Ethical Aspects of the Financial Crisis

The documentary film Inside Job directed by Charles Ferguson examines the origins of the financial crisis that broke out in 2007.

Certainly, this movie cannot be regarded as a scientific study of the recession, but it does raise several important questions about the behavior of financial institutions or political leaders. This paper will look at the ethical aspects of the meltdown from the perspective of utilitarianism developed by John Stuart Mill. Moreover, it is vital to examine this issue from the standpoint of social contract theory.

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In particular, it is necessary to speak about the ideas of John Rawls. On the whole, it is possible to say that different philosophers may disagree on various principles of ethics. Yet, they would agree that to some degree, the origins of the financial crisis can be traced to the immoral behavior of some individuals who attempted to maximize their own benefits of at the expense of others. Moreover, one can argue that the policies existing at that time failed to protect the interests of the majority.

It should be noted that in the movie Inside Job stresses the idea that the employees of leading financial institutions were engaged in illegal activities such as fraud, inside trading, or money laundering (Inside Job). Special attention is paid to the behavior of corporate executives such as CEOs whose compensation and bonuses are described as excessive and unjustified (Inside Job).

The film-makers emphasize several important points; one of them is lack of accountability, especially if one is speaking about corporate executives whose risky strategies deprived many people of their savings (Inside Job). Secondly, the authors of the movie stress the point that the laws failed to protect people who put their trust into banks or rating agencies.

They did contribute to the growth of some financial institutions, but they did not ensure the transparency of their work (Inside Job). There are some of the most important issues raised in the film. Thus, the main message of the film is that the meltdown can be the result of social injustice.

One can look at the situation from different philosophical and ethical perspectives. For example, this meltdown can examined from the standpoint of social contract theory which was advocated by John Rawls. In his belief, the political and social systems should be designed in such as way that they create equal opportunities for every person irrespective of arbitrary factors such as the income level of ones parents (Rawls 448).

Moreover, in his opinion, the laws can be viewed as just provided that they benefit or protect “the least disadvantaged members of the society” (Rawls 258). These are the main principles of social contract that he advocates. Provided that this approach is adopted, one can argue that this meltdown originated from the policies that benefited the most advantaged members of the community, rather than the least disadvantaged ones.

The film Inside Job stresses the idea that financial institutions have sufficient resources can influences the policies of the state, especially through lobbing activities (Inside Job). However, one cannot say the same thing about middle-class people. John Rawls might have regarded this discrepancy as a violation of social justice principles.

In my view, this argument is quite justified because the government did not defend the right of people who relied on the integrity of financial institutions and the prudence of their policies. These members of society can be regarded as less advantaged in comparison with corporate executives, because they may not have the expertise to protect themselves against possible fraud.

Secondly, this situation can be examined by applying the principles of utilitarian ethics elaborated by John Stuart Mill. In particular, one can speak about the Greatest-Happiness Principles that this philosopher proposes (Mill 16). According to this postulate, ethical behavior is supposed to maximize happiness of individuals and minimize their pain (Mill 16). It should be noted that Mill’s utilitarianism should not be confused with hedonism that places emphasis on physical pleasure.

More likely, Mill believes that an action can be viewed as moral if it maximizes the benefits of other people, and not only the agent of the action (Mill 16). The examples provided in the film Inside Job indicate that policies and decisions of corporate executives were aimed at maximizing their own benefits, rather than public welfare (Inside Job).

Overall, the legislation improved the welfare of a very select group of people, such as high-ranking employees of banks or hedge funds. Yet, the needs of many other people were disregarded. Thus, the Greatest-Happiness Principles was violated.

Certainly, the social contract theory of John Rawls and the utilitarianism of John Mills cannot be views as similar ethical philosophers. Yet, they can both suggest that to a great extent the financial meltdown was a result of policies that failed to safeguard the welfare of many people who relied on the efficiency and integrity of the financial services industry. In terms of social contract theory and utilitarianism, such actions can be seen as immoral.

Works Cited

Inside Job. Ex. Prod. Audrey Marrs and Charles Ferguson. New York: Sony Pictures Classics, 2010. DVD.

Mill, John. Utilitarianism, London: Longmans, Green, Reader, and Dyer, 1871. Print.

Rawls, John. A Theory of Justice, Revised Edition, Boston: Harvard University Press, 1999. Print.

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