Today's date:
Fall 2010

Gordon Gekko vs. Hugo Chavez

Oliver Stone is the director of some of Hollywood’s most famous films, from Platoon to Wall Street to JFK. He sat down in the Los Angeles offices of his production company, IXTLAN, to talk with NPQ editor Nathan Gardels about his documentary South of the Border, and his theatrical release Wall Street: Money Never Sleeps.

NPQ | As you show in your documentary, South of the Border, United States diplomacy and the American media have reacted with general hostility to the empowerment of the poor and indigenous in Venezuela, Bolivia, Ecuador, Paraguay and, to some extent, Brazil. Why is that?

Oliver Stone | I suppose it comes from the old imperial impulse of the US toward Latin America going back to the Monroe Doctrine, Teddy Roosevelt, the protection of American business interests and support for military dictators throughout the Cold War. The US remains hostile to anyone on the left coming to power in their “backyard,” anyone who thinks the resources of a country belong to its people.

As Argentine president Cristina Kirchner points out in the film, for the first time since the Spanish conquest, Latin America’s leaders look like the people they govern. Venezuela’s Hugo Chavez was raised in poverty. Bolivia’s Evo Morales is an indigenous Indian labor leader. Lula was a labor union leader who was not well educated. All three of these men were imprisoned at various times.

For the first time in modern history, much of South America is beyond US control.

It is also beyond the influence of the US-dominated IMF (International Monetary Fund). In 2003, the IMF had $20 billion in loans outstanding to Latin American countries. Today, it’s about $1 billion. Lula tells in the film how he resisted the IMF’s effort to get him to roll over Brazil’s loans. He wanted out of the dependence.

The US media tend to ignore the fact that so many of the poor today are better off than under previous regimes. From 1980 to 2000, when neo-liberal policies reigned, growth was dismal, the gap between rich and poor grew far larger. Yet, until the Wall Street-induced recession, growth had been high across the region under this new breed of leftist leaders.

From 2003 to 2008, for example, Venezuela’s economy nearly doubled in size. After Nestor Kirchner got rid of the IMF loans in 2002, unemployment dropped from 20 percent to 8 percent, and the economy grew 63 percent over six years.

NPQ | Yet, key figures of Latin America’s left are also critical of Chavez, Morales and the rest. Jorge Castaneda, Mexico’s former foreign minister, divides Latin America into the “irresponsible” left of Venezuela, Bolivia and Argentina and the “sensible” left of Brazil and Chile.

His worry is that the “irresponsible” left’s anti-globalization, populist spending policies, in the mold of Juan Peron, will lead Latin America back to the old cycle of inflation, stagnation, personalist authoritarian rule, corruption and disillusion. Former Brazilian president Fernando Henrique Cardoso has the same worry: “A country has to make a living in a globally competitive environment,” he says. “Building prosperity requires caution and patience. It requires time. Populism is a shortcut that doesn’t work.”

Indeed, today inflation in Venezuela, at 30 percent, is the highest in Latin America. The credit markets also rate it among the highest risks globally to default on its debts.

Is there anything to these criticisms in your view?

Stone | Today’s inflation does hurt the middle class most. And that is a problem. At the same time, let’s put it in perspective: Inflation in Venezuela was more than 100 percent in 1996, two years before Chavez was first elected. Inflation hurts the poor less under Chavez because they now have subsidized housing, education and health care.

As for the concern about Chavez’s personalist authoritarian rule in the stead of Juan Peron, former Argentine president Nestor Kirchner raises the issue in the film. He said, “I like Hugo as a friend, but I advise him that he should have 20 Hugos to succeed him instead of hanging on.” That is an issue.

If you ask Hugo, he will say that “I’d love to be president until 2020, a third term to consolidate my changes.” In his view, he wants one more term—which a referendum the country voted on has now allowed—because Venezuela needs sustained attention to change a very screwed-up country. But after that, he has said to me, “I want out. I’ll take my pension and go back to live a comfortable life in my village.”

Hugo Chavez is not a rich man. He hasn’t made a dime while being in power. He hasn’t been corrupted.

True, members of the Chavista movement have been involved in corruption as they moved into the system. There is mismanagement. There is a lack of competent personnel. There are shortages. Supplies of food sit there rotting for lack of efficient distribution—always an issue in socialist or quasi-socialist administrations. There are complaints about the corruption of the judiciary, just as there were before Chavez. He can’t control them.

His own zealous Chavistas are sometimes his biggest enemy. They do stupid things because they are so paranoid about the opposition. No question these problems exist. And Chavez tries to stem them when he can. Since the recession, Chavez hasn’t been as agile with a stimulus as, for example, Morales has in Bolivia. As a result, his enemies are at the gate over the last five quarters of poor growth. I’m sure the upcoming elections will demonstrate dissatisfaction.

If he loses, I guarantee you he will walk away. He will abide by the law.

But the overarching point of my documentary is that Chavez and other leaders across Latin America I highlighted are giving the poor a chance they’ve never had.

Don’t take my word for it. The World Bank and the UN have both reported that extreme poverty in Venezuela is down 70 percent under Chavez. That is the bottom line.

NPQ | At the end of the documentary you say you are against “predatory capitalism” and for “benign capitalism.” You spend a lot of time in China, where a very raw capitalism has lifted hundreds of millions out of poverty. Is China’s capitalism predatory?

Stone | There is certainly a harshly evolutionary competition that goes on in China. It’s a very Darwinian, survival-of-the-fittest existence there. But it’s also a controlled capitalism. You can’t grow strong unless you have a deal with the state. But don’t get too strong or step out of line because the state will crush you.

But it’s not predatory capitalism in the sense that the whole effort is geared toward production and harnessed to lifting up the standard of living of the whole country.

And it is surely not a free market as we understand it in the West. There are vast controls of currency and capital flows. I see this at my small level. I have an apartment in Beijing, and I can tell you that moving currency freely is very difficult.

China is far less free than Venezuela economically and politically. In Venezuela, the Internet is free. There are 1,000 radio stations. Globovision, the TV station that fiercely and openly trashes Chavez on a regular basis, is Fox News on steroids.

NPQ | Speaking of predatory capitalism, you made a sequel to your 1987 film, Wall Street. While the takeaway line from that film was Michael Douglas gloating that “greed is good,” judging from the trailers I’ve seen, the takeaway from the sequel is “greed is legal.”

Does that express your view about how American capitalism has evolved over the last two decades?

Stone | Well, it fits. What led to the crash was banks overleveraging other people’s money—gambling—in complex trades of highly risky securities to “reach for yield”—that is, higher profits. Clearly there was some fraud as well as disinformation by rating agencies. But largely it was all legal.

The real issue, as Paul Volcker has pointed out, is whether banks like Goldman Sachs should be allowed to trade for themselves. Even if the new reform law limits them to 3.5 percent in their hedge funds, and even if those trades are listed on a public exchange, they still have a lot of room to play with that.

One problem now is that the fear of inflation has led the Federal Reserve to keep interest rates so low that there is so little return on bank deposits that anyone with reserves is forced to play in the volatile and risky market. We are all being forced into the casino business.

If Goldman Sachs and the others were hedge-fund investors solely, let them do what they want to do, take their winning risks or losses. But they shouldn’t be allowed to be a federally insured commercial bank that puts other peoples’ assets at risk that the government is then called upon to rescue if they get in trouble.

We need good banks like in the old days. Banks were supposed to make money with a public license. They would make money on the difference between the interest depositors were paid and lenders were charged. It was a reasonable deal. Wall Street was a place you went to market stocks and bonds and build infrastructure.

There were banks that behaved well during this whole crisis, such as the Royal Bank of Canada. It was the only bank that let us shoot our film on its premises. They had nothing to hide.

Our financial system went awry when Sandy Weill—my father’s last employer, by the way—came along and built Citigroup into a financial supermarket that linked everything from traditional banking to securities trading to credit card debt and insurance premiums under one umbrella. Financial corporations grew into huge megaliths between 1970 and 2008. And, in my experience, the bigger an institution gets, the more likely it is to fail and subvert the business that it is in.

