“An age of greed… was not the result of the inevitable force of history or of a natural swing of a political pendulum. The new age was made by people, and how they reacted to crisis and change.”1 Jeff Madrick’s preliminary assumption is that history is never predetermined. Regarding the economy’s current weakness, he places blame not on economic cycles, but on the past, deliberate actions of opportunists. Madrick attempts to piece this by following several figures parallel to one another throughout 1970 to the present. In his book, “Age Of Greed”, he argues that because certain individuals sought ways to stretch laws for more profit, even breaking them in this time of ever-increasing leniency, the American Economy grew brittle.
Madrick begins with the platform of the conservative movement. Republicans seemed to be losing in the 1960’s, with Kennedy at the presidency and proliferating government programs. Even Nixon expanded government with the Environmental Protection Agency, definitely “not the conservative Uhler had hoped for as the next Republican president.”2 Despite this, Uhler espoused conservative ideas such as tax cuts, eventually designing Proposition One. The antigovernment sentiment was shared by businesses. Due to the stock market crash of 1929, FDR’s administration imposed regulation on banks. Wriston wanted to deregulate specifically Regulation Q, which limited investing potential. As the leader of City Bank, he created investments that allowed him more funds, namely certificates of deposit (CD). When Penn railroads proved to be a bad investment, the Federal Reserve chairman, Burns, bailed out the bank and removed the rate maximum of Regulation Q in 1970. The bank was wearing the government down. An emerging theory further challenged the Keynesian model. Friedman advocated monetarism, a theory stating that inflation exists due to a large money supply. At the basis of his theory, government spending was a problem. And when stagflation hit, Friedman seemed prescient. However, many of his works did not have supporting facts. Rather, Friedman had a bias “to exalt personal freedom and individualism”, which reducing government would achieve.3 A Republican majority rose after the unpopular Vietnam War, and Nixon, a reputable anticommunist, became president in 1969. Government was still seen as a possible solution to economic troubles, especially for the worsening inflation. Nixon unsuccessfully played to that role for reelection, issuing Phase III. This and other efforts only aggravated inflation, as did other factors, including the OPEC oil embargo in 1973. As it was inept, America became “distrustful of government…lay[ing] the groundwork for an age of greed freed of federal oversight.”4
In the face of dilating entities, government, with the halcyon tint that inhibiting government was best, allowed monopolies to fester. Obviously, large companies merged with others to gain more wealth. However, this tactic, traditionally done with consent, was transformed into a game of dominance, battling by bidding for stocks. Money was uselessly borrowed and spent, generating heaps of debt. Still, merging was popular. Ivan Boesky, a Wall Street outsider, inspired risk arbitrage as an aid for takeovers. Meanwhile, Wriston rammed once more into the government. Amidst loaning to other nations, global recession and the Federal Reserve’s increasing rates plunged Citibank. Another government bailout proceeded in 1982, lending to the debtor nations. The causal activities continued unhindered as Reagan and other cold warriors continued to believe that strengthening government was “the very essence of totalitarianism.”5 Businessmen too opted for size, as exemplified by Turner, Walton, and Ross, the creators of CNN, Walmart, and Warner Communications respectively. There were more victories in reducing government. Jarvis and Kemp passed Proposition 13, which lowered property tax, and Uhler finally passed a limit on income tax with Proposition Four. In 1980, the Carter bill erased Regulation Q. Trust-busting also subsided as “large size and market shares were no longer standards for judging abusive monopoly power.”6 Government values had now shifted utterly to a laissez-faire, free-market mindset.
