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I continue scanning the cinema for new films about private sector managers, to be analyzed in the book I’m writing or discussed in my course on narratives. There have been more than a few inspired by the economic crisis, the most compelling of which is Charles Ferguson’s 2010 documentary Inside Job. The latest to hit the screens is the drama Arbitrage, the screenplay and directorial debut of Nicholas Jarecki.

The title Arbitrage is misleading. Arbitrage involves taking advantage of price differences that exist in two or more markets to strike profitable deals. Economists generally approve of arbitrage, because arbitrageurs’ trades will eliminate those inefficient price differentials. The key character in Jarecki’s Arbitrage, hedge fund manager Robert Miller (played by Richard Gere) is however a fraudster, pure and simple. He has secretly invested $400 million of his firm’s assets in a Russian copper mining venture that he says is immensely profitable, but he cannot get any of his money out. Attempting to sell his firm, he borrows $400 million from a fellow hedgie to temporarily plug this hole in his balance sheet. He has a potential buyer, but to consummate the deal he must mislead both the buyer and the regulators. On the personal level, behind the façade of a happy marriage – his wife Ellen, is played by Susan Sarandon – he has a mistress, a young French art dealer for whom he provides an tony apartment.

The precipitating event: Miller escapes his sixtieth birthday party at home to visit his mistress and then takes her on a late-night drive. Tired from his hot sexual encounter, he rolls his Mercedes, killing her and injuring himself, visibly but not seriously. Miller embarks on an instant cover-up, calling in a favor to help him escape the accident scene and, when an NYPD detective begins an investigation, Miller denies any involvement in the accident. So Miller’s criminal fraud accompanies his commercial fraud.

Miller is yet another exemplar of the corrupt financier, a well-known character in financial fables. As played by Gere, he is handsome, charming, smooth, and determined. But he lacks the near-frenetic energy, ambition, and bombast of Michael Douglas’s Gordon Gekko, still the paradigm of this character. Miller is attempting to liquidate his firm for a mere half-billion to have a more quiet life – a lack of ambition that pales in comparison to the grandiosity of Gekko’s greed. We can’t imagine Miller giving a “greed is good” speech, because he is a much more shadowy and private character. I don’t think Miller will resonate with audiences the way Gekko did, and the movie stands or falls on how Miller is regarded.

Miller ultimately succeeds in selling his firm to another hedgie, played by the assuredly uncharismatic if not downright unattractive Graydon Carter, definitely a face made for radio. Miller’s criminal fraud is another matter. Much of the movie deals with the investigation of the accident. Miller beats the first rap, as his clever legal counsel has the charges against the accomplice who spirited him away from the scene of the accident withdrawn. Miller faces a more serious challenge in that his wife, who is well aware of Miller’s philandering, especially on the evening in question, presents him with a one-sided separation agreement, and threatens that if he will not sign, she will go to the police to destroy his alibi.

The movie ends without showing how Miller will respond to this dilemma. In terms of the four organizational fables I often discuss in this blog, Arbitrage presents itself as an example of the ironic fable, in which the protagonist Miller enriches himself at the expense of the purchaser of his firm and indulges himself to the disgrace of his family. The movie’s ending raises the possibility of it being an instance of the retributive fable in that, if Ellen Miller stays firm in her resolve, Robert Miller will end up either in jail, or a free man, but without his millions. Either way, he will be brought to justice and the moral order restored.

My initial judgment, on first viewing Arbitrage is that I will mention it in Enterprising Fables, the book on private sector narratives, as one narrative instantiating the rogue financier genre. But it is unlikely that I would use it in class. The financial chicanery is not particularly complex or enlightening, so students learn little about the financial sector. Miller is far from the most compelling of the rogues. And too much of the story revolves around his attempt to conceal the tragic consequences of his marital infidelity.

This post is about Dr. Bernard Ludwig, my uncle (mother’s brother) who, passed away on Sunday, Sept. 16 at the age of 90. His funeral will be Wednesday, Sept. 19 1 p.m. at Benjamin’s Park Memorial Chapel (2401 Steeles Ave West).

What is best known about him is that during his long career as an obstetrician-gynecologist, he delivered 20,000 babies – the population of a small town. He has been acclaimed for his willingness to work long hours and his devotion to his patients. This devotion found expression not just in his availability to perform deliveries, but in his willingness to listen and, if appropriate, offer advice.

On one of my visits when he was still at home, I brought my 12 year old son Alexander with me. He had a message for Alex, delivered succinctly in the words “aim high,” which he then expanded upon in terms of the importance of setting ambitious goals. He then had a personal demonstration for us. One of the reasons he was in such demand was that he was highly skilled in doing the difficult deliveries. He has large hands, and he asked both of us to hold his hands so that he could show us that they still remained – at age 90 – strong and steady.

He also has a large heart, and it was this largeness of heart that inspired his practice, and that his patients responded to. And it was this kindliness and warmth that his relatives, in particular grandchildren, nieces, nephews, and grand-nephews responded to.

I’ve often written about local heroes, people who never have 15 minutes of widespread fame, but who make a huge contribution to the community around them. Dr. Ludwig was the epitome of a local hero.

