The release of “Wall Street: Money Never Sleeps” inevitably will bring comparisons to the original “Wall Street,” released in 1987. What might also be interesting is a side-by-side evaluation of the present economic climate compared to the U.S. economy when Gordon Gekko was making trades 23 years ago.
The two eras seem like polar opposites: Small government reigned in the 80s under former president Ronald Reagan, while today’s nation is led by the federal stimulus-happy administration of President Barack Obama. Let’s take a look at how the market and the economy were behaving during the time frames surrounding the two storylines.
The mid-to-late 1980s have earned a reputation as America’s “Era of Greed.” The name suited many aspects of the decade, from the financial industry to the government that let go of the private sector’s reins to pop culture.
After suffering through a recession in 1981 that brought the national GDP to 2% to 3% below zero, a Reagan-run economy shot through the roof. The Dow Jones Industrial Average grew by nearly 300% during the decade as restrictions were lifted from the private sector of the economy. The GDP grew from -0.3% to 4.1% during Reagan’s presidency. The Wall Street trading floors were filled with loud, aggressive brokers in the vein of Gekko back in the 1980s.
The economic policies enacted by the administration, known as “Reaganomics,” reduced government spending, reduced inflation, reduced government regulation and reduced taxes. The tax reductions made America a very friendly place for big earners, as they held onto billions of dollars that would have been taken by the government as income tax in the past. The losers in the situation were lower- and working-class Americans who actually made less money during the 80s due to a shift in tax burden, and the federal government, which went into debt because it received so little in tax revenue.
One of the decade’s most popular songs was “Material Girl,” by Madonna, which focused on the material excesses of the time. Along with Dire Straits’ “Money for Nothing,” Madonna’s iconic song summed up a period of time that is commonly defined by glitz, glam and shiny clothing.
2010: ‘The Recovery’
The good times lasted through the 1990s and most of the 2000s as investors rode one bubble (tech) to the next (housing). The burst of the housing bubble, however, was nearly too much for the U.S. economy to withstand. The U.S. housing market peaked in 2005 after a steady and swift rise. In the chaos of the climb to the top, mortgage issuers got a little sloppy, giving mortgages to underqualified homebuyers. When the housing market collapsed, the economy went with it — it turns out large parts of the economy were made up of mortgage-backed securities, products that performed based on the status of home loans. When the mortgage market went off the deep end, so did the economy.
The economy entered a recession, which lasted from late 2007 through mid-2009. The U.S. is currently not in a recession, but the recovery has not come as quickly as many had hoped. The top scapegoat for the slow turnaround has been Obama. The President has taken drastic steps to try to return the economy to solid ground, but none has worked as well as the nation had hoped.
As a result, the nation is a very different place now than it was 23 years ago. Investment banks and Wall Street firms are still raking in profits but some banks have been humbled by new regulations meant to curb risky and predatory behavior. As unemployment and mortgage foreclosures skyrocketed in certain regions, entire neighborhoods became veritable ghost towns and once-middle-class citizens picked up frugal money habits.
It’s interesting to compare and contrast our lives now with the lives of those who came before us and to examine the ways we might be paying currently for the policies of the past. So when you take in Oliver Stone’s new blockbuster this weekend, think about the circumstances surrounding this film and its predecessor.