Magazine article The Spectator

City Pay Is No Side Issue: It's an Affront to Society

Magazine article The Spectator

City Pay Is No Side Issue: It's an Affront to Society

Article excerpt

Roger Bootle says it's wrong to argue that bankers' bonuses are the price we have to pay for economic success

The smart thing to say - indeed, Allister Heath said it in last week's issue - about bankers' pay is that it doesn't really matter: it's a distraction from more serious concerns about regulation or the structure of the financial system. Supposedly, people who express amazement and disgust at what bankers receive are motivated by feelings of envy, and they just don't understand the way the City works. If a bunch of bankers makes a few hundred million pounds or dollars - it hardly matters which currency the amount is denominated in - by trading options on the volatility in the dingbat, that's fine. In fact, so much the better for the rest of us because this creation of wealth will benefit us all. Extra taxes will be paid and extra demand created. Supposedly.

Of course, where banks and bankers have been saved with public money - and that means just about all of them - there is a perfectly obvious and legitimate reason for resentment. The taxpayer has provided the funds without which the business could not carry on, and yet the taxpayer has not benefited from the return of the good times, while the bankers have. Even those who seek to defend bankers' pay feel obliged to admit that taxpayers have got a raw deal. But you could say that this is due as much to the incompetence of those organising the rescue packages as to the greed of those being rescued.

Yet I think the problem goes far beyond these narrow limits. Bankers' pay does matter. There is such a thing as society. What holds it together is a web of bonds of mutual trust and support, a sense of commonality.

What separates the law of the market from the law of the jungle is the sense of society.

This feeling is not perfect and it certainly does not overwhelm the normal feelings of loyalty towards family or others close to us. But it is there - or at least it is there in all developed civilised societies. And where it isn't there at all, chaos ensues. It is difficult for this sense of commonality to survive the onrush of unbridled greed which spews forth from the financial markets. It makes those who work for modest rewards and who are concerned for the common interest feel stupid and naive.

Lord Griffiths of Fforestfach is a former adviser to Margaret Thatcher, an academic economist, a well-known Christian and now a vice-chairman of Goldman Sachs.

He says that the public should accept the huge bonuses at Goldmans and the like - and the subsequent inequality that this creates - as the price to be paid for overall economic success, from which we all benefit.

How comforting - for some.

Yet the issue is not about inequality as such, but rather about how the money has been got. People accept that some people earn more than others. Few would expect bus drivers to earn the same as brain surgeons.

And within hierarchies such as the army it would not be seriously questioned that a general should earn several times what a private earns. Equally, people readily accept that some individuals become fabulously rich as a result of chance - by winning the lottery for instance. But for society to organise a massive lottery covering several percentage points of GDP to the benefit of a certain small subset of society is beyond the pale.

The public has a strong suspicion that the money 'earned' by investment bankers has somehow or other been filched from the rest of us. I reckon that in many cases they are right. There are two ways in which people can make money. …

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