"Greed . . . is good. Greed is right. Greed clarifies, cuts through and captures the essence of the evolutionary spirit . . . Greed -- mark my words -- will save . . . the U.S.A."
-- Gordon Gekko in Wall Street
Remember those old jokes about the good news and the bad news? Well, the good news on the economic front is that most of us survived the money-money- money decade of the 1980s very nicely, thank you. The bad news is that we face appalling bills to be paid in the 1990s. That is not a joke.
The good news is that the U.S. gross national product doubled during the 1980s, from $2.7 trillion to $5.3 trillion. The bad news is that much of this was done by borrowing. The national debt tripled, from $909 billion to almost $2.9 trillion (interest alone now amounts to $165 billion a year, roughly the equivalent of the budget deficit). Corporate and personal debts both soared. All in all, the U.S. consumed $1 trillion more than it produced in goods and services.
The good news is that lots of people prospered. This was the age of financial wizards making fortunes in their 20s, and roughly 100,000 Americans became millionaires every year. Michael Milken, the junk-bond king at Drexel Burnham Lambert, set the record by earning $550 million in 1987. The bad news is that while the top 20% of American families' earnings rose more than $9,000 (after adjustment for inflation), to an average of nearly $85,000, the bottom 20% dropped by $576, to a hungry $8,880. The Government estimates that 32 million Americans -- 12.8% of the population -- live in poverty, compared with 11.4% a decade ago. And Michael Milken has been indicted on 98 counts of fraud and other misdeeds.
The good news is that the New York stock market recovered quickly from its worst one-day crash in history (a free fall of 508 Dow Jones points in 612 hours on Oct. 19, 1987) and climbed back to its pre-crash high of 2722. The bad news is that if adjusted for inflation, the Dow would have to reach 3900 to match where it was as far back as 1966.
The good news is that 20 million new American jobs were created during the 1980s. The bad news is that these new jobs did not come in the FORTUNE 500 companies, which actually cut their work forces by 3.5 million; many of the new 1980s jobs were low-paying service positions.
The good news is that booming international trade is spreading wealth around the world. The bad news is that the U.S. was the world's largest creditor in 1980 but went into the red in 1985, and has become the world's largest debtor. Its trade deficit runs about $150 billion a year. Foreign holdings in the U.S. now amount to $1.5 trillion, compared with $1.2 trillion in U.S. assets abroad. And meanwhile, the grinding poverty of the Third World, by now $1 trillion in debt, has not improved in the least.
The good news is that the Berlin Wall has crumbled, and the cold war seems to be over. That offers the possibility of immense cuts in the $300 billion defense budget and immense investment opportunities in Eastern Europe. The bad news for Americans is that the Pentagon is still clinging to every dollar, and the investors pouring into Eastern Europe are mainly the West Europeans, who are in the process of uniting into an economic superpower.