Peter Mandelson, silky sinister unelected eminence grise of New Labour turned silky sinister unelected eminence grise of Labour, has announced that today's supertax on bankers' bonuses isn't a punishment for their greed, hypocrisy, destruction of the economy, arrogance and failure to acknowledge that we've saved their skins.
He's right in a way: it's also a cheap and easy way to make New Labour look like it's on the side of the people for a change (it was Mandelson who said that he was 'intensely relaxed about people getting filthy rich as long as they pay their taxes' in response to a question about the ever-widening gap between rich and poor - despite leaving massive gaps in the tax regulations and selling the Inland Revenue's offices to a company based in a tax haven!).
It's a cynical piece of electoral politics which won't make much of a dent in the national debt. I still support it though. Many of the banks are state-owned and almost all of them are propped up by state guarantees and asset swapped. The bankers need punishing. They mentally decoupled the real economy from the financial services sector. They've bankrupted their institutions and nearly bankrupted the country, evade tax, award themselves massive bonuses and are generally partying like it's 1928.
This 50% tax on bonuses is nothing: supertax on the very highest sums once reached somewhere in the 90%+ range in the late 70s, and Thatcher only gradually reduced it.
The bankers will no doubt redouble their efforts to get the Tories re-elected. Cameron will make tutting noises about bankers until he's elected (because the Daily Mail isn't happy with them either), then resume his position (kneeling before a pinstriped crotch, mouth open). Will some bankers leave the country? Maybe. Where will they go? Somewhere the banking system's in rude health, with no angry citizens protesting over their continued beggary at the hands of financial whizzkids.
Oh dear. There's no such place. Poor bankers.
17 comments:
But what exactly is wrong with people getting rich providing they pay their taxes?
There's no problem as long as:
everyone's getting richer
people are enriching themselves in ethical and socially productive ways
enrichment doesn't lead to alienation
tax is paid rather than legally or illegally evaded.
The rich don't pay tax: they declare themselves 'non-doms', such as the editor of the Daily Mail, channel earnings through offshore accounts, or find other ways of evading the law: there's a massive industry dedicated to tax avoidance. As Ivana Trump says, 'only little people pay tax'.
There's a tendency amongst the rich to evade their social responsibilities. In the 19th century, fear of revolution made rich people spend their money on public works, such as Carnegie's free libraries. Bill Gates is doing similar things with his money.
However, we're essentially living in a situation akin to that of Rome after the fall of the Republic. Rather than contributing to the public good, the rich are spending their cash on self-gratification and further isolation. Bigger houses, more swimming pools, multiple homes, more holidays. Their activities are environmentally destructive and directly damage the public sphere: for instance, property prices in London are now so expensive that middle-class people have to take on massive debts to live within a couple of hours of work. My brother was commuting 2 hours to central London each way for a lowish salary, because the job he found could only be conducted in central London.
Then there's the charity debate: the rich say that they shouldn't be taxed because they give a lot to charity. The statistics say that the poor actually give a larger amount relative to income. Furthermore, charity is a matter of personal whims: included in rich giving is opera houses and donkey sanctuaries. If we taxed them properly, then public spending would be directed democratically at pressing public needs, rather than hoping that some rich bloke notices something urgent.
I almost forgot: the government made it easy for the rich to avoid tax. Take hedge funds: the winnings are taxed as 'capital gains' rather than income. This means that they're taxed at 18% rather than 40%. As one hedge fund trader pointed out, this means that he was paying less relative tax than his cleaner.
This is what I have a problem with. Ordinary people on ordinary salaries are paying more tax, taking on more debt and not benefiting from the increased wealth of the nation because the system, ideological structure and spirit of the nation has been reoriented towards individual greed. Hedge fund traders are literally socially useless: they don't pay their fair share and their jobs circulate money between a very small bunch of people while in many cases (short-selling for instance) whole workforces and huge groups of pensioners can be beggared literally overnight. Meanwhile, I can't afford a house because I've chosen a socially useful job. I don't want to be hugely rich, but there's clearly something wrong when social damage makes you rich and contributing to society condemns you to a life of debt.
I don't have any problem with people who start their own business getting rich, especially if it's providing a useful service and is ethical. These people take a risk with their own money so that's fair enough. But these knobbers in the city take risks with someone else's money, the taxpayers, safe in the knowledge that they will be bailed out if it all goes tits up.
I don't see why bankers need to be paid bonuses. This just encourages the short term risk taking that has got us into this mess, and if they don't like it they can piss off and ruin someone else's economy. Dubai perhaps? Oops! already screwed.
