A free market diplomat

2015-04-26 15:00

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Lloyd Blankfein, the CEO and chairman of New York investment bank Goldman Sachs, does not follow his compatriot, property tycoon Donald Trump, on Twitter.

So he never saw Trump’s tweet this week calling South Africa “a mess” and “dangerous”, insinuating the country was ready to explode.

“I like Trump. He’s a character and he loves making fun,” Blankfein says in an interview this past week.

He is on what he calls a routine visit to South Africa.

But what will he tell Trump if he bumps into him next week in New York?

“Explode? I don’t see that happening. Mess? Most places are messy. Yes, there is pressure for further change in South Africa, but it hardly looks like an explosion,” adds Blankfein.

South Africa is not a strange place for the world’s number one private banker. This week’s visit was his first since 1993. Prior to that he had been a regular visitor in his previous capacity as what he calls a “gold trader” for Goldman Sachs.

That was in the days when South Africa was the world’s top gold producer.

When Blankfein embarked on his life’s ambition to be an investment banker, South Africa was a mandatory destination.

Communists will most probably describe him as “the ugly face of capitalism and American imperialism”. But Blankfein doesn’t exactly fit that picture.

He has eyes that laugh almost all the time and is always ready with a quick joke – often at his own expense. He readily confesses to a faith in “hybrid capitalism”, which includes a role for the state and the proper regulation of financial markets.

He thinks, for instance, that the current regulation regime following the 2008 global collapse is “better”, but not as good as it should be. There are new challenges, such as an obsession with “safety”, which may dampen the risk to finance business ambitions.

And it does not bother him at all that the ANC – whose top leaders he met on this trip – is closer to Russia than the US.

He quotes former president Nelson Mandela writing that it would have been disingenuous for the ANC to dump the Russians when the liberation party took over in 1994, given that the Russians had been on the side of the ANC when it had not been fashionable.

Blankfein is a keen reader of biographies.

In the early 1990s, he was part of the Goldman Sachs team that introduced members of the ANC to the bank’s economic desk in New York, educating them about the realities of the global economy.

He remembers the then future Reserve Bank governor Tito Mboweni, future finance minister Trevor Manuel, Absa CEO Maria Ramos and Reserve Bank governor Lesetja Kganyago. He especially remembers Mboweni for his larger-than-life personality.

One would want to think that, when Blankfein speaks, most of South Africa would sit up and listen.

But when Blankfein visited President Jacob Zuma this week, he was not asked for advice.

“I offered some comments.”


“The response was generally positive. It was a brief conversation.”

He has a reason for being this diplomatic and has little left to prove. He received much of the credit for Goldman Sachs not going under with Lehman Brothers during the economic meltdown of 2008. He might not deliver front-page-worthy quotes, but is big on doling out wisdom.

At 60, and at the pinnacle of a career in global corporate banking, he is probably entitled to that – like the somewhat unconventional wisdom that it’s not really hard to be a leader in times of crisis.

“Your people stand with you. They’re afraid. Their first instinct is to be agreeable to help save the organisation.” He believes the real test for leadership often comes when people realise what they’ve been through and what they had to sacrifice.

What does he value when he appraises leaders? Expertise or character?

“Character all the way. You can remedy lack of expertise, but not the other way around.”

Blankfein chooses his words carefully when asked about South Africa, its current situation and prospects for the future.

This past week he spoke to about 40 South Africans, the majority of whom told him he was in South Africa “at an interesting time”.

His counterquestion to them was: “Over the decades, has there ever been a time when South Africa was not interesting?”

Remembering South Africa in 1993, the last time he was here, what were his expectations of what South Africa would be like 20 years later?

There is no doubt South Africa has exceeded “the upper band” of those expectations, he believes.

But he is rather blunt about the current situation.

“A country with an economy as strong and advanced as South Africa’s should have an uninterrupted supply of electricity.”

What about the xenophobic violence?

It is not good for South Africa. The continent is emerging as the next global market and South Africa is in a unique position to benefit from this. But it will be commercially detrimental if South Africa is seen to be setting itself up against the rest of the continent by attacking foreigners.

Asked what should be the engine for economic growth – business or the state – Blankfein reveals himself as an unapologetic free market thinker.

Apart from all the usual rhetoric about why economic growth should be driven by the private sector, he adds another reason in favour of the free market system: “In the public sector, there are no repercussions for wrongful deployment of capital, such as building a road or an airport that should not have been there.”

Which one is the priority to address? Inequality or poverty?

Blankfein, a registered Democrat, reacts rather strongly: “Many people have died because of inequality.” It leads to frustration that manifests in “destabilising behaviour”. People die in civil wars resulting from conflict between beneficiaries and non-beneficiaries.

“Just as people die from the failure to create wealth, resulting in poverty. You need both wealth and distribution. And the stability resulting from the perception that society is fair.”

Where in the world has the right balance been found between the need to create wealth and the need to redistribute wealth?

Blankfein thinks for moment.

“Look, I’m an American. The expression ‘the American Dream’ is a manifestation of getting it right for a long time.

“The dream is if you work hard and wealth is created, you’ll get your share of it. The country will get wealthier and you’ll get wealthier with it.”

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