While in the hospital room as he was dying, one of his former patients who knew he was in the hospital came by to offer prayers for him. And I was there to hold his hands. It was my way of saying thank you.

With the prospect of a PQ Government in Quebec after next Tuesday’s election and a third referendum (a syndrome called the “neverendum”) on the horizon, I will reflect a bit on how global capital markets – the bond vigilantes – might respond.

There is some relevant historical precedent. In the run-up to the too-close-to-call 1995 referendum, international capital markets refused to buy new Canadian public sector debt. At the time, I was on the board of the Ontario Transportation Capital Corporation, then responsible for building Highway 407. We wanted to replace the provincial treasury bills that were funding the project with long term debt, and were given that alarming news by the Ontario Ministry of Finance.

Since 1995, Canada’s fiscal position has become much more secure relative to that of other countries. On the other hand, the bond vigilantes are much faster to pounce on countries whose finances are at all suspect.

Quebec’s public sector debt now stands at about 50 percent of gross provincial product. Debt service costs approximately $10 billion and consumes 11 percent of the government budget. The critical question is what will happen to the federal debt in the event Quebeckers were to vote for sovereignty in a future referendum. Sovereigntists will ignore the question or obfuscate. The federal government will argue that the debt was incurred by the entire nation, that federal assets in Quebec (the St. Lawrence Seaway, airports, federal buildings, national parks) will remain in situ and would thus become the property of a sovereign state of Quebec, and that therefore an independent Quebec must assume its fair share of the federal debt.

If we assume that a fair division of federal debt results in Quebec assuming its per capita share of the debt (24 percent, based on the 2011 Census), then an independent Quebec’s debt would increase to approximately 90 percent of gross domestic product (as shown in a recent briefing note entitled Quebec Election: Handle with Care posted on the Pimco Canada website). If we then assume that Quebec would be able to pay the same interest rate on its additional debt as on its current debt, then debt service costs would increase to close to 20 percent of the government budget.

Enter the bond vigilantes. Public debt of 90 percent of GDP is close to the situation in Greece, Italy, or Spain. If the bond vigilantes are skeptical about the long-term viability of the public finances of a sovereign Quebec, they would demand a substantially greater risk premium for debt issued by a sovereign Quebec than by the Canadian province of Quebec. The downward financial spiral faced by Greece or Italy could become a reality for Quebec. So virtually the first action of a sovereign Quebec government would be to seek a bailout.

If the sovereigntists’ Achilles heel is therefore public debt, then the federal government could exploit it. As soon as a sovereigntist government begins to prepare for a referendum, the federal government should enact a Fiscal Responsibility Act that would be parallel to the Clarity Act. (Recall that the latter requires a clear referendum question passed by a supermajority as a prerequisite for negotiating Quebec sovereignty.) The Fiscal Responsibility Act would stipulate that a sovereign Quebec would have to accept its per capita share of the federal debt. The Fiscal Responsibility Act would be intended to so substantially increase the economic cost of sovereignty for Quebeckers that it would dissuade them from voting for it in a referendum.

What I have outlined here is one of the key sticks the Harper Government could use to keep Quebec in confederation. But what carrots could it provide? It is a majority government with minimal representation from Quebec. Prime Minister Harper, to his credit, has achieved a level of fluency in French that, unfortunately, few members of his Cabinet or caucus can match. On a host of issues – for example social policy, cultural policy, and the long-gun registry – the Conservatives are completely out of step with Quebec. The Harper Government will have to do some serious thinking about how it can present a more welcoming face to Quebeckers if it is still in power during another referendum. Threatening to saddle Quebec with an unsustainable debt burden may be necessary to preserving the Canadian confederation, but it will not be sufficient.

After some vacation time, I’m now back to the blog. The latest round in advertising for the US presidential campaign features attack ads by the Obama campaign and by Americans for Prosperity, a conservative superpac.

The Obama campaign’s attack ad starts with Barack Obama’s affirmation – in his voice accompanied by his physical presence – that he approved the ad. With Romney’s off-key rendition of “America the Beautiful” in the background it reminds us that Romney’s firms outsourced private sector jobs to Mexico and China, and that as Governor of Massachusetts, he outsourced public sector jobs to India. It continues that Romney personally has millions in Swiss bank accounts and tax havens like Bermuda and the Cayman Islands. It ends with the text message “Mitt Romney’s not the solution. He’s the problem.”

The Americans for Prosperity ad starts with a clip of Obama pledging to cut the deficit in half by the end of his term in office and then shows clips of a “national debt clock,” in which the national debt increases from $10 trillion at the start of his term of office to the current level of $15.9 trillion – the latter displayed with a cacophony of background voices talking about the debt crisis and government spending. The ad ends with another clip of Obama saying that “I will be held accountable. If I don’t have this done in three years, then there’s gonna be a one term proposition.” The ad’s punch-line is the text message: “let’s make this a one-term proposition.” The ad concludes with a narrator stating that “Americans for Prosperity is responsible for the content of this advertising.”

What stories is each ad telling? Who is the narrator? Which ad is more convincing?