Just as Wal-Mart destroyed so many small businesses, so the concept of the financial supermarket destroyed sound banking.

NPQ | When did you decide to make this sequel, Wall Street: Money Never Sleeps?

Stone | We decided to make this sequel as a bookend to the first Wall Street in the wake of the crash. Twenty-plus years after the first film, we were experiencing the end result of what started in 1987: the concept of Wall Street profiting for itself, of investment houses trading to increase their own profits instead of the profits of their clients.

We did quite a bit of research for the film, including talking to young bankers working on Wall Street for only two or three years. We were allowed to shoot scenes for the first time at the Federal Reserve Board.

We talked to people who had been in the key meetings in the middle of September, 2008, when the crash started and when it was decided to bail out the banks.

NPQ | Did you learn anything new that you didn’t know before about Wall Street?

Stone | The extensive computerization of trading was totally new to me.

In the old days, you believed in a stock and traded on it. Now, massive supercomputers are programmed to arbitrage minute shifts in value over five-second intervals in which thousands of stocks are traded back and forth. You can churn a nice profit if you make a third of a cent on 15,000 trades a day.

I also was able to understand how companies like Goldman Sachs make money by trading against themselves.

Elliot Spitzer, the former governor of New York, sat down with us in early 2009, some eight months before it was news, and told us to look at the dealings between Goldman Sachs and AIG. “That,” he said, “is an evil empire.”

He brought the idea to us that Goldman Sachs—which we call Churchill-Schwartz in the film—was hedging its investments in subprime mortgages, going long and short simultaneously. He said the deal was suspect when AIG, using the government’s taxpayer bailout money, indemnified Goldman 100 percent, giving it $13 billion back as its counterparty instead of discounting it.

NPQ | Aside from your earlier Wall Street, has there ever been another Hollywood film about finance?

Stone | Several. There was a wonderful 1954 film called Executive Suite, directed by Robert Wise, with Barbara Stanwyck and William Holden. It is a story about how, at America’s most prosperous moment, it was losing focus on production and shifting to a marketing and accounting bottom line. Instead of focusing on the car’s engine, we began focusing on the tailfins. It was when Madison Avenue started to take over.

NPQ | And your subtitle, Money Never Sleeps, reflects the continuing financialization of the American economy over the decades?

Stone | Yes. In the film, Michael Douglas’ character, Gordon Gekko, points out a statistic: Finance companies account for 47 percent of corporate profits in America today. Back in the 1980s, I believe it was on the order of 15 percent. Usury has become America’s largest industry. Greed is legal.

NPQ | How much of a problem is it to portray the convoluted, opaque and boring business of finance in a dramatic film?

Stone | Well, there is no question we have to exaggerate and simplify.

Most of the shenanigans that go on are so complicated to portray. We had to cut a very well-done scene on AIG because it was just too complex to follow.

In documentaries and books you can go right to the issues. In a film you need to dramatize it.

Through several major characters—Gekko, his protégé, Jake Moore, who is also Gekko’s estranged daughter’s fiancé, and two bankers—we try to dramatize the present condition on Wall Street.

The first Wall Street was simpler. Gekko’s protégé, a greedy young man who came from a blue-collar family (Charlie Sheen), met his comeuppance in the end. His father was an honest union chief (Martin Sheen).

In this film, there are no unions because, frankly, the unions have lost so much power there is no call for such a character. Companies in 2010 are no longer being taken over, they’ve already been downsized and subsumed into some conglomerate.

In this film, the protégé starts as an idealist investment banker, not a trader. He’s trying to raise money for an alternative-energy company he believes in.

While the economy has changed, the choices in life haven’t. The issues in this film are the same as those in the last one: Is greed good? Does it work? Are human values more important than financial ones? These are all issues we face in our own ways.

NPQ | For you, those issues are what link your two latest film projects, South of the Border and Wall Street: Money Never Sleeps.

Hugo Chavez is your anti-Gordon Gekko?

Stone | Yes. One clarifies the other for me.