Evil Geniuses: The Unmaking of America: A Recent History (19 page)

To give a sense of what that meant, let’s look more closely at two pieces of the consumer economy with which everybody’s familiar—cable television (and now Internet) service and TV commercials for pharmaceuticals. Only if you’re middle-aged or older, however, do you remember the time before everyone paid for TV, which was also back when TV ads for prescription drugs didn’t exist.

In 1969 fewer than 4 million U.S. households had cable, most of them in rural places beyond normal broadcast coverage. Everyone else watched TV for free. By 1976, there was HBO and exclusive sporting events, so one in six households had gotten cable, which was enough to make businesses launch more programming channels. By 1984 almost half of Americans were wired-up basic cable subscribers.

Because cable had initially been a collection of who-really-cares little local businesses stealing and streaming network shows, the federal government barely bothered to regulate it, leaving that to towns and counties, which set the rates that their local operators could charge. But then in the early 1980s, as cable and TV were about to become synonymous—a utility that almost everyone would pay for, like water and electricity—the big businesses that were taking over the industry saw an opportunity. They got Washington, in full deregulation mania, to radically deregulate their booming industry—specifically, to make it
illegal
for local authorities to regulate the fees the local cable monopolists could charge local citizens. The Senate passed the bill 87–9, the House on a voice vote, and Reagan signed it into law a week before his landslide reelection in 1984.

Right away the cable operators did what monopolists do: in the first four years after deregulation took effect, the average cost of the most basic cable service rose 61 percent. A generation later, the lucky big businesses that had come to control cable service started offering fast access to the Web as well, making them even luckier—virtually unregulated quasi-monopolists selling one highly desirable utility, TV, and a second, genuinely essential utility, the Internet.

At least cable TV and the Internet were actually new technologies that required us to figure out new ways of regulating them—or, as it happened, declining to regulate them. By contrast, no technological breakthroughs occurred in the 1980s that obliged the government to allow pharmaceutical companies to deluge American citizens with ads for prescription medicines. Rather, two industries consisting of very big businesses, pharma and media, took advantage of free-market mania.

In this case, they took us back in time to the turn of the twentieth century, before Americans decided it wasn’t a good idea to let makers of medicines that were unnecessary or dangerous advertise them freely, back when half of newspapers’ ad income came from bogus and/or addictive patent medicines. From 1906 to 1962, federal law regulated medicines ever more closely, trying to make sure they were safe and did what they were supposed to do. As new pharmaceuticals proliferated, a federal law in 1951 finally established the legal category of prescription-only drugs. In the industry, they were known as “ethical pharmaceuticals” and “ethical drugs.”

And the industry quite effectively self-regulated, ethically, marketing those drugs exclusively to physicians…until the 1980s. There was no federal law against advertising prescription drugs directly to consumers in newspapers and magazines and on TV, just sensible norms, observed all over the world, that it was a bad idea
.
But then in the early 1980s, a couple of pharmaceutical companies began running a few ads on TV, and the FDA asked them to stop, pretty please, for a moratorium. Then in 1985 it lifted the moratorium. Ads on TV popped up, at first without actually naming the drugs, then naming them, then pushing the boundaries more. Pharma quickly became, so to speak, addicted to consumer advertising, as did, of course, advertising-supported media, especially TV networks, which had spent the 1980s encouraging the drug companies to begin consumer advertising and the Republican administrations to give it a green light. After an FDA commissioner tried to hold back the tide, the Republican Speaker of the House, Newt Gingrich, called the agency America’s “number one job killer,” and the floodgates opened wide. Suddenly in the 1990s such ads were all over the place. In 1991 the pharmaceutical industry’s total consumer ad spending was $102 million in today’s dollars, a small fraction of it going to television; just seven years later it was twenty times higher, more than $2 billion, $1 billion of that on TV. Since then pharmaceutical ad spending has tripled to more than $6 billion a year.

For the pharmaceutical as well as the media business, allowing consumer ads for prescription drugs, a deregulation that required no laws being debated or passed or repealed, worked splendidly. In 1980 the average American spent the same on prescription drugs as she had in 1970. By 1990 that amount had doubled, then it doubled again before the end of the decade, and since then it has more than doubled again. So we now spend
ten times
on prescription drugs, in real dollars, what we spent in 1970—and not just because drugs are much more expensive, thanks to all the micro-monopolies our big-business-friendly government creates for individual drugs. We see the ads, so we simply take lots more, surely more than we need and more than is healthy. America is exceptional, in this as in so many ways. Only one other country on Earth, New Zealand, allows prescription drugs to be advertised directly to its citizens.
^*6
Until the 1990s, we spent around the same per person on prescription drugs as Canadians and western Europeans, but now we spend as much as 200 percent more. By the way, after the 1980s the term
ethical drug
quickly faded from use. That was probably just a coincidence.

