It’s a tragedy how little we collectively learned from the financial disasters of recent years. So many aspects of market ideology were discredited, if not decimated, at a huge cost to the economy (even if that “cost,” it seems to me, was largely measured by clawing back wealth that was largely illusory in the first place); our prevailing (if wretchedly complacent) assumptions about what we can reasonably expect from society – employment levels, housing standards, pension entitlements – are still teetering from it. There’s a general awareness that something has to change. But the “change” that’s advocated for is largely incoherent, based on a woolly assumption that major sacrifice and realignment can either be dodged or borne by the voiceless, or else on a barely tweaked version of the same theories that got us to where we are (as in so many things, this is even more gruesomely vivid in the US than it is here).
The problem, I think, is that the society we’ve created for ourselves feels so solid – it’s too daunting a thought experiment to imagine it might actually be fragile and unsustainable. Since we got this far, and our technological capabilities are now greater than ever, then of course we’ll steer our way through, however bumpily. Sure, I suppose it’s likely that some version of humankind will make it through, just as plenty of people survived the Titanic. But through willful blindness and inaction, we’re forcing ourselves to careen into the iceberg, leaving the fate of the passengers to little more than blind chance.
Pay for performance
One thing’s for sure, the captains won’t be among the last on board – they’ll be whisked away in a private helicopter, and back in the warm mansion while the victims of their negligence battle the waves. Executive pay has exploded out of proportion to any index of performance or prosperity, answerable to no logic except its own self-referencing one. It’s absolutely true that corporate leadership is almost unimaginably complex and potentially murderously stressful, laden with risks of various kinds; the job certainly warrants a different magnitude of reward. But that general philosophy has been distorted to justify almost no practical limits. Most egregious is the notion that outsized compensation packages constitute a necessary motivation; that if a CEO didn’t get paid $50 million, or whatever (and didn’t pay as little tax on it as possible), then they couldn’t possibly turn in the optimum quality and intensity of personal contribution. Needless to say, this kind of psychological analysis isn’t applied lower down the work chain (if you’re not sufficiently incentivized by your twelve bucks an hour, well, there’s the door).
Although you can find any number of think pieces criticizing this trend, they’re just so much background noise. It’s important to realize that the executive pay racket is just as much an arbitrary redistribution of wealth as a punitive tax regime would be; there’s nothing “natural” or inevitable about the network of boards and institutions and advisors that keeps it going. But anyone who tries to critique or limit this normalized corruption is too easily caricatured as an enemy of “freedom,” or even as a socialist, as dancing on the slippery slope that leads to all your money being taken away and handed to welfare cheats.
Too Big to Fail
Curtis Hanson’s Too Big to Fail, now playing on HBO Canada, is a good springboard to thinking about these issues. The film is set over a few days in 2008, as Wall Street’s major institutions realize the damage done to their stability and liquidity by the age of irresponsible mortgage lending and uncontrolled derivatives trading. William Hurt plays treasury secretary Hank Paulson, the quarterback in the effort to avoid a domino effect of bank failure that might trigger another great depression. Working under unimaginable pressure, and to a great extent making it up as they go along, he and his team find themselves spending hours on strategic decisions that would normally require months; such as ordering major companies to merge with their competitors, or asking Congress to free up $700 billion on the basis of a three-page bill. We may forget (or maybe it’s that the momentousness of it all was hard to absorb at the time, even if you were watching closely), but it’s all true.
The film is remarkably efficient, telling the story in barely more than an hour and a half, with a super-capable cast (including Paul Giamatti, James Woods, Cynthia Nixon, Matthew Modine, and many others). It’s a fiendishly complex story of course, meaning Hanson spends much of his energy on basic exposition (for a while, it feels like half the screen time consists of old clips from CNN and CNBC): like last year’s Oscar-winning documentary Inside Job, if you have a general sense of these events, the film serves primarily as a recap, providing limited new perspective. Hanson (most famous for LA Confidential) is more than competent, but he’s not much of a stylist (at some point the story demands a fearless six-hour version, as Olivier Assayas made last year about the terrorist Carlos – among much else, this would allow more space for Hurt’s subtle evocation of Paulson’s underlying torment). Still, it’s sadly unusual to receive any films at all on such subject matter, and Too Big to Fail doesn’t squander the opportunity.
Saving their souls
In the end, Paulson assures his colleagues that what they’ve put in place will work, but his uncertainty is evident. As you may recall, the system didn’t collapse – not yet anyway – but it didn’t rebound as they hoped for either. The US economy remains far from where it should be to fund the accumulated heartbeats and entitlements and dreams. Unemployment is high, with all the human cost that entails; the mortgage mess isn’t even close to being sorted out; the company’s finances are out of control. And yet in 2010, Wall Street compensation was the highest it’s ever been. Many of the rules had been broken and rewritten, but as a couple of exchanges in the closing scenes make clear, the executives’ pragmatism about the life and death of their institutions didn’t extend to their own pay: they’d sell their companies long before they’d sell their entitlement-driven souls. Indeed, ironically, the demise of some competitors and the enforced mergers of others meant the remaining players became bigger and more vital than ever, increasing their mystique and reducing their susceptibility to oversight and moral suasion: despite all that’s happened, “excessive” regulation – even over something as demonstrably volatile and perilous as the derivatives market - is still easily demonized as job-killing interference. Sadly, it’s as likely as not that the main “change” we can look forward to is a repeat crisis even worse than the last one.