Friday, February 20, 2009

Bonus malus

Why is it so difficult for so many people to accept that top financial sector executives have been overpaying themselves, and that the rest of us have lost out as a result?

Even the Independent, hardly a cheerleader for the neoliberal right, has trouble with this notion. It asks

The bonus question: Should Gordon put the public finances before public opinion on bankers' pay?

This article tells us that tax receipts last month were below predicted levels, and that falling City bonuses, on which tax is paid in January, explain much of the decline from £60.5bn last year to £53bn in 2009. No figures are presented to justify this, however, although the article does also say that income tax was down 4.3%. In the absence of any further evidence, I have no idea how the Independent can conclude that Gordon Brown faces a dilemma between paying bankers bonuses which inflame public opinion, and increasing the government's budget deficit - the core message of the article.

Of course, the collapse of the financial sector does reduce government revenue, and the government's deficit is in large part the consequence of this collapse, as the recession it has created has destroyed 100,000s of jobs and cut income tax receipts whilst increasing spending on social benefits. But the bonuses paid in recent years, if anything, have been direct causes of this current crisis, by encouraging reckless risk-taking and syphoning off bank capital into employees' pockets. And, let's not forget that in the case of the banks now effectively nationalized, the bonuses are paid with public money. Maybe that's why public opinion is a little shirty on this issue.

Public opinion isn't always right, but I think most of the time people know when they've been had. I know it's hard to accept for well-paid London-based professionals (such as journalists), but making a handful of people unfeasibly rich and letting them destroy the world economy in the process is not a smart thing to do. Maybe we shouldn't let them do it again.