Obama’s voice and the accompanying clip of him in the White House at the outset proclaim his status as a metanarrator, the person with authority to set in motion the attack on Romney. The attack is waged on two levels, first public policy, namely that Romney has outsourced both private and public sector jobs in the past and can be expected to do so in the future; and second, personal probity, the implication that, through bank accounts in Switzerland, Bermuda, and the Cayman Islands, Romney has been aggressively, and perhaps illegally, minimizing his tax obligations. Contrasting Romney’s public display of patriotism with his policy decisions and personal conduct as taxpayer suggests hypocrisy and an absence of integrity.

The Americans for Prosperity ad has a much less authoritative metanarrator. Who or what is Americans for Prosperity? The conflation of the deficit with the national debt is unexplained and the cacophony of voices hides a fuzziness of thinking. In the second clip of Obama, in which he says “if I don’t have this done in three years,” it isn’t even clear that the “this” he refers to is the same “this” (cutting the deficit in half by the end of his first term) he was referring to in the first clip. The ad’s implicit message is that Obama is a promise-breaker. But is breaking a promise a sufficient reason to throw an incumbent out of office? There are plenty of instances of incumbents being reelected even if they broke their promises. What incumbents must argue is that they made a sincere attempt to keep their promises, but circumstances changed, and changing circumstances required a changed response. Obama hasn’t yet made that argument, but he could, and he could certainly blame the Congressional Republicans for their role in the US Government’s inability to halve the deficit.

To summarize: the Obama campaign’s attack ad tells a more coherent and convincing story than does the Americans for Prosperity ad, it hits at more serious personal failings on Romney’s part, and it uses a more authoritative metanarrator. Advantage in round two to the Obama campaign.

Our colleague Peter Aucoin passed away on July 7, 2011, almost a year ago. Yahrtzeit is a Yiddish word meaning anniversary (literally, time of year), and Jews are obligated to observe the Yahrtzeit of the deaths of members of their immediate family (parents, siblings, children). Within Judaism, it is a way of ensuring that everyone will be remembered for several years, hopefully a generation, after passing away.

Another way that people are remembered after their passing is through their professional achievements. This certainly appears to be the case for Peter Aucoin, whose accomplishments, at the end of a long and productive career include the Donner Prize-winning book Democratizing the Constitution and the April 2012 article in Governance about the New Public Governance in Westminster Systems.

Aucoin’s article about the New Public Governance (NPG) raised the spectre of politicization of the bureaucracy by first ministers intent on centralizing power in response to 24/7 media, 24/7 political competition, and 24/7 pressure for transparency and accountability. Aucoin made it clear that he regarded NPG as an ideal type present in varying degrees in the four different jurisdictions he discussed (Canada, the UK, Australia, and New Zealand).

The article has the look and feel of being written when the author’s time is running short. Aucoin’s writing was very simple and direct. At the end of his life, he wanted to communicate his message with the utmost clarity and forcefulness. Aucoin also qualified his views much less than is typical of most academic writing. Thus he wrote, “NPG constitutes a corrupt form of politicization to the extent that governments seek to use and misuse, even abuse, the public service in the administration of public resources and the conduct of public business to better secure their partisan advantages over their competitors. At best, this politicization constitutes sleazy governance; at worst, it is a form of political corruption that cannot but undermine impartiality…” (p. 178). Aucoin provided some examples, but his intent was less to provide exhaustive evidence than to develop a conceptual framework that can be tested empirically by other scholars. A clear measure of the fruitfulness and impact of Aucoin’s work would be if his ideal type of NPG stimulates ongoing scholarship.

For example, Aucoin remarked, without elaboration, that “the communication function of government has become the black hole of public service impartiality” (p. 183). There is certainly fertile ground for research on the politicization of the communication function of government. My ongoing research about the use of narrative by politicians, while starting from a very different set of premises than Aucoin’s, is leading me to conclusions similar to his, at least with respect to the Government of Canada.

Let me conclude with a personal note. Peter Aucoin was very explicit with colleagues in the last years of his life that he was fighting cancer. A very important prayer in Judaism is the mishebeirach, a prayer for healing, said in the middle of the Torah service. The rabbi, or leader of the service, asks members of the congregation to name aloud family or friends who are ill, and the congregation prays for their health. (“The One will send him/her, speedily, a complete healing – healing of the soul and healing of all the body – along with all the ill, among the people of Israel and all humankind, soon, speedily, without delay, and let us say: Amen.”) Readers who are interested may Google mishebeirach, and there is a particular moving choral setting by the late Debbie Friedman on YouTube.

We academics are generally secular in our outlook and dealings with one another, yet naming Peter in this prayer seemed to me to be the right thing to do. I emailed Peter and he responded that “it is greatly appreciated from one for whom prayer is central to life.” The last email I received from Peter, three months before he passed away, reported that he was in good spirits, even after seven weeks of chemotherapy and radiation and the exhaustion of treatment options. He again asked for prayer on his behalf, and concluded looking forward to the completion of Democratizing the Constitution.

As we approach Peter’s Yahrtzeit, I think it is important to remember some of the values he embodied towards the end of his life: optimism, prayer, and working as long as he could to communicate his message.