In this new environment, financiers profited from the manipulation of money alone. In the 1980s, the world shifted industrially to foreign products. Tom Peters argued that the American economy’s revival depended on valuing workers more. Jack Welch at GE was perceived as such a manager. However, he dropped department and worker alike if no money was generated and obsessed about stock prices. Milken gained his fortune by junk bonds. He was reputable in his trade, one time conjuring $100 million instantly for KKR’s leverage buyout scheme. There was no worry about these dealings, as the Federal Reserve had Greenspan as its chairman at the time, a total “ideologue” of free market.7 Soros and his Double Eagle Fund/Quantum Fund profited from selling Britain’s pound, leading to a recession in Britain. This tragedy repeated with Asian countries and their currencies in 1997. Meriweather headed LTCM, which used math to calculate risk and prices. When it eventually failed, fourteen banks had to be organized for a bailout, and major trading firms suffered substantial losses. Meanwhile, Weill, a dark horse, overtook Wall Street. His aggregate company with Citicorp became one of the top firms.
But the consequences of uncontrolled investment caught up. There was a vital instability present once the takeovers occurred: CEOs’ salaries became more dependent on stock. This allowed for excessive greed, as their salaries rose from stock decoration in 1996 to “210 times the level of average pay for production workers” from only “twenty-five times higher in 1970.”8 But not only CEOs indulged in deceit. Investment banker Quattrone manipulated IPO stock, adding to a bubble that crashed in 2000, and partook in a pot of “at least 2.275 trillion.”9 Sanford tried to reduce a report of loss by using reserved cash, and again was the center of scandal in 1994, when his company BTC ruined a client. Grubman, an analyst, rated stock with favoritism. Mozilo represented the “American Tragedy”: traders that went against their own morals for a share in profitable markets.10 These trends, along with mortgage securitization, created the housing market bubble and the resultant 2008 recession. Major companies, such as Merrill Lynch and Citigroup, were on verge of collapsing, but were saved by government infusions. Most investment bankers and CEOs left the crisis financially unscathed.
Madrick argues that the greed of few individuals, encouraged by the deterioration of government, set decay upon America’s economy, concluding that a general oversight by the government is necessary. He describes how conservative, free-market ideas of government and the economy, fueled by an increasingly more antigovernment view due to political incompetency and scandal, provided an environment that allowed greed to thrive in Wall Street. Friedman’s monetarism theory blamed the government for all economic troubles, as it was the source of money, and this assumption seemed justified by the failures in policies addressing inflation. It seemed especially so during the stagflation of the 1970s. Such aided attempts to deregulate by self-interested banks. Thus, all this began a trend of loosening restraints on Wall Street. But such growth only led to risky investment behavior and crises. To remind of a few, it caused “the defaults on Third World debt in 1982…the thrifts failures and junk bond collapse…the Asian financial crisis in 1997…and the bursting of the high-technology bubble.”11 All these crises resulted from unsound investments and always poured money away from healthy American businesses. Because these investments were profitable in the short-term was precisely why firms invested as they did - they were greedy. And the consequences were shouldered by the American public and forced solutions by constant government intervention.
Madrick is the “Director of the Bernard L. Schwartz Rediscovering Government Initiative”, and author of “Why Economies Grow” (2002) and “The Case for Big Government”(2009). He also was a Wall Street editor of “Money Magazine” and “Business Week Magazine” in the closing of the twentieth century.12 He personally saw the covert operations of Wall Street, which led him to conclude that only a big government could stop the enormity. That would explain why Madrick converted from Wall Street to pro-government, which he himself portrays as antipodal camps. However, the strength of Madrick’s bias mainly stems from his own exposure to history. The 2008 recession was only three years before he wrote “Age of Greed”. Any recession or panic, as grievous as it is objectively, has a tendency to be exaggerated in temporal proximity. Surely, he would stress the need for more government if it could prevent such an emotionally distressing disaster.
Historians Richard Parker and Steve Fraser agreed that Madrick catalogued the history well, but as to fulfilling his purpose, they differ. Parker lauds it as a well-crafted work, “mov[ing] across politics, academic economies, and the intricacies of day-to-day finance”, tying them together.13 He sees the validity in Madrick’s thesis and juxtaposes it to the modern situation in agreement to its relevance. Furthermore, Parker praises the completeness of the work. For him, the characters appeared to be superbly intertwined within the narrative, each a vital contributor of rampant greed. However, Fraser cannot see the same conclusion. For Fraser, Madrick seemed to deform many characters in order to fit them to his thesis. One example concerns Walton, the owner of Walmart. He doubts the portrayal of Walton being a man of avarice, and suggests that it was more of a necessity to do so in such a hostile business. And Fraser further questions the choice of Madrick’s cast by pointing to Clinton’s contribution to greed, a Democrat. He suspects a bias, an “aversion to thinking of the crisis as systemic and to a related faith…of the New Deal.”14 Madrick appeared to be writing the book to prove a point, rather than developing one.
