Corzine calls for more even wealth distribution for economic stability

In a speech before roughly 70 students and community members in Dodds Auditorium on Monday afternoon, Corzine stressed that the greatest underlying cause of the recession was the growing income inequality in the country. “Far too much of the commentary that I see [in the media] misses the point that the imbalances are still there and need to be dealt with,” he explained.

He added that the last decade’s unequal income distribution is reminiscent of that of the 1920s, when similar factors contributed to the Great Depression.

Because consumer spending makes up 70 percent of the U.S. economy, allowing spending power to be concentrated among the nation’s wealthy renders the economy unstable, Corzine said, asserting that a more equitable distribution of wealth is necessary for a strong economy.

“The staggering redistribution of wealth,” Corzine said of the past decade, “created a pretty toxic sense of inequity and a spiraling appetite for debt in our society.”

Following the recent concentration of assets among the richest Americans, the top economic quintile now possesses 50 percent of the country’s wealth, Corzine noted.

But, he said, the problem did not begin in the last decade — rather, per capita income has decreased by about 12 percent since the 1970s, accounting for inflation. Household income only managed to avoid a similar dip because of the influx of women into the workforce, he added.

While Corzine argued that restoring a more equitable distribution of wealth is needed for economic recovery, he also said that government regulation plays a critical role in increasing stability.

He cited government interventions like the Glass-Steagall Act of 1933, which created barriers between investment and commercial banking, the creation of the Securities and Exchange Commission, and post-Depression reforms as measures that “laid a foundation for growth that ... put us into a position to really succeed for the greater part of 70 years.”

However, the later repeal of reforms like the Glass-Steagall Act contributed to growing imbalances in the financial sector, which played a role in causing the current recession, Corzine argued.

The build-up of debt will have long-term economic implications, Corzine said. “We’ve pretty literally been raiding our grandchildren’s inheritance.”

Corzine was the chief executive of Goldman Sachs prior to his election as a U.S. senator from New Jersey in 2000. He became governor in 2005, a position he held until losing his bid for reelection in 2009.

Allen Paltrow-Krulwich ’14 drew a comparison between Corzine’s remarks and those of Ben Bernanke, who spoke on Friday on the state of economics. Paltrow-Krulwich said that both speakers “talked about the problems with society during the crises, instead of suggesting limits on financial institutions.”

Get the best of the ‘Prince’ delivered straight to your inbox. Subscribe now »

“It was pretty awesome to have two financial bigwigs on campus in such a short span of time,” he added.

Corzine’s lecture was the first in a series hosted by the Wilson School that will also feature former Secretary of the Treasury Henry Paulson; former chairman of the Federal Reserve Paul Volcker ’49, who now chairs President Barack Obama’s Economic Recovery Advisory Board; Josh Bolten ’76, a visiting professor in the Wilson School and President George W. Bush’s former budget director and chief of staff; and Andrew Sorkin, a New York Times financial columnist.