A young urban professional walks out of their well-paying job and jumps into their convertible. They’ve got a bright white smile, perfect hair, a Rolex, and are clothed from head to toe in Ralph-Lauren. They drive off while talking on their car phone and appear to be the poster child for success.
They are clearly well off and make sure to flaunt this affluence. This individual would soon become the image that defined wealth and excess in the 1980s. But, at the same time, an economic downturn, inflation, and rescission have arisen that exist in stark contrast to this defining image.
Today, we travel back to an era of economic uncertainty and extreme wealth. This is the story of Yuppies, Reaganomics, and the crazy 80s economy.
What do you picture as defining images of the 1980s? It may be the Rubix Cub, Deloreons, Pac-Man, or a Walkman. But what about the physical embodiment of the 1980s? If you were to show someone from another planet a cliche example of what someone from the 1980s looked like, what are they wearing? You may get the image of pastel colors, crewneck sweaters tied over the shoulders, and an overall country club appearance. This obviously isn’t the case across the board, but this seems to be one of the images that emerged from the decade that would later define it.
It’s easy to think of the 1980s as Lifestyles of the Rich and Famous, with consumer spending at an all-time high. This is part of the picture, but the 1980s were also an era of great recession. This is a time period when we were in a lot of financial trouble and there was a focus on less government and lower taxes as the way to create a strong economy. But how did we get to this point? How did we suffer such economic hardship while also existing in a time of such lavishness? What laid the foundation to allow for the rise of the yuppie, and how did Ronald Reagan play a part in all of this?
The term Reaganomics is one key to understanding the economy of the 1980s. This is an extremely general overview, but Reaganomics is also known as the supply-side theory or trickle-down economics. In the late 1970s, there was a big deficit. Ideally, the goal is to stay under 2%. Going into the 1980s, it was over this 2% mark, and Reagan blamed Jimmy Carter for not controlling the federal budget.
When Reagan inherited the Whitehouse, unemployment was high, prices were rising, but economic growth was pretty slow–almost stalled. The quick lesson is that Reagan believed tax cuts for corporations and the job creators would stimulate business investments, which would create more jobs, and therefore raise the wages for workers. This would all help the economy because the booming revenue would then boost the government tax revenue and this, in turn, would eliminate budget deficits. Reaganomics also decreased social spending and increased the military budget.
Reagan also deregulated a lot of domestic market restrictions and for kids in the 80s, this was good news as it eliminated advertising restrictions and opened the floodgates for an era of toys, cartoons, junk food, and breakfast cereals the likes we had never seen before. This surely wasn’t his intent, but from a pop culture standpoint for kids, this deregulation of market restrictions created the 80s as we know it. He-Man, Transformers, My Little Pony, Strawberry Shortcake, Care Bears, GI Joe, My Pet Monster; all of it may have not happened if it wasn’t for Ronald Reagan.
I’m sure Reagan didn’t care that I now had a sweet new Castle Greyskull, but basically, he wanted less government and lower taxes. In 1981, Reagan put this plan into action and ushered in many big tax cuts. But it resulted in an enormous loss of government revenue. The deficit seemed to double and almost triple in just a few years. It quickly topped out at nearly $200 billion dollars and if you adjust that for today’s money, it’s about $650 billion.
The early part of the 80s was completely intertwined with recession. And this was felt everywhere.
The Recession of 1982
The early 80s were a tough time financially for many countries. And A lot of this also comes out of the 1979 energy crisis. Going into 1980, the disruption to the global oil supply caused oil prices to spike. Many countries were already suffering from high inflation and the oil crisis only made it worse. Major advanced countries were now facing double-digit inflation.
High interest rates were causing havoc, especially on farms where farmers were forced off their lands. In the cities, homelessness was getting out of control. Also, in the cities, businesses were closing at an alarming rate. Not only that, there just didn’t seem to be enough jobs and unemployment was the highest it had been since the great recession. I’m not sure why we call it great, but you get the picture.
Here in Canada, we faced the early 80s recession even worse than the U.S. We had higher inflation, higher interest rates, and higher unemployment. Our dollar dropped, and it made US imports way more expensive. That Yars Revenge Atari game I wanted now cost a small fortune. But it wasn’t just North America, other countries were also affected by inflation, including the UK, Japan, Italy, and what was then West Germany.
For kids in the 80s, we had no idea what was going on, but this energy crisis and rising oil prices did have a benefit for us: it created the era of toys and action figures we know and love. The rising price of oil was obviously causing an economic crisis and inflation, but it was severely affecting the toy industry. The cost of oil was so high that the toys we were used to became too expensive to produce.
I’ve just covered more of this in my episode on the history of GI Joe if you want to go back and read that here. But the GI JOE of yesteryear–which was a giant 12-inch action figure–was now too expensive to produce. It would be toy company Kenner, who would shrink down the action figures to 3.75 inches when they released their Star Wars toy line in the late 70s.
Hasbro would follow suit with the GI joe figures you’re now familiar with, and this forever changed the course of the toy market. Vehicles and Playsets could be shrunk down to match this 3 and three-quarter-inch figure size, which would keep retail costs relatively low. Even though the cost of oil and production was higher, this smaller form factor still made the figures more affordable, giving us the chance to own more toys without breaking the bank.
Ronald Reagan was not even a few years into his presidency but really beginning to feel the pinch. The growth he anticipated just wasn’t happening. Not only was this growth not happening, but it was going in the opposite direction, putting us all into a financial disaster. High-interest rates were now inevitable. Reagan didn’t pretend that this wasn’t a tumultuous time and even wrote in his own diary that “we are really in trouble.” That did not bode well.
The U.S. was staring down the barrel of a 200 billion dollar deficit. They were at the point where the hope of a miracle was the only course of action. But Regan wanted to stick to his guns and stay with his financial plan. If everyone could just get through 1982–and beyond–the “fever would break.” Reagan stayed the course. He could see the big picture, but those feeling the strain didn’t have this luxury, and the public was losing faith in him. How in the world would we get out from under this?
By 1983, there was a glimmer of hope–depending on who you ask–as there began to be a recovery from the stagnant economic growth. And there was a bit of economic prosperity that continued through Reagan’s presidency. So, going into the mid-80s, there was still a lot of economic turmoil, but financial prosperity for some. And this newfound prosperity inadvertently created a brand new culture.
Birth of the Yuppie
The 1980s are a dichotomy of this economic downturn and a period of extraordinary wealth, especially for those who already had money. But Now, they just had a lot more of it. What’s good for the rich was really good for the rich. And what was supposed to trickle down to all of us turned out to be extremely beneficial for higher earners. Their salaries rose by almost 80% throughout the decade. The thing is, the rise in wages for everyone else didn’t necessarily drop–it just didn’t go anywhere near expected. The wage increase for 90% of the rest of people never went over 3%. Better than nothing, but not want anyone was hoping for.
But the growth in wealth gave rise to a new individual: the young urban professionals, or Yuppie.
Whether you picture Zack Morris or Gordon Gekko, the Yuppie was distinctive and their appearance is one of those defining images of the entire 1980s. However, at first, Yuppie was never meant as a descriptive term but had more mocking undertones. It was kind of a snarky insult in the same way we’ve used the word hipster or Maple Leafs Fan.
Yuppie was quickly associated with Wall Street and arrogant–and extremely wealthy–people who didn’t necessarily deserve it. Today’s version of these undeserving rich and obnoxious people may be called finance bros or a Kardashiann . But the yuppie’s place in society soon became cemented. They wore the latest fashions, drove BMWs, used new inventions called “cell phones,” listened to music on something called a compact disc, and seemed to have money to burn.
They were well off, and they wanted you to know about it. The Yuppie lifestyle was a stereotype at first, but soon became the definition of an affluent lifestyle. As the 80s continued, the Yuppie wasn’t just an obnoxious millionaire, but became associated with a well-off lifestyle. The Yuppie moved from beyond Wall Street and became associated with other professions. You didn’t have to work in finance to be a Yuppie as other careers soon became connected to it, such as academia, the arts, and tech, and one tv show helped to capture this new era better than anything.
Lifestyles of the Rich and Famous.
