What is a person's capacity for change? What are the lines between right and wrong, and who decides where those lines are drawn? These are the questions at the heart of The Lives of Others, nominee for Best Foreign Picture, which comes into the Oscar race boasting seven Lola Awards (the German equivalent of the Academy Awards) and European Film Awards for Best Film, Best Actor (Ulrich Mühe) and Best Screenwriter. Set in East Germany about four-and-a-half years before the fall of the Berlin Wall, The Lives of Others follows Captain Gerd Wiesler (Ulrich Mühe), a Stasi (Secret Police) officer who believes wholeheartedly that the job he does is in the best interest of the State and the ruling Party. Wiesler takes the Stasi's motto -- "To know everything." -- quite seriously. We meet Wiesler as, with eerie calm and a relentless --yet misleadingly gentle -- approach, he conducts an interrogation on a prisoner whose neighbor escaped to the West.

Wiesler, teaching the future generation of Stasi officers, uses a tape of the interrogation of this poor, unfortunate soul to demonstrate to his class how, by sleep-depriving prisoners for a period of days, one can break them and get them to confess. Wiesler does his jobs, both teaching and police work, with a calm detachment; he is a moral straight arrow, a man utterly convinced that what he is doing is right. He believes so deeply in the system, he no longer questions it at all -- if he ever did. The players and events that set the gears of the story in motion all come together one night when Wiesler is invited by his old Stasi school chum, Lt. Col. Grubitz (Ulrich Kukur) to attend the latest play written by Party golden boy Georg Dreyman (Sebastian Koch), one of the few "intellectuals" who vocally supports the Party in spite of his close friendships with artists who are considered dangerously outspoken. p>For his part, Grubitz is too busy brown-nosing and scaling the scaffolding of the Party's power structure to consider issues like right or wrong, or to bother with pesky things like moral judgments. When Grubitz is asked by Minister Bruno Hempf (Thomas Thieme) to open an investigation on straight-arrow Dreyman, Grubitz complies without questioning why, merely because he wants to be on the minister's good side. Grubitz assigns Wiesler to the case, and, quicker than you can blink an eye, the Stasi guys have Dreyman's apartment wired from stem to stern. Wiesler ensconces himself in the apartment building's deserted attic, and soon he's listening in on Dreyman's most private and intimate moments, immersing himself in the artist's life with his girlfriend, Christa-Maria (Martina Gedeck) a famous and gifted actress who plays the lead in his play.

When Wiesler spies Christa-Maria getting a ride home in a fancy car one night, he has the plates run and discovers the car belongs to none other than ... Minister Hempf. When Grubitz tells him to bury that information, Wiesler realizes, perhaps for the first time, that the people who run the Party might sometimes give orders that have more to do with their own self-interest than what's best for the Party. Meanwhile, as Wiesler studies Dreyman up close, immersing himself in the other man's life, he sees the passion and innate goodness of the man, and begins to question just what he's doing there and why he's being asked to find a reason to destroy this man's life. But change is coming to Dreyman as well, as the idealistic writer struggles over the depression of his good friend, director Albert Jerska, who has been blacklisted by the government from directing plays for seven years after speaking out against the government. Dreyman's liberal writer friends are constantly pressuring him to stop supporting the Party.

When a tragedy strikes, and then Dreyman realizes that Christa-Marie is cheating on him -- and with whom, and why -- his idealistic world view is shaken to the very core. Wiesler, watching events unfold from Dreyman's perspective, is shaken as well. Helmer/screenwriter Florian Henckel von Donnersmarck, making his feature film debut, hits all the right notes here. He keeps his story arc tight and his focus locked in on Wiesel and Dreyman as they move through major philosophical and psychological flux, revealing subtle changes in his characters with control and deliberation. Although the other characters, especially Christa-Marie on one side and Grubitz and Minister Hempf on the other, are important to the film as catalysts setting events in motion, von Donnersmarck's focus is on how each of them directly impact Wiesler and Dreyman and changes them.

Stylistically, the visual design is appropriately grey and gloomy, as befits a story set in East Germany under the oppressively watchful eye of the Stasi, and the cinematography favors lots of tight shots of Wiesel listening intently to Dreyman's life. This works well for the film primarily because of Mühe, who manages somehow to simultaneously maintain a tightly controlled poker face while conveying emotion with the set of his jaw or the intensity of his stare. An achingly sad performance by Gedeck brings Christa-Maria to life as yet another victim of a system that, no matter the idealism it started with, has gotten corrupted along the way, and Koch portrays Dreyman, the playwright, with just the right combination of warmth and intelligence.

The Lives of Others is a political film, of sorts, in that it looks at what happens with the boot-heel of the state crushes the people it is supposed to protect. At it's core, though, this is really just a simple story told and acted extraordinarily well. von Donnersmarck, with his much-buzzed about debut feature film (he dropped out of film school to make this film) has set a high watermark for himself and those around him. With his eye for visuals and great sense of story, I can't wait to see what's next from him.

For another take on The Lives of Others, check out Martha's review of the film from the Toronto International Film Festival.