Hypocrisy in the Debate about Income Inequality

A popular and frequently-cited “inequality” discourse has risen to challenge the dominant neoliberal discourse that economic deregulation and globalization will “raise all boats” by increasing the overall standard of living in western economies, particularly by increasing access to lending, as illustrated by Wolfowitz’s short tenure heading the World Bank (see Hitt, 2005).

Several well-established academic economists – especially Emmanuel Saez (2008) and Thomas Piketty (2014) - have played particularly important roles in establishing the most-often cited discourse of economic inequality within the US found within the corporate media. Their discourse has been promoted by liberal think tanks, such as Think Progress, and has been popularized by Jacob Hacker in his work on risk shifts (e.g., see 2006). Their account has arguably become the most widely circulated account by the corporate media of the worsening life conditions of Americans as defined in terms of growing wage inequality and contracting economic opportunities. Evidence of the discourse’s widespread circulation can be found in prominently placed news coverage in The New York Times and The Wall Street Journal, among other locales (e.g., The Atlantic, etc.). 

Corporate and financial leaders are weighing in, carefully. When Goldman Sach’s Lloyd Blankfein joined the conversation on inequality by condemning growing “wage inequality” as “destabilizing” in a televised interview with CBS, the liberal think tank “Think Progress” coded Blankfein’s comments as “ironic” given his role as CEO of one of the world’s largest investment banks:

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. (Covert, 2014, http://thinkprogress.org/economy/2014/06/13/3448679/goldman-sachs-income-inequality/)

Think Progress decried the Blankfein’s hypocrisy. 

However, careful deconstruction of Blankfein’s language choices alludes to a hidden politics of privilege embedded in the social construction of taxation. Blankfein specifically cited wage inequality, rather than capital inequality, as driving instability. This linguistic framing is revealing when one considers that bankers’ wealth is derived primarily from investments that are not treated as identical to “income” in most tax-related government classifications. The main instruments of banker wealth -- such as capital gains and stock – are taxed at a lower rate than earned income (Garrett, 2014). Blankfein is a savvy rhetor. 

I find Blankfein’s rhetorical savvy even more nauseating when one considers the role played by Goldman Sachs in the promotion of corporate inversions. “Activist investors” (including hedge funds) are pushing for corporate “inversions” through acquisitions of foreign holdings designed to move headquarters out of the US and into lower-tax rate nations (Benoit, 2014). Media coverage of the recent spate of inversions results in proposed regulation by the Treasury Department, a communication resisted by influential corporations, such as Goldman Sachs, “which has an 88 percent market share by deal size, followed by Morgan Stanley, J. P. Morgan and Bank of America” (Paletta & Mattioli, 2014, p. B7). 

Goldman Sachs has an 88 percent market share in packaging these corporate inversions, which shield formerly US corporations from taxes, further shifting the tax burden to individual households and small-to-medium-sized businesses. Moreover, the corporate inversions packaged and financed by Goldman predictably lead to more layoffs within the US and abroad as acquisitions are typically followed by re-organizations and layoffs, further reducing job opportunities in the US.

Hypocrisy oozes from many of the main agents responsible for the financial crisis, which exacerbated income inequality and transferred capital, from the many to the few, across the globe.

References

Benoit, D.  (2014, August 3). Activist Firms Join Tax-Deal Push: Hedge Fund Marcato Seeks to Interest Big Hotel Companies in Inversion Bid for InterContinental. The Wall Street Journal Available, http://online.wsj.com/articles/activist-firms-join-tax-deal-push-1407124167

Covert, B. (2014, June 13). CEO Of One Of The World’s Largest Banks: Income Inequality Is ‘Destabilizing’ . Think Progress, http://thinkprogress.org/economy/2014/06/13/3448679/goldman-sachs-income-inequality/

Galbraith, J. K. (2009). The predator state.

Hacker, J. (2006). The great risk shift. New York: Oxford University Press.

Hitt, G. (2005, September 22). A kinder, gentler Wolfowitz at World Bank. The Wall Street Journal, p. A4.

O’Connor (2014, August 6). Poll finds widespread economic anxiety. The Wall Street Journal, p. A4.

Paletta, D., & Mattioli, D. (2014, August 6). A double-punch for tax ‘inversion’ deals. The Wall Street Journal, p. B1, B7.

Piketty, T. (2014). Capital in the Twenty-First Century (A. Goldhammer, Trans.). Cambridge, MA: The Belknap Press of Harvard University Press.

Saez,E. (2008)  Striking it richer: The evolution of top incomes in the United States. Pathways Magazine, Stanford Center for the Study of Poverty and Inequality, Winter 2008, 6-7.

Song, J. (2014, June 10). Goldman Sachs CEO: Income inequality is "destabilizing." CBS News. Available,http://www.cbsnews.com/news/goldman-sachs-ceo-lloyd-blankfein-income-inequality-is-destabilizing/