Egalitarian-minded economists are pushing for a ‘GDP 2.0’ — and getting some lawmaker help.
Lloyd Blankfein, one of America’s most powerful bankers, a few years ago told a reporter that his Goldman Sachs financial colossus was doing “God’s work.”
Earlier this week, one of Blankfein’s high-finance peers, JPMorgan Chase CEO Jamie Dimon, made some headlines of his own. In a widely heralded New York Times op-ed, Dimon proudly announced that his bank is making a major move to “create more widely shared prosperity.”
JPMorgan, Dimon declared, will be raising the minimum pay of 18,000 of the bank’s workers to “between $12 and $16.50 an hour.”
Every business, the JPMorgan chief pronounced, needs to do its part to “address economic inequality.” As a nation, he added, “we must find ways” to help Americans “move up the economic ladder.”
Is Jamie Dimon serious about all this? Of course not. Like his CEO rival Lloyd Blankfein, Jamie Dimon is only kidding. Modern banks like JPMorgan Chase don’t “address inequality.” They create it.
America’s financial industry — as a just-released study from the Roosevelt Institute details — has over the last few decades shifted trillions of dollars in wealth out of the pockets of average Americans and into the portfolios of America’s rich.
A properly functioning financial system, this new Roosevelt Institute Overcharged: The High Cost of High Finance study points out, will help families save for major outlays and channel financing to productive investment. The United States had a financial system that operated along these lines for much of the middle of the 20th century.
This “boring banking” — a product of New Deal-era regulatory reform — generated lots of opportunities for middle-class Americans. But rich Americans looking to become richer found the New Deal’s banking rules outrageously restrictive.
By the 1990s, these wealthy movers and shakers had begun dismantling the New Deal banking rules that discouraged risky financial behaviors. By the 21st century, they had their rule changing all complete. “Boring banking” had become “speculative banking.”
Huge new banking giants were soon towering over the nation’s financial landscape, notes the new Roosevelt Institute study, “generating asset bubbles that feed both outsized financier income and dangerous instability.”
Big bank asset management operations, meanwhile, were charging excessive fees and delivering “mediocre returns for households trying to save for retirement.”
Overall, the authors of Overcharged calculate, speculative banking squeezed at least $13 trillion out of the rest of the economy between 1990 and 2005. If we add into the mix the post-2005 impact of the Great Recession, speculative finance turns out to have cost the typical American family between $105,000 and $184,000.
“Without this loss,” the report relates, “the typical American household would have doubled its wealth at retirement.”
On the other hand, this same speculative finance has much more than doubled the wealth of banking execs like Jamie Dimon. Could these same execs now be seeing the error of their ways? Could that wage hike that Jamie Dimon unveiled last week somehow mark a turning point?
Dream on. The wage hike that now has JPMorgan Chase winning kudos worldwide has much more to do with optics than redistribution. JPMorgan isn’t raising wages to fight inequality. JPMorgan is raising wages because the bank really has no choice.
The bank, media watchdog Jim Naureckas points out, has huge chunks of its workforce in political jurisdictions that have already enacted plans to raise the minimum wage to $15 an hour, states like New York and California.
And if JPMorgan had any real interest in battling inequality, adds New York magazine’s Annie Lowery, the bank could certainly afford more than a “puny” $1.85 wage increase spread out over three years. After all, in just the first three months of 2016 alone, JPMorgan tallied $5.5 billion in profits on $24 billion in revenues.
Three years from now, as the Economic Policy Institute’s Larry Mishel reminds us, JPMorgan’s lowest-paid workers will still be making only $12 an hour. That, he notes, “hardly seems to deserve a parade.”
But Jamie Dixon doesn’t really need a parade. He only needs to keep Americans distracted from the realities of a financial industry that’s “insatiably funneling money,” as one pair of Wall Street critics have just put it, to America’s richest one-tenth of 1 percent.
And distracting certainly can be lucrative. Ask Jamie Dimon. He pulled down from his JPMorgan labors $27 million last year.
Institute for Policy Studies associate fellow Sam Pizzigati co-edits Inequality.org. His most recent book: The Rich Don’t Always Win: The Forgotten Triumph over Plutocracy that Created the American Middle Class, 1900–1970. Follow him on Twitter @Too_Much_Online.