Shows like Lifestyles of the Rich and Famous with Robin Leach showcased this luxury and shoved Yuppie culture right into our living rooms. The show debuted on March 31st, 1984 airing on CBS. We had watched the fictional worlds of shows like Dallas and Dynasty, and if you are a TV aficionado, you may remember the short-lived NBC series called Berrenger’s about a wealthy New York family. But this new wealth seemed to be everywhere. And Lifestyles of the Rich and Famous was interesting because it wasn’t just household names featured on the show. “Regular people” were featured, allowing them to show off their excess.
The show was created by Al Masini and, along with Solid Gold, Star Search, and Entertainment Tonight, made up his Operation Prime Time project. We were entering the age of the entrepreneur and shows like Lifestyles of the Rich and Famous showcased this to a wider audience. The New York Times called programs like this “an extension of Reagan era values.” The message seemed to be that capitalism was back. These shows also represented a form of raw escapism. But a new generation saw it in a different manner.
Not surprisingly, Lifestyles of the Rich and Famous–along with shows like Dynasty and Dallas–were big hits in the 24-41 age demographic. Robin Leach–who also produced Lifestyle of the Rich and Famous–said he believed this age group wasn’t tuning in for the escapism, but rather to take notes on how they would get this money and spend it themselves. For many, Lifestyles of the Rich and Famous wasn’t escapism: it was schooling. And it was motivation.
Was Greed Good?
In the mid-80s, wealth was growing. The spread of Yuppie culture made it seem like more young people could just rise up to join this lifestyle. In an article from March 1984, the New York Times called 1984 the year of the Yuppy. The cover of Newsweek even featured Yuppies. Yuppies were much different from their parent’s generation. Yuppies were more educated. They understood the new world of computers and were technologically literate.
There’s debate over who coined the term Yuppy, but some credit Joseph Epstein a writer and editor for the American Scholar. Some say it was Dan Rottenberg from the Chicago Magazine who saw how much downtown Chicago was changing. This new “yuppie”–he observed–was rebelling against suburbia, preferred to be downtown, and was more interested in stimulation than comfort or security.
Even the name has undefined origins. Though it eventually stood for Young Urban Professional, Yuppy may have evolved from Hippy, Yippie–a counterculture movement connected to the Young International party–and country club preppy culture. Regardless of how the word got mashed together, it stuck and defined an entire generation. The term Yuppie also had a lot of political connotations. This was a weird time in culture. Yuppies could still technically be baby boomers, as a yuppie is considered to be born between 1946 and 1965.
The older end of the Yuppie spectrum were the people who created the counterculture. They listened to rock and roll, but now their hair was starting to turn gray. And now the Younger Yuppy was taking over. They were into partying, New Wave music, clubs, champagne, excess, and let’s be honest–since it was the 80s–probably a lot of cocaine. The new Yuppy just wanted to have a good time, but they were still driven to get the money–and were ruthless in their pursuit. This is the generation that seemed to invent the work hard play hard mantra.
It was an era of let’s do lunch and have your people call my people. The previous generation said don’t trust anyone over 30; yuppies said, don’t trust anyone making under 30–grand a year, that is. This was their time and, I’m not making this up, there was even Yuppies: the Musical that ran in Toronto in 1985.
Though they may not have the same wealth, many copied that Yuppie lifestyle. Even if you didn’t have the money, you could try to look the part by buying knock-off versions of Ralph Lauren and at least create the image. Crewneck Cashmere sweaters, pastel colors, and pinstriped suits are now synonymous with this era in history.
Wall Street and Alex P. Keaton
Economic hardships seemed to be pushed to the side so the Yuppy could have their day in the sun. Going into 1986, Wall Street was humming along. “Whiz Kids” were rushing to make money working in the financial industry and often had starting salaries of around $70 grand a year. That’s about $190,000 adjusted for inflation. Young graduates flooded Wall Street and the finance world. Most Yuppies were now often just in their 20s. Basically, Just picture Alex P. Keaton from Family Ties.
Everyone also got a deeper look into this strange new world in Oliver Stone’s film Wall Street. Stocks, bonds, and the market used to be a boring industry conducted by aging individuals. Now, there was more of a youth movement, as there was so much money to be made. The Wall Street movie introduced us to Gordon Gekko and the notion that “Greed was good.”
GREED IS GOOD CLIP
Stone sought out to make his version of the Pilgrim’s Progress, where a youngster is drawn into the world of easy money, quickly loses it, but then tries to redeem himself. Wall Street showed this financial world to a broader audience and what was happening with the new quick buck movement happening in the 80s. Ultimately, Wall Street is a movie about sharks and the feeding frenzy that was happening in the investment world.
