approach is treating the symptom.  Americans need to reconsider how they became ruled by love of gain which is less than love of wisdom or at least love of wisdom as practices by political men. Americans cannot find political men guided by a teaching instil a love of wisdom (good gain) over gain simply. To reverse the crisis we need reform.  The economic reforms are occurring though these will only be sustained if there is reform within the regime.  America needs reform within the education system. This is paramount because it is what shapes the young. Perhaps there are signs of hope as we see Americans continuing to pay down their credit card debts. If this signals a new political and economic relationship to prioritising gain, then America may yet renew itself.  If it cannot, then it will surely decline.  The lessons from history are there, the question about their future is there for Wall Street and Main Street; will they do the right thing?


[1] ^ Thomas L. Pangle, (1987), The roots of political philosophy: ten forgotten Socratic dialogues, page 78. Cornell University Press.  My analysis follows Bloom’s analysis within this book as well as Jason A. Tipton’s Love of Gain, Philosophy and Tyranny: A Commentary on Plato’s Hipparchus Vol. 26/2 (Winter 1999) Interpretation: A Journal of Political Philosophy