*1
In fact, during the 1980s America developed a weirdly bipolar attitude toward regulation: just as we started deciding government should be banished from the free market so that big business could do as it pleased, and that parents didn’t have to send their kids to school, and that gun ownership couldn’t be regulated, we also started licensing every possible occupation and got hysterical about children being hurt on playgrounds or kidnapped or abused by satanic cults.

*2
The fraction who tell Gallup there’s
too much
regulation of business has bobbed up and down in this century in an intriguing pattern: a low of 28 percent during the Bush administration, up to 50 percent during Obama, then back down to 39 percent under Trump. In other words, whenever Americans elect an antiregulation president, they discover they actually want regulation.

*3
Fun fact: In the 1990s right after the government busted Microsoft for monopolism, in Microsoft’s new Internet magazine,
Slate,
that executive, Nathan Myhrvold, reviewed my novel
Turn of the Century,
a main subplot of which involves hacker characters posting a stock-market-moving fake Internet news story about Bill Gates.

*4
But then in the 2000s the more surreptitious and structurally profound form of corporate deregulation, the weakening of antitrust,
reduced
airline competition and undid much of the good. A wave of mergers left just four companies controlling 85 percent of the U.S. market. In addition to providing less service to smaller cities, North American carriers in the last decade became three times as profitable as carriers in Europe, where antitrust rules are more aggressively enforced.

*5
I understand how encounters with difficult bureaucrats or stupidly written rules make people suspicious of regulation. In the 1990s the New York state authorities in charge of preserving forests informed my wife and me that we’d have to pay the same large financial penalty whether we clear-cut the plot of rural forest land we’d just bought or only the couple of acres on which we thought we might build a little house. Briefly I was put in touch with my inner Republican.

*6
In 2015 the doctors’ American Medical Association finally declared itself in favor of a federal ban on mass-market prescription drug advertising.

The public face of American business, in the middle of the twentieth century, was reliable, responsible, deliberately boring. In fiction, Ayn Rand, especially in
Atlas Shrugged
(1957), depicted big businessmen as fuck-you swashbucklers, but the real ones didn’t dare come off like that. As late as 1981, when left-wing professor Marshall Berman finished writing
All That Is Solid Melts into Air,
he noted how reticent corporate leaders were, seldom celebrating the intrinsic thrills and chills of capitalism. How ironic, he wrote, that in this modern CEOs, obliged to appear to be reassuring
anti
radicals, had been outdone a century earlier by Karl Marx’s enthusiastic depiction of capitalism’s “revolutionary energy and audacity, its dynamic creativity, its adventurousness and romance, its capacity to make men not merely more comfortable but more alive.” As Berman said of modern American corporate executives:

Even as they frighten everyone with fantasies of proletarian rapacity and revenge, they themselves, through their inexhaustible dealing and developing, hurtle masses of men, materials and money up and down the earth, and erode or explode the foundations of everyone’s lives as they go. Their secret—a secret they have managed to keep even from themselves—is that behind their facades, they are the most violently destructive ruling class in history.

But in fact, after working up to it for a decade, America’s capitalists were finally, fully
feeling
the destructive glee and at that very moment coming out of the closet, loud and proud. It’s remarkable how well in 1987 a big Hollywood movie—a movie distributed by the studio Rupert Murdoch had recently acquired—dramatized, in real time, the unashamed new money-money-money American zeitgeist that considered capitalism nothing but
awesome
. It wouldn’t and couldn’t have been made just a dozen years earlier.

The main plot points of Oliver Stone’s
Wall Street
were spot on: a superstar financial speculator engages in illegal inside trading, a predatory takeover strips a profitable company of its assets, and unionized workers are bamboozled into going along with a deal that will leave them without their good jobs and pensions. The corporate raider Gordon Gekko, played by Michael Douglas, does get his comeuppance in the end because his stockbroker, the Charlie Sheen character who provided him with the tradable inside information about his mechanic father’s airline company, flips on him. But Gekko is the star of the show, the exciting sexy late-model 1980s antihero.

