Email
Print
ShareSotto voce
"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 of its forms; greed for life, for money, for love, knowledge -- has marked the upward surge of mankind." Movie buffs will recognise these lines as being from Wall Street, the 1987 film that so typified the zeitgeist, the decade which about excess, of money, of lifestyles and most of all, of greed. (They were also about shoulder pads in jackets, bad hairstyles and bad music, but let that go.)
Whiz kids made multi-million dollar deals, got million dollar bonuses, bought fancy cars and acquired trophy wives who looked liked a million bucks. Derivatives, leverage deals and asset stripping were the games they played with weapons like junk bonds. Tom Wolfe, in his masterly novel Bonfire of the Vanities called them 'Masters of the Universe' and Gordon Gekko, the creepy dealmaker whose lines are quoted above and who was played by Michael Douglas, was the biggest master of them all.
Wall Street ended with Gekko getting arrested and indicted for insider trading along with his protégé Bud Fox, played by Charlie Sheen. It was an echo of the arrest and jailing of Mike Milken, the notorious junk bond dealer. One by one the Masters were either locked up or simply faded away. Companies collapsed and the loud-tie-wearing, Porsche-driving yuppies went out of fashion. The caring, sharing 1990s made us forget the greedy 1980s.
Well, guess what. The 1980s are back. Substitute mergers and acquisitions with deal-making, private equity with asset-stripping and hedge funds with junk bonds. CEO salaries are stratospheric and bonuses are touching outer space. Gordon Gekko would feel right at home. In fact, he will soon get a chance to come back among his own -- Michael Douglas has announced a sequel to Wall Street, probably sniffing that the current mood is the same as 20 years ago; just the players have changed and the deals have gotten bigger.
So have the salaries. CEOs of American companies in the Standard & Poor's 500 received a combined $4.16 billion in 2006, with at least 10 getting over $30 million. The total bonuses paid in Britain amounted to 42 billion pounds, a third of the country's budget on education.
More than the packages, though, questions are also slowly being asked about the money made by the deal-makers, or as they have been called, financial alchemists: the lawyers, the consultants and top executives, who don't actually produce or manufacture anything. You could argue that they have a specialised talent which deserves such high compensation, but you could also ask: talent for what, exactly?
Here too, there is an answer. They are experts at M&A, private equity buy-ins or breaking up companies which releases 'valuations' and makes everyone rich. But the jury is out on that one -- valuations and the deals behind them definitely makes the deal-makers rich; can the same be said about shareholders, who usually get only paper rich and may one day see that fortune disappear? And the bigger question is, while some people have made huge profits, is this growing prosperity trickling down to the rest of the population?
In a seminal essay, titled 'The Undeclared war on America's middle-class', Thom Hartmann, host of a popular radio show, describes how even two-wage families with one earner sometimes even doing two jobs, cannot keep their heads above water. In London, the new financial capital of the world, where homes are being sold and re-sold at humungous prices, the middle-class is being edged out of the city to neighbouring towns.
What has this got to do with us in India? Here the middle-classes are having a whale of a time, earning, spending, consuming. True, we have a lot of poor people (and have always had them, so what's new), but hasn't our growth been much more widely spread? Haven't salaries gone up? Isn't a lot of wealth being created?
Yes, but what all this hides is that middle-class debt is growing and official inflation hides the real cost of living. Don't go by macro-growth or the booming stock market or indeed the rising property values. The salary boom is for a few and Indians haven't yet fully grasped the true impact of long-term mortgage debt. It's foolish to think this party will last forever and already, with high interest rates, people are discovering that.
This is no dirge of pessimism, but it is worth realising that the last time the world saw such runaway excess, it ended with a market crash and then a slowdown. The ones who got hurt the most were wage earners, not the Gekkos -- they always manage to bounce back again. Did Manmohan Singh have a point after all?
Email: sidharth01@dnaindia.net