But The movie is a cautionary tale of the downfall that can come from the pursuit of the easy money. The problem is, Wall Street inadvertently influenced a whole new era to get into stock trading. Even the fashion style of Gordon Gekko became heavily copied by all the real-life Yuppies. The true intention of this movie–greed and 1980s excess–was lost on a lot of people. Fun fact: this is the only movie to win both an Oscar and a Razzie. The Oscar went to Michael Douglas for best actor and the Razzie went to Daryl Hannah for worst supporting actress. If you want some more detail about Wall Street, stick around to the end of the show for details on the Everything 80s movie review podcast.
Computers Change Everything
This high-risk, high-reward lifestyle was catching on like wildfire. There was a lot of money to be made and more people were flush with cash than seemingly ever. How did this happen so quickly? The answer probably lies in the computer.
It was now easier to access information than ever before. Ivan Boesky–who the character of Gordon Gekko was based on–recognized how important computers would be in the future of Wall Street. He harnessed their power to become the most successful trader of the day. This was an interesting time of old-world attitudes and modern advancements. A lot of trading floors didn’t even allow computers, but by the mid-80s, program trading became the dominant form of trading.
Another big piece is there used to be an enormous gap between institutional trading and retail trading. Institutional trading is trading that happens for big groups or intuitions. They basically have access to securities and enormous quantities not available to you and me. While retail trading is the stocks and bonds an individual has access to and is investing for themselves and not on behalf of others. This giant gap–which shut many out of the market–was now closer than ever before–All thanks to computers.
With computers and program trading, anybody with money could get a piece of the stock market and own a portfolio of stocks. The same thing has been happening today in an even accelerated fashion with things like crypto and the ability to buy and sell stock with just a few taps on your phone. We’re all used to accessing anything with a few taps or clicks, but this hadn’t been a thing in the 80s until computers appeared on Wall Street. Now, hundreds of millions of dollars of stock could enter the market just by pressing a button.
So The market was an absolute raging bull. Had Wall Street created a monster? Were yuppies taking over the world? Maybe greed was good, as there seemed to be so much money out there just for the taking. In August of 1987, the DOW hit an all-time high, and if you know your history–you know where this is going.
On Friday, October 16, 1987, the DOW drops 108 points. Chaos ensues. This was the largest sell-off in US history. Tradeoffs were happening at an alarming rate and everyone was selling their shares. Despite this, traders were still making a fortune, with many saying it was the most contracts they ever signed in their careers. But it was alarming as this was the lowest drop ever. Surely we had hit the bottom of the market. It couldn’t possibly get worse than this. On Sunday night, October 18, 1987, investors, analysts, brokers, and anyone with money in the stock market went to sleep with no idea what was about to greet them the next day.
The Crash of 87
Some call the stock market crash of 1987 the defining moment of the entire 1980s. Again, it has to do with your perspective and age during the time period. I was ten in 1987 so my concerns were more based around if Hulk Hogan could defeat Andre the Giant at WrestleMania III, but this concern was not shared by everyone… As kids, we were blissfully unaware of the greatest one-day stock market crash in history. But it caused absolute havoc.
Fifteen minutes before the opening bell, The New York Stock exchange becomes overrun with sell-off orders. What was going on? In an instant, $500 million dollars in stock is sold. Brokers were walking into absolute chaos. Things were already bad from the Friday, but stocks opened on Monday ten percent lower. Did the Friday drop create a panic while the markets were closed over the weekend? That looked to be the answer.
The moment business hours began on October 19th, panic ensued. There was such a swell in sell-offs that Giant companies like IBM and Disney couldn’t even begin trading for hours after the opening bell. What was causing this? You have to remember, even though computers were being introduced to stock trading, the act of buying stock was still a manual execution. There wasn’t electronic trading and a majority of stock is still being traded through phone calls, running on the floor, executing the trade, and running back to the phones. It wasn’t an instant act.