The most memorable scene from
Wall Street
is Gekko’s speech to a meeting in a big hotel ballroom in midtown Manhattan of hundreds of shareholders of a paper manufacturer in which he’s bought up stock to execute a hostile takeover. The company’s stuffy old CEO speaks first, explaining to his investors that he is “fighting the get-rich-quick, short-term-profit, slot-machine mentality of Wall Street.” In this new approach to American business, “we are undermining our foundation. This cancer is called
greed
. Greed and speculation have replaced long-term investment. Corporations are being taken apart like Erector Sets, without any consideration of the public good.”

Then the smirking, charismatic, sharply dressed Gekko strides onto the podium. “We’re not here to indulge in
fantasy,
” he says, “but in political and economic
reality
.” Then he harks back nostalgically to the good old days of the nineteenth and early twentieth centuries, as the real-life capitalist right actually did and does—

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….You own the company. That’s right—
you,
the stockholder. And you are all being royally screwed over by these, these
bureaucrats
….The new law of evolution in corporate America seems to be survival of the
un
-fittest….I am not a destroyer of companies. I am a
liberator
of them. The point is, ladies and gentlemen, 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….And
greed
—you mark my words—will not only save Teldar Paper, but that other malfunctioning corporation called the USA!

In just four minutes, Gekko summarized and incarnated the U.S. political economy’s new doctrine. It was Libertarian Economics for Dummies, the Friedman Doctrine dramatized, a stump speech for money and its manipulation as the root of all glory.

And in the movie, Gekko’s audience responds with wild applause, a standing ovation, the whole crowd ecstatic over his endorsement of single-minded financial marauding. And life imitated art, which was imitating life. Among the millions of Americans watching in theaters and at home on TV were tens or hundreds of thousands of actual and would-be investors and traders and bankers and bloody-minded players of the system who were electrified and inspired, virtually coked up. I’ve met business guys who can recite Gekko’s lines. For them, it was a rousing band-of-brothers speech to the assembled mercenaries in the new war. The Gekko character’s commission of felonies was almost incidental, part of the plot because a Hollywood movie requires them, although the crimes also make him seem even more badass.

Lots of
Wall Street
fans also got their ferocious animal spirits ignited by watching and memorizing the most memorable scene from a contemporaneous companion piece, David Mamet’s
Glengarry Glen Ross,
where Alec Baldwin’s character Blake mysteriously arrives to terrify an office of real estate salesmen. “A-B-C—
A,
always,
B,
be,
C,
closing.
Always be closing,
” “Coffee’s for closers only,” “Do you think I’m fucking with you? I am
not
fucking with you,” “Nice guy? I don’t give a shit. Good father? Fuck you, go home and play with your kids,” and “What’s my name?
Fuck You,
that’s my name.”
^*1
He’s like a hellish noncommissioned officer to Gekko’s gleefully demonic general in the U.S. capitalist legion as it was then being reconstituted.

In 1987 as well, some Wall Street guys started referring to themselves as Masters of the Universe, thanks to
The Bonfire of the Vanities,
Tom Wolfe’s novel inspired, as he said, by “the ambitious young men (there were no women) who, starting with the 1980s, began racking up millions every year—millions!—in performance bonuses at investment banks.”

Suddenly in the 1980s the news media were also celebrating and glorifying real-life big businessmen as they hadn’t since the 1950s and early ’60s—in fact, as they really hadn’t since the 1910s and ’20s. It was in 1982 that
Forbes
realized it was now acceptable to create an annual ranked list of the four hundred richest people, with estimates of their wealth, and in 1984 some A-list journalists launched a very glossy, stylish national monthly about businesspeople called
Manhattan, inc.

The most celebrated and glorified were the megalomaniacal loudmouth alpha-male SOBs like Lee Iacocca and Jack Welch, leaders of two of the biggest public companies, Chrysler and General Electric, who barked and swaggered in ways that such leaders hadn’t really been allowed to do in the modern age. They were hired managers performing the roles of lovably tough and cantankerous founder-owners. Both companies were big old-fashioned manufacturers from the golden age, each the tenth-largest company in America when Iacocca and Welch took them over in 1979 and 1981, respectively, just as we began realizing we’d entered the twilight of big old-fashioned American manufacturing. Each is a good case study illustrating the breakneck remaking of our political economy, in response to both new technology and globalization
,
and by decisions that the bosses and financiers and political leaders chose to make.