As I wrote a while back, bonuses only improve productivity for tasks which don't require much thought, such as a factory production line. What we want is bankers who's motivation for doing the job is a satisfaction in making the economy run smoothly, who think more about what makes a good economic system and less about lining their pockets.
I work in the IT dept of a bank (one that didn't take public bailout money), and I'm not rich. I live in London where salaries are higher, but so is the cost of living accordingly higher. I commute for 2 hours a day mashed into the Tube. I took a 25% paycut this year. I spent 3 months out of work. I don't get a bonus, and the people I work with who do, get relatively modest bonuses (a few grand) which they get for working long hours, weekends and for providing overnight support for our systems. This is a highly boring job that gives little satisfaction. Yet this is the life I chose.
I am not ex-public school. I went to a state school (where I received free school meals) and grew up on a council estate in lovely Telford. None of the people I work with are ex public school, and some are from working class backgrounds.
I do not see these Fat Cats everyone is talking about anywhere. What I do see are a lot of bored people who are fed up with their lot in life.
So who are "the rich", Vole?
Now Adam,
what you've got here is false consciousness. You aren't a banker: you work in a bank. You, despite what I suspect is a pretty healthy salary despite cuts (the median wage in this country is £22,000), are a proletarian. Your Fat Cats won't be making an appearance in your office. You do the work. They collect the cash, whether or not the bank is propped up by the taxpayer.
Fat Cats at your bank: how about Bob Diamond (£20 million bonus this year)? He took £36 million in 2007 and £26 million in 2006. That's quite fat.
Need I go on?
Not sure why you raise your background. The New Tories of the 80s encouraged classless greed. You can read about this culture class (barrow boys v. landed gentry) in Caryl Churchill's 'Serious Money'.
I don't know why you and others have chosen a boring job, especially one which involves lost weekends, long hours and no/low satisfaction. I chose a job which has its own stresses and a low maximum wage, but it makes me happy. Well, most of the time. Doing an unfulfilling job helping to further enrich an elite which floats free of reality is beyond my comprehension.
Adam is right Vole. Who are "the rich"? Are you stupid enough to think it is those people who earn "lots of money"?
Adam, Adam, Adam... if you work at a bank and don't see fat cats do you think that is possibly because they (wrongly) don't think you are worth socialising with?
Vole did not claim that anyone connected with the banking industry is evil. But are you really claiming that everyone connected with banking gets moderate bonuses? Really?
Stop making me agree with Vole Adam. Stop it right now!
Which council estate, Adam?
Good post Neal.
But I dont agree with the Vole here: "There's no problem as long as
everyone's getting richer"
But I suppose that's more or less the argument for and against socialism in a nutshell. If I had a good job and was getting paid well, why would I care a jot about anyone else being richer/poorer?
Because you're not a monster?
Oh. I forgot. Excellent use of the word "knobbers" there Neal.
Hear hear to the knobber comment.
Ewar: hopefully you care about other people because you're technically a member of the human race and a starving child (or adult) should give you pause for thought.
Let me remind you that there's never been a shortage of food or indeed money, as Amartya Sen's Nobel-winning thesis proves: there have only been distribution problems.
Ewar, are you really saying that you literally do not care about your fellow humans? In that case, I fall back to the Victorian capitalist's argument. If you're rich through some socially-damaging activity, you should fear the anger of the poor.
Ben: thanks for the reluctant support. Adam's actually a thoroughly decent member of homo sapiens.
Not saying that at all Voley, as I suspect you know anyway. Perhaps I didn't explain my view clearly.
All I'm saying is that if I was a lawyer, for example, and I had worked bloody hard and was receiving a good wage, why should I feel in some way guilty towards the guy round the corner who was disruptive at school, failed all his exams and now earns a pittance working at the chippy?
I just don't share the view that I can only feel satisfied making lots of money, if everyone else is at the same time.
OK Ewar, you didn't make your argument particularly nuanced, and I enjoy winding you up.
I don't think that hard work should go unrewarded. I just happen to think that much hard work does go unrewarded, and much useless activity IS rewarded. Your lawyer, for instance: protecting the poor from corporate assault, or suing for 'whiplash'?
Your approach is too individualistic. Neither the school swot nor the disruptive student exist in a vacuum: they have a family and cultural context which should be considered rather than assuming that the individual is the sole source of their state.
I don't think you should feel guilty, just consider the structure of a society which requires nasty jobs to be done for low pay and status.
It still sounds like you're taking pleasure in others' condition. It doesn't sound like you in person.
