Lloyd Blankfein, CEO of investment bank Goldman Sachs, called income inequality “very destabilizing” during an appearance on CBS “This Morning” on Thursday.
Arguing that the growing division between the top and bottom of income earners drives political divisions that makes it difficult to legislate and “deal with problems” and therefore “drive growth,” he said, “It’s a very big issue and something that has to be dealt with.”
Blankfein himself can be counted among the 1 percent who have been grabbing most of the country’s income growth, as he is the world’s best paid banker with a $2 million annual salary and tens of millions more in bonuses, adding up to a net worth of $450 million.
While Blankfein argued that one way to fix income inequality is to “make the pie grow” and grow the economy, he also acknowledged that “too much of the GDP of the country has gone to too few of the people.” He added, “If you grow the pie but too few people enjoy the benefits of it, the fruit, then you’ll have an unstable society.”
In fact, that’s what the country has been experiencing for the past few decades. Between 1979 and 2007, the top 1 percent of families saw their incomes rise by 278 percent, but those in the middle only saw a 40 percent increase. That top 1 percent also got 47 percent of all income growth in about the same time period and took home 20 percent of all income in 2010. In 2012, the wealthiest 10 percent of the country took home half of the country’s total income, the largest share ever recorded.
Meanwhile, the bottom of the income scale hasn’t been reaping the rewards of a growing economy. Corporate profits are hitting record highs and workers keep increasing their productivity, but wages are growing at the slowest rate since the 1960s and they’ve experienced an entire decade of stagnant growth.
Rising income inequality comes with a host of negative consequences: It pushes Americans into more debt, makes them sicker, makes them less safe, and keeps them from moving up the economic ladder. It also hurts economic growth, while addressing it through modestly redistributive policies doesn’t.
And it destabilizes the political system, as Blankfein predicts. Research has found that high inequality leads to a less representative democracy and a higher chance of revolution as the less well off come to believe that the government only serves the rich. And those people would be right, as our current political system is far more responsive to the wealthy — like Blankfein himself — and doesn’t listen to what the middle class and poor want and need.