Posted by: John Elliott | October 21, 2009

Goldman Sachs backs vast inequality to boost prosperity

“We have to tolerate the inequality as a way to achieve greater prosperity and opportunity for all”

This astonishing remark was made today in London (where I’m visiting) by Lord (Brian) Griffiths, vice chairman of Goldman Sachs International. He was defending massive bonuses in financial services that are estimated to be exceeding £6bn this winter in Britain, despite the recent international banking collapse and government-funded rescues.

Maybe the statement’s not surprising, coming from Goldman Sachs which has just produced massive profits of $3.2bn in the third quarter of the current year, and is reported to be on track to pay its 31,700 employees salaries nearing an astonishing $700,000 average this year.

But Griffiths has a wider brief than just making money, or so it would seem, because he is also chairman of Christian Responsibility in Public Affairs, as well as the Archbishop of Canterbury’s Lambeth Fund. So he’s a leading figure in the Church of England as well as a banker. Less surprisingly, he was also once a top adviser to Margaret Thatcher, one of Britain’s most socially uncaring prime ministers.

But is it Christian to defend inequality in Griffiths’ terms? Do the large cheques received by him and his colleagues and other bankers really create wealth And, in any case, is it acceptable in any religion, stated as blatantly as this?  Surely it is it even more indefensible when the gaps in wealth are as huge as they are now between financial services and other equally stressful but often more productive occupations.

Stephen Green, Chairman of HSBC and a Church of England priest, has shown more Christian consciousness. He has said banks owe what he called the “real world” an apology for the past year’s crisis. Banks, he said recently, need to “learn the lessons” related to “governance and ethics and culture within the industry” – and that included the way that banks award and control bonuses.

Even in India, international banks have been paying relatively astronomic salaries in recent years to people ranging from top executives to new recruits from management colleges. Top Indian businessmen have been debating salary levels, having been urged by prime minister Manmohan Singh to curb them at the top.

But only one, Mukesh Ambani of Reliance International (RIL), has volunteered to cut his salary – by 66% to $3.2m (in 2008-09) which itself is astronomic for India and totally unnecessary in terms of giving enough headroom for his top executives to be well rewarded. And his gesture was probably just that, aimed at polishing his image.

Of course, it is inevitable that any push for economic growth will create riches for some while leaving others behind. That has been increasingly evident in India since the 1991 economic reforms boosted unequal growth. The social price of this growth are vastly widening the gaps that are developing between the rich and the poor and that are beginning to show up in violent social and political rifts across South Asia.

One would not of course wish the Naxalites on Griffiths and his colleagues, but his arrogant remarks today in London surely deserve to be dammed internationally.


Responses

  1. Call me conservative, if you will, but in my opinion it is this greed for earning bonuses, in the first place, that led to the bloodbath of the past year.

    Whether or not Goldman Sachs, needed the TARP funds, is a totally different question. But the looming fact is that they did use them, and more importantly they also indirectly got more than they bargained for – from the TARP Program – for instance almost USD 4.6 billion from AIG (refer here http://tpmmuckraker.talkingpointsmemo.com/2009/03/government_sachs_tarp_funds_just_the_tip_of_the_ic.php).

    Well I reckon, Goldman’s Bonus program – is more like robbing the gullible to make the rich richer. Of course the rich just also happen to be bankers!!

    What say??

  2. Well HSBC (and Stan Chart) did not need to be bailed out. And that was because they had a different management style which was not into trying to make huge leveraged bets. Most of those who tried the latter – RBS, Citicorp, Merrill etc – came unstuck. But Goldman did not, albeit it did dip into TARP funds and some allege benefited from interference run by the previous tenant of 1500 Pennsylvania Ave., ‘Hank’ Paulson. Whatever, the fact remains that with the enormous upheaval in asset prices over the past year-and-a-half there have been gigantic profit opportunities for those who had the balance sheet elbow room, the right judgement and good luck. Goldman seems to have had all three, the former no doubt enhanced by access to TARP.

    So they made tons of money and have shared the spoils; within their rights strictly. It is bad form to claim that this is also for the general social good. Whether, that is perhaps hubris beginning to show and a come-uppance (a string of bad luck) is headed their way or perhaps they truly are blessed with Providence’s favour and they’ll keep making money and boasting about it into the foreseeable future, we wil have to wait and see. After all, it is not as if, all events have a morally satisfactory ending.

    As for Lord Griffiths’ religious duties, the statements ought not to be held against him on that count. Many more (including rich, educated and famous*) do such hideous things in the name of their own religion that such minor apparent inconsistencies as of Lord Griffith hardly bear pointing out.

    Note: * Such as one Sheikh Osama bin Laden and his many supporters drawn from Arab elites

  3. In a way one should appreciate Lord Griffiths honesty in telling what he really felt so that he gave an oppurtunity for others to judge him.

    What some of our politicians do by claiming to do the opposite are relatively worse than this . Just shows how much Politicians are dependent on business men that gives them the audacity to say and get away with such things.

    Goldmam sach may be creating inequality in the West but in a country like India politicians activities deny survival of the vulnerable people.


Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

Categories

%d bloggers like this: