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Goldman Sachs CEO: "Tensions Between Capital And Labor" Are "Fueling Anxiety"

The chief of the world's most powerful investment bank worries about the fate of labor in an economy tilted towards the already-wealthy.

Last updated on July 3, 2018, at 1:01 p.m. ET

Posted on December 11, 2014, at 11:25 a.m. ET

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Lloyd Blankfein, chief executive officer of Goldman Sachs Group and bestselling French economist Thomas Piketty

Speaking on the 63rd floor of One World Trade Center to an audience of bankers, reporters and executives, the CEO of Goldman Sachs fretted over the fate of labor in the modern economy.

When asked about how corporations allocate their capital — increasingly buying back stock from their shareholders — Lloyd Blankfein said "the capital we're spending is augmenting capital" that could be invested elsewhere, such as in hiring or expansion.

Andrew Ross Sorkin, who was interviewing him for the New York Times's DealBook Conference, then asked about Uber, which recently raised over $1 billion at a valuation of over $40 billion — with Goldman also raising money for Uber from its wealth management clients. Blankfein said the "sharing economy" can create more efficiency, which "can sometimes be the enemy of maximizing the labor force," and that the gains from that efficiency go to investors like venture capital firms that have large stakes in Uber.

"The efficiencies are coming at the expense of labor," Blankfein said. "That's creating all sorts of problems for the country."

The huge gains in wealth for investors and employees of technology companies, Blankfein said, wasn't going to workers. "When you look at it and say who's getting that $20 billion, it's not going to labor, that $20 billion is savings, it's attaching itself to the people who are putting up the capital to that company. That $20 billion, some of it is wealth created, some of it is wealth steered away."

This isn't the first time Blankfein has expressed concerns over inequality. In an interview with CBS in June, Blankfein said that income inequality was "a very destabilizing thing."

But his comments today were a longer explanation of how he thinks workers might fare in a new economy that Goldman has a large role in funding (it is an investor in Uber). "You see tensions between capital and labor that's fueling people's anxiety and feelings of wealth inadequacy."

Blankfein, perhaps inadvertently, was echoing the most unlikely best selling author, French economist Thomas PIketty, whose almost-700 page tome Capital in the Twenty-First Century argues that we're facing an economic era where owners of capital — like shareholders or homeowners — will see their returns rise faster than the growth rate of the economy and the wages of workers.

While Piketty's solution to this dilemma is taxing wealth, Blankfein said that we have to accept these technological shifts and adjust to them. "I wouldn't want to regret it, no sooner than I would want to curse the tides," he said.

Blankfein also expressed optimism that these shifts in the economy could make it grow faster, despite the anxiety and displacements they may cause.

"I consider efficiency and creation of new technologies, that's an advance," he said. "It's new ways of employing labor, from industries where they're less needed to industries where they're more needed."

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