Goldman Sachs CEO Lloyd Blankfein spoke at a sold-out breakfast at the Canadian Club of Toronto yesterday.We’ve transcribed an excerpt from Blankfein’s conversation with Royal Bank of Canada’s CEO Gordon Nixon.
Gordon Nixon: “Moving on to the social implications of what has occurred over the last five years. The way I describe it to my kids is that our generation, you and I are in the same generation, ‘we had an incredible lengthy party and we’re now suffering from a hangover’…”
Lloyd Blankfein: “I’m sorry. This is how you talk to your kids?”
Nixon: “We’re now turning to our kids and we’re saying ‘It’s your job to clean up and to pay the bill.'”
Blankfein: “I’ll do the same thing and say ‘Gord is suffering from a hangover.'”
Nixon: “You look at the next generation. You have really high youth unemployment. In Europe, I mean the numbers are staggering and even in the U.S., particularly if you look at the real youth unemployment numbers there are well into the high double digits. You’ve go the Occupy movement. A lot of social unrest. The inequality issue. Obviously, Goldman has been at the centre of that discussion and debate. What is your take on the social implications on what has happened in the financial services industry and the global economy and that plays out and what the impact of tha might be in terms of political flexibility going forward?”
Blankfein: “I think the last question is really punch line, really draws out the punch line. I’d say, look, let me just say it has not just been the last five years. To some extent, we’re stewards of the economy. To some, we’re not really, we’re marketeers and play our role in it.
“But you know in good times, we walk around, to some extent, maybe this is a bad analogy. If you’re going to be the Samurai class, if you lose a war you’ve got to be prepared to take the consequences. If you’re going to get the benefits when things are good because you carry yourself in a certain kind of way you’re going to have to and it’s not unfair for people to ask you to bear the brunt of the system you were part of.
“It’s not just five years. If you look at the widening of inequality in the United States, it’s been a march for 30 years and so people, to some extent, I don’t think there’s a lot of social unrest in the United States. Maybe people worry there will be more and I don’t want to dare anything. I think it’s appropriate to be nervous, but don’t forget the United States has a political system and you can vote and have access and peoples’ voices are heard…. .That appropriately takes starch out of it because people can express themselves at the ballot box and they do.
“You don’t need to have social unrest per se to recognise that the two goals of the financial system and the economic system, not just the financial system, but the whole economic and production system should be to expand the wealth of the world and to distribute it fairly. And the two are linked, but they’re totally separate because if you were the richest country in the world and wealth was disproportionate you wouldn’t have a stable society. And I can tell you have a lot of stable societies that are just stable and deadly poor. So you need to achieve both and I think in the United States, over the last generation or two, we have been much better about generating wealth and much less good about distributing it in a way. And I’m not saying, no one’s going to accuse me of being a socialist, and I’m not. And I don’t believe in wealth redistribution over producing. And if you believe in production, you have to believe in incentives and the consequences of giving people incentives, they have to bear the benefits and the fruits of it.
“But over the long term, if the system works well it should accomplish both goals and it hasn’t accomplished enough of the second goal in the right way and that’s what the distress is over and different things. If you’re on the front of people minds and different people will get disproportionate. I”m not saying that attention that the financial institutions get, or our institutions per se, or us per se is unfair. It’s of course disproportionate relative and it’s the nature of things and that happened after the Depression…
“And I think certainly, for me, it’s very distracting to say the least, but I don’t want to suggest we’re repelling the notion of it because it’s unfair. It’s just disproportionate. It’s fair to the extent that we are fiduciaries in some part for the financial system and it hasn’t worked well enough for everybody. We have to go out and have a good conversation and dialogue recommending changes to it and get engaged. Now, the trauma in the United States was so recent and so powerful that we’re not necessarily having a good conversation or dialogue…People count the number of times you visit the White House or go in this building as if people who manage and regulate the economy are doing something wrong if they talk to the private sector leaders of the economy. A certain amount of craziness has to dissipate and we have to engage in a very, very serious conversation about something that affects all our well being.
Nixon: “‘The CEO of Goldman a Socialist.’ That would be actually a pretty good headline.”
Blankfein: “I’ve seen every other headline.”
Nixon: “That’s true.”
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