In the 1970s the U.S. auto industry had responded slowly to ramped-up foreign competition and higher oil prices. Chrysler did worst of all, continuing to manufacture nothing but hulking, unreliable gas-guzzlers on which it lost the equivalent of $1,000 per car. But the company was deemed too big to fail, the first, so Iacocca arranged for a nonbankruptcy bankruptcy, getting the federal government to cosign for billions in bank loans. Meanwhile, he made himself the star of Chrysler TV ads and even flirted with a presidential candidacy in 1988—his campaign slogan was to be “I Like I.”

In a 1985 cover profile I wrote for
Time,
I said he was “overbearing,” had “a Daffy Duck lisp,” and went “hardly a half-minute without mentioning
‘guys’
—specific guys or guys in the abstract, guys who build automobiles (‘car guys’) or sell automobiles or buy them.” But I kind of liked him. In our interviews, he slagged Reagan’s economic right-wingism.

The Democrats today are more pragmatic, not so ideological….We are deindustrializing the country….I’m not very popular with the people around the White House anymore. I told them [on trade policy], “Let’s make sure we don’t get hosed.” They don’t like that. This Administration sees you either as a protectionist or a free-trader, with no shades in between. And we’re going to lose, as a country, for it….Where’s Dave Stockman? Every time he tells the truth he gets in trouble. He gives them the hard facts….So who’s in charge of economic policy? Who are these people?

Iacocca convinced his unionized workers to agree to be paid the equivalent of $20,000 a year less than GM’s and Ford’s workers—and then spent the remainder of the 1980s laying half of them off. After retiring in 1992, he returned a few years later as part of a Gekko-like raider’s attempted leveraged buyout of Chrysler, which failed and wound up enabling its takeover by a foreign company.
^*2

General Electric, for its part, wasn’t in trouble when Welch became CEO. Rather, Welch took advantage of the new rules of the economy to make the company’s stock price skyrocket, which had been deemed, even more than actual profit, the only thing that matters. Like Gekko in
Wall Street
and Blake in
Glengarry,
Welch was known for being brutally candid. In fact, GE made a doctrine out of brutality, codified it as a system that ensured worker insecurity by constantly identifying a quota of doomed losers. Every year, according to Welch’s new rule, one out of every ten GE employees were fired, no matter what, because nine other employees were judged by their superiors to be superior. It was called the Vitality Curve, and other big companies were soon instituting dread-inducing worker-culling systems with their own euphemistic names—Personal Business Commitments at IBM, Individual Dignity Entitlement at Motorola. At GE, many were never replaced; during Welch’s first five years as CEO, the workforce shrank by a quarter, and he became known as Neutron Jack—ha!—because like a neutron bomb, he evaporated tens of thousands of people without damaging the businesses where they worked. Such corporate “rank-and-yank” systems were just one way that an acute new sense of economic insecurity spiked in the 1980s and then stayed high.

Welch also started turning GE from a manufacturing company into more of a financial services company—just as the abstract and increasingly exotic games of pure financial betting, lending, and otherwise making money by fiddling with money and hypothetical money was sucking up more of America’s resources and focus and giving Wall Street ever more influence and control of our economy. In addition to eliminating jobs, the original great American technology company drastically cut back its spending on research and development. As a result, GE’s profits increased (for a while) and its stock price went up phenomenally (for a while), and Jack Welch became the superstarriest CEO, worshipfully covered by the media and emulated by corporate executives. He and Iacocca and were both perfectly cast for the hypernostalgic
USA! USA!
moment—John Waynes in suits and ties, straight-talking manly men from working-class families who’d come to the rescue of enervated, simpering corporate America, taking over iconic companies to remake them for a hard-assed new age.

By the way, although American spectators had started doing that
“USA! USA!”
chant with its cheerfully fuck-you edge at international sporting events during the 1970s, it was in the 1980s that it became a national cultural habit, first at the 1980 Winter Olympics in Lake Placid, when Team USA (a new coinage) beat the unbeatable Soviet hockey team, then spreading into professional wrestling and Reagan reelection campaign rallies and finally to any sort of excited mob of Americans who felt like madly
insisting
on our awesomeness, to
perform
feelings of patriotic self-confidence, which used to abide more organically and implicitly. In other words, the
“USA! USA!”
chant was yet another expression of the nostalgia tic, an old-timey barbaric yawp spontaneously invented and then ritually reenacted.