Link to this page: https://www.socialistparty.org.uk/issue/887/22148
Witty take on credit crunch misses problems at heart of capitalism
'The Big Short' is a story about the 2008 world economic crash. You won't find the unemployed or the homeless in it. But what you will see is the fraud, corruption and greed of finance capital at its worst.
The film is entertaining and witty as it seeks to explain the deliberately obscure world of high finance. Much of its humour comes from the eccentricities of its main characters.
It is difficult, however, to sympathise with individuals who made millions of dollars from a crash which led to misery for billions of workers.
The plot follows the true story of three groups of US banking "outsiders" who could see the financial system was about to crash.
Lenders had been selling mortgages to US workers who they knew could not afford long-term repayments.
They hid this 'sub-prime' debt in packages called collateralised debt obligations (CDOs) for sale on the finance markets.
They even invented the 'synthetic' CDO, which made money by betting the CDO market would continue to make a profit.
The Big Short nicely sums this up with a scene at a Vegas gambling table. The protagonists aimed to make a fortune by betting CDOs would fall in value - known as short selling.
The trillion-dollar CDO market was - as Marx would describe it - fictitious capital. (This bit isn't in the film!)
Real capital is based on workers making products and running services. Capitalists only pay back part of the value workers create as wages - keeping the rest as profit.
Fictitious capital is money expanding itself through 'speculation' - betting on real wealth - or speculation on speculation. As the economic upturn turned into its opposite, this great credit swindle was found out.
The outsiders tried to warn the financial establishment that CDOs were about to crash. What they found was a gravy train of financiers, 'regulators', mortgage brokers and credit assessors - whose interests were to cover up the truth.
Big institutions like Lehman Brothers and Bear Stearns crashed, but the taxpayer bailed out the system. In the USA alone, nearly nine million people have lost their jobs and around seven million their homes since the credit crunch.
The film went on to say that, of course in the years after 2008, the state prosecuted hundreds of brokers, broke up the banks, and strengthened regulation... It then delivers the punchline: "Only kidding!" In fact, only one minor banker faced prosecution.
In 2015, US banks started to market CDO-like packages once again. Capitalist competition requires this endless quest for ever riskier, ever more short-term profits.
The Socialist Party calls for public ownership of the finance sector, to plan resources for social need instead of gambling to enrich the 1%.
In The Socialist 3 February 2016:
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