With no automation, no one could catch up on all the sell-offs, and the entire system was swamped. But at the same time, some did have access to computer program trading and they could execute millions of dollars in trade in an instant. The sell-offs and market chaos triggered thousands of computer programs to trade billions in stock from around the world. The panic was spreading everywhere, and assets of any type were being sold off. If you owned any stocks, bonds, or even gold, you better sell or you risked losing everything.
Within an hour, sell orders hit the billion-dollar mark. This is still the early days of computers as we now know them and they simply couldn’t handle the overload and volume of orders. It was a remarkable occurrence, as both computers and the market were now crashing. Since so much centered around the New York Stock exchange, it was having a chain reaction with other markets and countries. But all the electronics were down and everything had to be done manually.
Today, of course, everything is done in an instant electronically, but actual human beings are what traded stock back then and on paper. But because of the relatively new inclusion of electronics, over 100 million shares were now lost in the system. By 12:30, the Dow has dropped over 250 points. And it’s only getting worse. People are in tears and it’s only around 2 pm. Every time they thought the market had hit the bottom, it only went lower–like my love life.
But Unlike today, there was no way to halt trading. By 4 pm, the dow has dropped 508 points. It was the worst one-day drop in history. In a single day, 22% of the market value was lost. This is twice as bad as The Great Crash of 1929. IN just seven hours, $500 billion dollars in capital was gone. It would forever be known as Black Monday.
After the markets closed, no one knew how to process this financial apocalypse. Would governments go broke? Was the banking system as we knew it over? The crash of 1929 entered us into the Great Depression. This was twice as bad. Were we about to enter our own great depression? In the UK, the same questions were being asked, and the public faced the threat of financial panic. Ditto for Toronto, Sydney, and many other countries as what happens on Wallstreet reverberates around the world.
The federal reserve told the banks they had to loan money to the market makers to get us out of the bloodbath that just occurred. Central banks also cut interest rates, which also helped in the recovery.
But the interesting thing about the crash of 87 is the pretty remarkable bounce back. This hasn’t been the case with other crashes. The crash of 1929 led to the great depression and some say we are still feeling the effects of the financial crisis of 2008. The market would climb back to pre-crash levels relatively quickly and by 1989, it had pretty much recovered and even surpassed the pre-crash highs. But many still lost a fortune. The crash of 1987 couldn’t be pinpointed to a singular event. However, it was thought the new era of computer program trading was a major culprit. It was ironic how the computer era, which was supposed to make life easier, almost destroyed it.
But one of the key takeaways from 1987 is the shock to the system it created. You may think that greed is one of our most powerful desires or behaviors. It turns out fear is much more powerful. Those who had been cocky about their acquisition of wealth and the desire to want more faced a terrifying reality. Everything could be gone in an instant. It was almost like we were brought back down to earth in the midst of all this excess. Fear and panic gripped people in a way greed never could. It was like we were playing with a lighter and finally got burned.
Final Thoughts on Yuppies, Reaganomics & the 80s Economy
This has been an extremely broad economic overview, but the big question is: What’s the legacy of all this? When Reagan took over, the national debt was around $995 million dollars. By the end of the 80s, it was over $2.6 billion. National debt had risen by 186%. And this was happening all over. This was an era with the highest income inequality since that sort of thing was tracked and was being felt in many other countries. But Some see it as a great time.
Proponents of the whole Reagonimics thing say it did what it intended to do and should be considered a success. Opponents state that an economic recovery would have happened, regardless. Critics say it also led to larger deficits and clearly larger national debt. Did corporate greed just continue to help the 1% while hurting the middle class? The rich were already rich. Did Reaganomics just make them richer?
But then Black Monday brought everyone back down to earth. And in a complete coincidence–which seems to happen a lot with this show–this episode is being released exactly 35 years to the day of Black Monday.
Reaganomics and the crazy 80s economy are a defining part of this transformative decade. It’s also one of the most unique and volatile times in modern financial history. From a cultural touchpoint, the economic changes gave rise to Yuppie culture and the deregulation of domestic markets created a lot of the pop culture of the 80s that we know and love. It’s funny how the financial state of the world in the 1980s–and Reaganomics–gave us some of the defining images of it. The things we associate with the 80s, such as GI Joe, Alex P. Keaton, Doublemint gum commercials, and Yuppies, would not have happened without it.
But I’m still not over that Family Ties episode where Tom Hanks punches out Alex. If you know, you know…