Opinion

Ben Walsh

Goldman: The rest of you should invest in America

By Ben Walsh
July 19, 2012

Lloyd Blankfein has taken to the op-ed page of Politico to extol investing in America: “When I meet with [CEOs] and institutional investors and they ask me where to invest, my response is that the United States remains as attractive as ever”.

But Blankfein’s champion-of-America pose doesn’t square with the fact Goldman is now an avowedly transnational company. They invented the term “BRICs” and have spent the last decade hyping the growth potential of Brazil, Russia, India and China. Since 2006, the firm has held an annual board meeting in each BRIC country, with the Middle East also thrown in for good measure. More recently, Goldman has moved on to evangelizing an even longer list of “growth markets“. And the bank’s success depends, as Bankfein’s said last year, on “chasing GDP” across the globe. Right now, that means doing a massive IPO for a state-owned Malaysian agro-conglomerate from offices in Singapore and Hong Kong.

Since 2010, Goldman has cut headcount by 17% with more reductions to come. Employees in so-called mature markets (the US and EU) have been disproportionately affected. Before the bust, the firm liked to brag that its center of gravity was in the middle of the Atlantic, halfway between New York and London. That portion of the world, however, is increasingly seeing tepid economic growth; Goldman’s future is more Pacific than Atlantic. The IMF recently revised its projection for 2013 GDP US growth down to 2.3%. On the other hand, emerging economies are projected to grow at 5.9% next year (though they are slowing). Those emerging economies are where Goldman’s business is growing.

Between 2006 and 2011, Goldman saw its number of counterparties in the US and Western Europe grow by 21% and 22% respectively. That seems pretty good until you see what happened in Asia (+59%) or in Eastern Europe (+89%). And it’s downright pathetic compared to the whopping 142% increase in counterparties that Goldman saw in Latin America. From 2000 to 2010, the region where Goldman was best been able to turn GDP growth into revenues was Asia. Other banks are seeing similar trends – JPMorgan’s revenue has declined for three straight years in the US while growing for three straight years in Asia.

Blankfein may be touting US investment when he meets with clients, but he’s doing something different with the business he runs. Goldman Sachs advising clients to do one thing and then doing another? We’ve heard that one before.

Comments
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Good article.

And it’s not just Goldman. Any business grouping of humans sitting at a table, from tribal times to today, from small-town tiny partnerships to multinational corporations — naturally tend to say, in their meetings, “It’s us against the world.” And it is.

After all, life itself is a competitive struggle. And business is especially so.

The PROBLEM is that the populace of any given country erroneously believe that the corporations that are legally chartered in their country have Patriotic notions.

A patriotic corporation? Nothing could be further from the truth. Corporation chartered in America — like Goldman, Exxon, IBM, Apple, Intel, Google. Boeing — are legally created, by a legal document, to do what’s in the interest of their shareholders, period.

That’s why you see these American-chartered companies routinely outsourcing American jobs, selling and divulging American technology to foreign partners, selling weapons to foreign governments, importing low-wage foreign H1B Visa engineers to replace American engineers, and allowing the foreign engineers to take their newly learned skills back to their home countries to compete against America.

In short, corporations, whether American-chartered, Spanish-chartered, or Mexican-chartered, have zero patriotic notions. Patriotism is not part of the human-corporate-animal. How could we expect otherwise?

That is OK. The problem is that the common populace of each country, for example America, or Spain, or Mexico, erroneously think the “American”, or “Spanish”, or “Mexican” corporation is on their side. When in fact, the corporations, in many ways, are their worst enemies, selling them out at every opportunity.

Posted by AdamSmith | Report as abusive
 

They simply go where the money is and where fiscal incentives are stronger.

Posted by robb1 | Report as abusive
 

Well DUH!!!

Posted by tmc | Report as abusive
 

so if were not a banker were SCREWED.

Posted by monoloco | Report as abusive
 

U.S. GDE (Gross Domestic Equilibrium) will only be reached when the cost-of-doing-business reaches a point where the United States can compete with foreign markets. Among other variables within the cost-of-doing-business equation, the cost-of-living will be either much higher in those foreign markets or much lower in the US, on average. Yet the American free-market mindset would rather maintain the current imbalance.

Posted by BloodSavage | Report as abusive
 

The history of mankind is littered with the carnage of collectivism. Whether that be of the communist ilk where the party/union dictators control the fate of worker bees or fascist religious organizations of the cooperative kind whose board of directors only owe a duty to the God of Monetary Profit.

It -those twin evil antithesis of individual freedom and responsibility- have been the Con-gress of Pro-gress since their macro economic models came out. Ever so often times and technology combine to create r3volutions like the Gutenberg Bible (tech => printing press), US Civil War (tech => steam & mechanical power) and todays “Globilization” (tech => computers and Internet).

The Berlin Wall and collapse of the Soviet Union appeared to happen overnight. One day there was Gorbachev and then there was Yeltsin. However, just like it took 100+ years for Lincoln’s declaration freeing the slaves to come to fruition it will take decades or millenia for the watershed events in Tienanmen Square or the Arab Spring to change the course of human events.

Posted by GLsword | Report as abusive
 

Patriotism is a scam…

Posted by areddy831 | Report as abusive
 

Adam Smith – You did a great service to readers here by posting your insightful comments.

Posted by Midnattsol | Report as abusive
 

This global corporation era is not good for any workers anywhere in the long haul. These international corporations rule governments and turn the work force into a globla feudal system which is not good for countries or for human kind. They roam the world seeking the cheapest labor and come and go as they please leaving governments with no dependable tax base. Indeed they are vampires that need to be put in their place and must be controlled. We must go back to Glass- Steagall and keep deposit banking separate from investment banking. 401ks should become obsolete and turn them into national savings account in our deposit side banking. Only those who can afford to gamble should be in investment banking. Luring the general public into it through CD’s IRA’s and 401ks is just plain deceptive and diabolical.

Posted by JLWR | Report as abusive
 

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