Greed Is Good or Is It? Quote and Meaning

Is Greed Good?

Greed is good
Michael Douglas reprised his role as Gordon Gekko in the movie "Wall Street: Money Never Sleeps.". Photo: Herrick Strummer/Getty Images

In the 1987 movie Wall Street, Michael Douglas as Gordon Gekko gave an insightful speech where he said, "Greed, for lack of a better word, is good." He went on to make the point that greed is a clean drive that "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."

He then compared the United States to a "malfunctioning corporation" that greed could still save.

His next point said, "America has become a second-rate power. Its trade deficit and its fiscal deficit are at nightmare proportions."

Both of these points are more true now than in the 1980s. First the European Union (in 2007), and then China (in 2014), surpassed the United States as the world's biggest economy. The U.S. debt is now larger than the country's entire economic output. The trade deficit has only gotten worse in the last twenty-five years. 

Greed Is Bad

Is greed bad? Can the financial crisis of 2008 be traced all the way back to the greed of Michael Milkin, Ivan Boesky, and Carl Icahn -- the Wall Street traders upon whom the movie was based? Perhaps it's always the human drive for more, or greed itself, that's the inevitable cause of the irrational exuberance that creates asset bubbles. Then still more greed blinds investors to the warning signs of collapse and recessions.

That's certainly true of the 2008 financial crisis when traders created, bought and sold sophisticated derivatives.

The most damaging were mortgage-backed securities, which were based on underlying real mortgages. They were guaranteed by an insurance derivative known as credit default swaps. All were traded successfully until 2006, when housing prices started falling at the same time interest rates rose. As mortgage-holders defaulted, no one knew the value of the mortgage-backed securities.

Companies like AIG that wrote the credit default swaps ran out of cash. The company, along with Fannie Mae, Freddie Mac and the major banks, all had to be bailed out by the Federal Reserve and the U.S. Treasury Department.

Greed Is Good

Or is greed, as Gordon Gekko pointed out, good? Perhaps, if the first cave man didn't greedily want cooked meat and a warm cave, he never would have bothered to figure out how to start a fire. Perhaps Milton Friedman and Friedrich Hayek were right -- that the free market forces, if left to themselves without government interference, unleash the good qualities of greed. Capitalism itself is also based on a healthy form of greed. 

Could Wall Street, the center of American capitalism, function without greed? Probably not, since it depends on the profit motive. The banks, hedge funds, and securities traders that drive the American financial system buys and sell stocks. The prices depend on the underlying earnings, which is another word for profit. Without profit, there is no stock market, no Wall Street, and no financial system.