Tuesday, May 20, 2008

"Greed - for lack of a better word - is good. Greed is right. Greed works."

According to Robert Mundell, Columbia economist and Nobel laureate, the movie Taxi Driver is responsible for "creating more wealth" than any other movie in history. Why?
The 1976 classic, directed by Martin Scorsese with Robert De Niro as the bitterly alienated protagonist, gave the world De Niro's catchphrase, "You talking to me?", and introduced a young Jodie Foster. But what does it have to do with the world economy?

John Hinckley, the deranged would-be assassin who attempted to kill US president Ronald Reagan in 1981, claimed that he was inspired by it. He said that his action was an attempt to impress Foster. (The movie features a scene in which a mohawked De Niro attempts to assassinate a politician.)

According to Mundell, the wave of sympathy for Reagan that was engendered by the assassination attempt deterred Democrats in Congress from voting against his proposed tax cuts. Because of this accident of history, the US administered a big fiscal stimulas at the same time that Paul Volcker at the Federal Reserve was administering tight money. This, for Mundell, was vital in creating the era of prosperity that followed.

"Taxi Driver is the most important movie ever made from the standpoint of creating GDP," Mundell told delegates. "It's the movie that made the Reagan revolution possible. That movie was indirectly responsible for adding between $5trn and $15trn of output to the US economy."
Personally, I'm skeptical that
a) Taxi Driver is really THE cause that of the Reagan assassination attempt (as opposed to the fact that Hinckley was crazy);

b) that the assassination attempt is THE cause for the tax cuts passing (as opposed to the fact that tax cuts tend to be popular in general, and Reagan had just routed Jimmy Carter in 1980 51%-41% while carrying 44 states); and

c) that the tax cuts are THE cause for that much economic growth (given that Reagan then raised taxes twice starting in 1982, and that the economy grew faster under Clinton than it did under Reagan in any event).

I'd probably choose Wall Street as the biggest wealth-creating movie of all time. God only knows how many future I-bankers were created by watching the Michael Milken/Carl Icahn/Ivan Boesky-inspired Gordon Gekko. True, he was supposed to be a villain, but lots of people didn't (and don't) necessarily see him that way. Plus, this has got to be the greatest monologue in defense of capitalism of all time:

Well, ladies and gentlemen, we're not here to indulge in fantasy, but in political and economic reality. America. America has become a second-rate power. Its trade deficit and its fiscal deficit are at nightmare proportions. Now, in the days of the free market when our country was a top industrial power, there was accountability to the stockholder. The Carnegies, the Mellons, the men that built this great industrial empire made sure of it because it was their money at stake. Today, management has no stake in the company!

All together, these men sitting up here own less than 3% of the company. And where does Mr. Cromwell put his million-dollar salary? Not in Teldar stock: he owns less than 1%.

You own the company. That's right. You, the shareholder. And you are all being royally screwed over by these, these, bureaucrats with their steak lunches, their hunting and fishing trips, their corporate jets and golden parachutes.

Teldar Paper, Mr. Cromwell, Teldar Paper has 33 different vice presidents, each earning over $200,000 a year. Now, I have spent the last two months analyzing what all these guys do and I still can't figure it out. One thing I do know is that our paper company lost $110,000,000 last year, and I'll bet that half of that was spent in all the paperwork going back and forth between all these vice presidents.

The new law of evolution in corporate America seems to be survival of the unfittest. Well, in my book, you either do it right or you get eliminated.

In the last seven deals that I've been involved with, there were 2.5 million stockholders who have made a pretax profit of $12 billion. I am not a destroyer of companies, I am a liberator of them!

The point is, ladies and gentleman, that greed - for lack of a better word - is good. Greed is right. Greed works. Greed clarifies, cuts through, and captures the essence of the evolutionary spirit.

Greed, in all its forms - greed for life, for money, for love, knowledge - has marked the upward surge of mankind. And greed - you mark my words - will not only save Teldar Paper but that other malfunctioning corporation called the USA.

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