Reaganomics was largely responsible for touching
off the biggest bull market in Wall Street history. Yet much of the financial
frenzy had little to do with the kind of entrepreneurship that Reagan
envisioned. Instead of investing in research, capital development, and higher
productivity, many businesspeople chose to devote their energy to mergers and
takeovers. Using huge sums of borrowed money, corporate raiders bought out
sound companies and then sold them off piece-by-piece to pay creditors and
squeeze out a quick profit—typically at the cost of laid-off workers.
In the movie Wall
Street, the character named Gordon Gekko captured the new morality when he
said, “Greed is good. Greed is right.” Gekko was loosely modeled
after a central figure in the takeover boom, Ivan Boesky. The son of a Russian
immigrant, Boesky was known as Ivan the Terrible for his relentless wheeling
and dealing in the stocks of companies targeted for acquisition. His frequent
business partner was Michael Milken, who pioneered the use of junk
bonds—high-risk, high-yield corporate bonds—to raise billions of dollars to
finance takeovers. Boesky and Milken often made more money in a few hours than
most Americans would earn in a lifetime. In the end, however, both men went to
prison and paid in fines much of their windfall after being convicted of
insider trading and stock manipulation.
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Despite his greed, junk-bond king Milken did not
live extravagantly, which put him out of step with the rest of the decade’s
high rollers. Those who had it were expected to flaunt it. When Nancy Reagan
decided the White House needed new china, she bought $200,000 worth, with
private donations. Sales of stretch limousines doubled every year during
Reagan’s first term.
Pop demographers identified a new socioeconomic
class infatuated with wealth and material possessions. These were the yuppies,
an acronym that stood for young urban professionals. Yuppies of both sexes ate “power
lunches” and “dressed for success” by “wearing power suits”.
Hard-driving overachievers, they worked out in chic health clubs and either
possessed or were seeking an MBA degree, which ostensibly stood for master of
business administration but was widely held to mean “Making It Big in America.”
Shopping malls became the cathedrals of American
materialism. Surveys showed Americans spent more time there than anywhere
except home, job, or school. Much of what they shopped for—microwave ovens,
VCRs, cordless phones—relied on the fingernail-size microprocessor chips that
were transforming every facet of American life. Transcending all these
prodigies of miniaturization was the person computer, which in the 1980s became
a staple in homes and standard in every office.