“Age of Greed”, though it is the informational treasure as Parker and Fraser said, simply was not executed well. He grasped for a level of connectivity between the book’s disparate parts that was exceedingly demanding, perhaps at an impossible level. Much of the content was redundant. Uhler was depicted as this trendsetter, but his life pre-Reagan was not relevant, and when it was, all his achievements were repeated in a section about Reagan. Why separate the story of Wriston into two parts, with several chapters in between? Why add the story of Walmart, CNN, and Warners in a book not only about greed, but also about the government’s role? Why did the story of Angelo Mozilo exist? Was he an “American Tragedy” just because he decided to practice immoral actions of the greedy for a share in the market? If so, how does any aspect of his fall add to Madrick’s narrative? These obscure blots disrupt the book’s flow, and further confuse the message and delivery. But, as for the message itself, to whatever semblance of it was maintained, it seems reasonable to conclude that the rising of government over the economy and Wall Street would be for all our benefit. Madrick makes a persuasive case that deregulation and weakening of the government led to financial abuses by powerful individuals, with increasingly larger crises correlating to the crumbling of government. He convinces the reader to abandon the conservative legacy of the last forty years, lest we replay history with the American public once again the “losers” in greed-fueled strategies.15
“Age of Greed” supports the assessment that the 1980’s were a time of conservatism, and in being so, a decade of political anti-progressivism. The reigning conservative theme of the time was personal freedom, which translated to less-interventionist economies among other things. Monetarism, the leading thought of the time, was the economic form of this individualism ideal and called for less government spending. This meant cutting off programs considered progressive, such as the Glass-Steagal Act, Social Security and Medicare, all New Deal legislation. In fact, Madrick explicitly states, “Friedman, in effect, provided the intellectual map for a reversal of the progressive evolution of the nation.”16 Indeed, for Madrick, the deregulation and tax cuts that followed are used as examples to prove how America shifted to conservatism, and explains the greed of Wall Street as actually a strict adherence to free market, where they were free to compete and chose to crush competition and investors. He defined conservatism in these policies and ideas, and argued that progressive legislation was damaged by it.
Throughout his book, Madrick shows innovative insight on how a weak government, which induced a more laissez-faire environment, allowed greedy individuals to trample on the economy for personal gain. He also presents how our national government was the only dependable entity during these trying times, and thus should be granted more power to restrain a loose Wall Street. “The Keynesian response did work”, attesting to the potential salutary effects of big government on a frail economy.17
1. Madrick, Jeff. Age of Greed. United States: Alfred A. Knopf, 2011. x.
2. Madrick, Jeff. 9.
3. Madrick, Jeff. 49.
4. Madrick, Jeff. 71.
5. Madrick, Jeff. 116.
6. Madrick, Jeff. 172.
7. Madrick, Jeff. 222.
8. Madrick, Jeff. 327.
9. Madrick, Jeff. 332.
10. Madrick, Jeff. 351.
11. Madrick, Jeff. 375.
12. Madrick, Jeff. “About Jeff.” Jeff Madrick. Jeff Madrick, n.d. Web.
13. “How They Wrecked the Economy.” The American Prospect. (July, 2011 – August, 2011): 1582 words. LexisNexis Academic. Web.
14. Fraser, Steve. “More Than Greed.” Dissent (00123646) 59.1 (2012): 101-104. Academic Search Complete. Web. 22 May 2016. 103.
15. Madrick, Jeff. 332.
16. Madrick, Jeff. 27.
17. Madrick, Jeff. 403.