I don't take pleasure in others sufferings, don't worry. Well, maybe Liverpool fans, but they dont count.
I'm off to Little Ewar's Nativity Play now so I'll just conclude with my usual: You are absolutely right Vole, etc etc.
Vole: you're absolutely right, I am a prole; but no self respecting prole wants to be poor his whole life. The problem is, the more you earn, the more you pin yourself down with a mortgage etc, & so the more trapped you are. There are enjoyable aspects to my job, but you are also right about alienation. Then again, the grass is always greener on the other side. Too late now, but I really should have continued with my very first career choice and become an astronaut.
The reason I raised my background is because not all of the folks who work in banks are "fat cats" or even rich. They may be low paid, well off, comfortably well off, and spectacularly rich. There's a mix. I think "bankers" and "the rich" are dog whistle blasts, and generalisations. Someone has a vested interest in diverting blame and attention away from their failings, it's all: "let's blame it on 'Someone Else'". I don't like it when the Daily Mail is blaming immigrants and single parents for the country's ills, and I don't like it when the Mirror blames "the rich".
Ben: I have to ask who are the rich, because it's not as simple as people who earn "lots of money". How much money? When politicians say it, what do they mean? Everyone on the 40% rate? Are people who earn 44K rich? Why should a senior nurse or headteacher pay more tax to bail out banks?
I reckon that most people see "the rich" as anyone who earns more than they do, and boy are they going to pay for all this!
A true story: A friend of mine was at a party. Two ladies were chatting and invited him into their conversation. They were talking about people they knew. "John" was worth fifteen units, "Tom" was worth eighty units, etc. My friend asked "What's a unit? Is it a million dollars?" The reply was "Darling! We're talking about rich people."
You are right Adam, people do see anyone who earns more than themselves as being rich, I agree with you, but that isn't what the Vole's post was about. It was about bonuses to people who run the banking industry.
Take your head nurse on 44 grand. If she was taking such risks as a nurse that a thousand patients died under her care, should she get a bonus? It is a clumsy analogy but that is how people view this. It is not about wealth but undeserved wealth, and worse undeserved wealth that is at least in part funded by the public purse. Yes the media loves to throw the phrase "the bankers" about and yes bad government policy is equally to blame but I feel no sympathy for high earners in the city. Sorry, but I can't.
Incidently my bonus this year was £300. I'm not complaining. £300 is a lot of money to me. But when it is, am I wrong to label people who earn wages in the hundreds of thousands as rich?
Oh and everyone should pay more tax. Tax is a dirty word - perhaps Money-that-stops-your-life-being-shit would be a better name for it. It does pay for a lot of useful stuff.
How much better would politics be if the parties argued about how to spend tax instead of pretending they were going to charge you less?
Oh and don't worry about the bankers: when the oil and regional sources of fresh water start to run out we will all remember them as angels.
Adam, I do understand the motivation and your situation. I was indeed using 'banker' as a shorthand for those owning and controlling the means of production. I wouldn't begrudge a machinist in a weapons factory his or her job because we all need jobs.
I also think you're right that 'banker' is a crude target. I differentiate (or should) between retail banking and investment banking. even more specifically, not all investment bankers are antisocial. My specific objection is to the atomisation which leads bankers and other financial traders to take decisions which benefit themselves and their companies while causing damage to the wider economy and social fabric. This is why I believe that a tamer banking sector is needed. The Germans manage it: the only German banks to go bust were those in Länder whose rightwing governments deregulated their state banks.
I also know that we entirely agree that these bankers wouldn't have behaved as they did if they hadn't had the legal and political licence to do so. Of course, they're not passive recipients of political largesse: their lobbying, schmoozing and donations created a landscape in the 1980s until now which saw deregulation and unfettered speculation as the ONLY way to prosperity, but the political parties are equally guilty. The Tories simply saw Friedmanite monetarism as benefiting their kind and didn't care about anyone else, while Labour realised that they couldn't challenge this hegemony and decided instead to embrace it and even extend it. For which they have my undying hatred.
As to who counts as rich: being on the top rate isn't enough to qualify you. I happen to think that the working and middle-classes earn too little, and that there should be a higher band (the temporary 50% rate for earnings over £100,000 seems a nod in the right direction.
Like most things in life, I think that the UK should hand over control to Norway, Denmark, Sweden and Finland. Average earnings are much higher taxes are higher, redistribution works and visible ostentation is minimal. There are still lots of rich people, but a higher tide of money keeps everybody afloat rather than leaving some drowning.
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