I’ve just finished watching Inside Job, the award-winning documentary showing at the Encounters Film Festival.
It’s a good documentary, part-comedy as well the way some of the interviews with the bank executives and consultants have been edited. It got a round of applause at the end, and is worth seeing.
I want to note two things that struck me.
First, the phrase “trapped by ideology”. At one point, a commentator was discussing one of the deregulation proponents – I forget which one. He mentioned how, eventually, this person became convinced of the impending crisis, of the scale of the catastrophe, but could still not accept the need for more regulation. He was trapped by his ideology – the holy cow of deregulation that had been blindly followed by the US government since the Reagan revolution in 1980, and that’s had such a disastrous effect on everything from the financial system to the food industry.
It made me think of a column by Ivo Vegter, a Daily Maverick columnist I almost never agree with, but enjoy reading. In the column, Vegter makes the claim that quite often larger companies practise higher standards than small companies, while complaining that his ideological opposites, the “eco-minded progressive classes” of “the left” are constantly and unfairly targeting bigger companies, logos. Shell as opposed to Bundu gas, in his example (of the opposition to fracking in the Karoo).
He’s right. Quite often larger companies do have higher standards. If I was going to eat a hamburger, there are countless corner stores that can provide me with older grease, more dodgy ingredients and that treat their staff worse than favourite corporate baddie McDonalds. There are also many that live up to higher standards, providing healthier food and with better working conditions.
Being large or being small has little to do with behaviour. His point that it’s usually larger corporations that are targetted is correct, and quite understandable. The impact of one large corporate is huge, and they are more visible and easier to monitor. It’s easier to raise opposition to misbehaviour from a large brand that most people know about than against a small one that most people aren’t familiar with.
But as the column goes further, it descends into his usual ideology, with attacks on greenies, leftists and cherry-picked examples of corporate responsibility and government incompetence.
The other thing that struck me was the apparent contradiction between my seeing it as self-evident that certain things should be better-regulated, and my belief that less regulation often works better, as in something like Wikipedia.
Wikipedia is a prime deregulation success story. Instead of having teams of fact-checkers approve every change before it’s committed (as was tried with the failed Nupedia and again with Citizendium), Wikipedia opened the doors, putting no barriers in the way. And people responded by rapidly writing a massive, high-quality encyclopedia in multiple languages.
So what’s the difference between Wikipedia and Wall Street?
Motivation and alignment of interests.
The motivation for contributing to Wikipedia is mostly a sense of scholarship, of contributing to the global body of knowledge and having fun while doing so. Learning and sharing knowledge is enjoyable. With that as the primary motivation, putting obstacles in the way makes little sense. That’s changing to some degree now, as Wikipedia, in English at least, is much more complete and much more influential, the motivation for pharmaceutical companies, politicians etc. to subvert it becomes greater, at the same time as the kind of contribution that people can make becomes less. It’s not so easy to add much to an article when it’s already pages long, pretty complete, well-sourced and broken down into further detailed sub-articles. The Wikimedia Foundation is doing extensive research into why contributions are (relatively) falling in the English Wikipedia, and I’d suspect that it’s mainly because it’s no longer a pioneering project. Now contributions involve much more fending off commercial and vested interests rather than adding a quick fact to a revolutionary body of knowledge.
What’s the motivation for getting a job on Wall Street? Almost always, greed. Very few consider any kind of social consequence to their actions – it’s about making as much money as possible. And making as much money is personal – there’s no loyalty to a company. If someone working at Lehmann Brothers was offered a more lucrative position at …, they’d almost certainly take it.
And, the structure of their job facilitates this.
So, the crisis was in part caused by people deciding to sell more profitable product X rather than less profitable product Y. It wasn’t their job to look into the systemic issues caused by the packaging of subprime mortgage loans, and even for those who did see, acting on the observation was difficult. Action would impact on the revenue of your friends and colleagues, and in a case like that it’s easy to find justifications, to disbelieve the evidence, to use the excuse that everyone else was doing it.
Why does a soldier, by all accounts a pleasant person at home, become a torturer? In part because the system has created a role for them where it’s very difficult to do otherwise. When all your colleagues are participating in torture, when placed in a strict hierarchical system designed to stamp out any questioning of orders from a “superior”, it’s rare to find someone brave enough to stand up, someone like a Bradley Manning, someone who sees the atrocities and does something about it, knowing he’s putting his or her personal situation in jeopardy.
Claiming that “regulation is always bad” or “regulation is always good” is simply naive extremism, a case of being trapped by one’s ideology. It’s a case of the right kind of regulation, aligning with the motivations. Political leaders are at risk of being corrupted by corporate interests, so strict regulation is needed. We need to make sure politicians are transparent about their funding. Similarly, in a system where banks can loan money and have no concern about whether it’ll be paid back or not, as they’re passing on the risk to another entity, there’s a need for intervention and simply “leaving it to the market” is naive in the extreme.
Reality is a lot more nuanced than ideology!