If you’re a politician or a populist commentator looking to stir up cheap populism, you should give thanks this week for Goldman Sachs. The financial giant has committed the unpardonable sin of making a profit—a record profit, no less—and, worse, it plans to reward employees who helped create that profit.
Imagine that! What nerve!
Goldman figures to hand out at least $16 billion in bonuses this year to its high-achieving employees. Although it apparently comes as news to some of Goldman’s critics, this is the way firms like Goldman operate. They create incentives to encourage exceptional performance. And guess what—it works, to everybody’s benefit.
New York’s astonishing revival since the early 1990s was financed in large part by the creativity and success of Goldman and its employees. Its recovery from the disasters of 2008 likewise will depend in large measure on the prosperity of Goldman. Like it or not, the entire region benefits when Goldman and other firms are profitable. Bonus money doesn’t get stored in a safe—much of it is spent on an array of commodities, creating an economic stimulus that requires no expenditure of taxpayer dollars.
Lloyd Blankfein, Goldman’s chairman and CEO, has admitted that the financial industry made some terrible mistakes over the past decade or so, and he has committed $500 million to stimulate small businesses around the country. The welcome gesture was criticized by demagogues who blame Goldman for the failures of other firms. That’s a shame.
Goldman is doing the right thing by its employees. The firm’s critics, silent during better times, have nothing to offer but venom.