More hollywood realism - you will love what these economists say - I use bold and italics below to interject hollywood predicting the future - scary sometimes.
Foundation for Economic Education
fee.org
Hollywood’s Views of Capitalism
Published in The Freeman: Ideas on Liberty - March 1993
by Raymond J. Keating
Raymond J. Keating is New York State Director of Citizens for a Sound Economy
Although the movie industry has certainly thrived under the free enterprise system, Hollywood is often unfriendly in its cinematic portrayals of businessmen and capitalism, though there are some exceptions. A visit to your local video store reveals a disagreement among film makers over what capitalism represents. I recently rented movies by three prominent directors-Oliver Stone, Francis Ford Coppola, and Frank Capra. The contrasts were stark, especially between Stone and the latter two.
Oliver Stone’s Wall Street leads the movie-goer to believe that the securities industry is a rigged game, and that capitalism is inherently corrupt. Hard work as a means to success in the financial community is debunked, only to be supplanted by corruption and law breaking, as securities trading is seen as a game with little or no productive value. Stone presents a harsh judgment on an economic system he fundamentally misunderstands.
Wall Street has come to be the historical revisionists’ cinematic representation of the 1980s—the so-called “decade of greed.” It, unfortunately, offers a view prevailing not only in the film industry, but in academia and the media as well. In many ways, Wall Street perpetuates a class warfare myth, with contrasts being drawn between so-called haves and have nots, or the bourgeoisie and the proletariat.
The movie’s antagonist is Gordon Gekko, a corporate raider. Gekko’s speech at the stockholders meeting of Telder Paper, his takeover target, is meant by Stone to reflect the corrupt nature of capitalism. In fact, Stone managed—knowingly or not—to provide a glimpse of why corporate raiders provide a positive service in a free market economy. Gekko states:
Telder Paper has 33 different vice presidents, each making over $200,000 a year . . . . Our paper company lost $110,000,000 last year, and I’ll bet 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. . . . I am not a destroyer of companies; I am a liberator of them. The point is, ladies and gentlemen, that greed for a lack of a better word—is good. Greed is right. Greed works. Greed c1arifies, cuts through, and captures the essence of the evolutionary spirit. Greed, in all of 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 United States of America.
http://www.nytimes.com/2005/04/03/business/yourmoney/03pay.html?pagewanted=all&position=
My Big Fat C.E.O. Paycheck
By CLAUDIA H. DEUTSCH
Directors, meanwhile, are spending more time scrutinizing auditor reports and management strategies, looking for just such fudging. And for that, they've been rewarded. Pearl Meyer's data show that average total compensation of directors at 200 large companies probably topped $200,000, up from an average of $176,000 the previous year.
'Directors are meeting more often, so their meeting fees are up,' said Jannice L. Koors, a Pearl Meyer managing director, 'and there's clearly a sense that the liability they face, both personally and professionally, has increased, and thus warrants more pay.'
Inflated pay for deflated performance has become ever more rankling to shareholders, many of whom are still scrambling to recoup the losses they suffered after the stock market imploded in 2000.
Greed or Self-Interest?
The word “greed” in such a speech is Stone’s carrier of corruption. It is his word of choice designed to elicit a specific response from the movie-going audience. After all, how could one view greed favorably? In fact, “self-interest” would have been a more apt term, which was understood over two centuries ago by Adam Smith, the father of capitalism. Smith wrote in An Inquiry into the Nature and Causes of the Wealth of Nations: “It is not from the benevolence of the butcher, the brewer, or the baker, that we expect our dinner, but from their regard to their own interest.” Self-interest removes the judgmental nature of Stone’s presentation, while encompassing not only greed, but also industry, charity, self-improvement, and altruism i.e., any human motivation.
Gekko’s later statements lend greater clarity to Stone’s view of the world. In reference to a Gekko plan to liquidate the holdings of an airline company, Budd Fox (the movie’s symbol of redemption as he in the end rejects the greed Gekko represents) asks, “Why do you need to wreck this company?” Gekko’s answer: “Because it’s wreckable!” Stone views the breakup of a firm as pure destruction. He is unable to understand what Joseph Schumpeter termed “creative destruction.” That is the notion that resources might be more efficiently used if freed from less profitable ventures and reinvested elsewhere. This is the dynamic aspect of capitalism that allows for renewal and growth.
But the essence of Stone’s limited vision is captured in Gekko’s definition of capitalism: “It’s a zero sum game. Somebody wins, somebody loses. Money itself isn’t lost or made, it’s simply transferred from one person to another—like magic. This painting here, I bought it ten years ago for $60,000. I could sell it today for $600,000. The illusion has become real, and the more real it becomes, the more desperate they want it. Capitalism at its finest . . . . I create nothing. I own . . . . You’re not naive enough to think that we live in a democracy, are you, Buddy? It’s the free market.” Stone does not understand that wealth can be created, not merely shifted around, and that the free market provides the incentives for individuals to create, innovate, and take risks. He sees a rise in the price of a painting as the pinnacle of capitalism. In fact, it is in those nations that have rejected free enterprise where the only source of value is to be found in a painting, for little else is created.
Wall Street presents a view of capitalism as being controlled by the few at the expense of the many—democracy versus the free market in Gekko’s words. Stone does not understand the nature of an exchange economy, missing a fundamental point that in a free enterprise system, one must first supply a service or good in order to demand; i.e., even the most greedy individuals must supply something that fulfills the needs or wants of another individual in order to participate in an exchange economy. Individuals vote with their dollars, if you will. The phrase “democratic capitalism” seems quite natural, for example, while “democratic social ism” seems oxymoronic.
Warren buffet writes that adam smith meant for the USA to trade production for production, not sell the farm to china to consume plasma tv's - that our consumption must be limited by our production - we make green paper - but what else? The author however makes a good point about alternating VIEWS of the SEC - I read about SHO violations and how the SEC and STOCKGATE are so crooked and feel the tucker model more accurate
....The two views of government presented in Wall Street and Tucker are instructive as well. In Wall Street, stock market regulators act as saviors, cleaning up what unbridled capitalism has wrought. In Tucker, the Se curities and Exchange Commission does the bidding of powerful politicians and special interests in crushing the entrepreneur. |
