In 1989, the CEOs of the seven largest banks in the US earned an average of $2.8 million, almost a hundred times the annual income of the average US household. In the same year, the CEOs of the largest four UK banks earned £453,000, fifty times average UK household income. These are striking inequalities. Yet by 2007, at the height of the financial sector boom, CEO pay at the largest US banks had risen nearly tenfold to $26 million, more than five hundred times US household income, while among the UK’s largest banks it had risen by an almost identical factor to reach £4.3 million, 230 times UK household income in that year.
People who have benefited from such obscene ‘pay’ often get any debate on it steered towards the idea they earned the money and the chance to do this was central to their ‘motivation’. Yet the evidence may be that they were making negative contribution to our economies all the time, fuelling bubbles that would inevitably burst. And the creation of this super-rich class has also confounded what we thought were our democracies. I doubt it’s now possible to vote anywhere for candidates not sullied by the money-grubbing. Blair is a classic example, but across the pond politicians can legally trade on insider information and beat the markets in their personal dealings by 12%, way in excess of traders like Soros. The classic study on this is – “Abnormal Returns from the Common Stock Investments of the U.S. Senate, Alan J. Ziobrowski, Ping Cheng, James W, Boyd, and Brigitte J. Ziobrowski, was published in the Journal of Financial and
Quantitative Analysis (Dec. 2004).
Many questions need to be asked before we are suckered into asking whether the right question is whether huge salaries are desirable or even necessary. The first is what these payments actually are and how we pay for them. Banking is not self-sustaining, and any moves have effects on the rest of us – what would be the point of the vast riches is they didn’t buy something off the rest of us? My argument is we become indentured to them.
Many of us have not yet noticed the effects of quantitative easing and the rest of the bailout. Some have seen their monthly pensions drop from (say) £1200 to £580 and no doubt some have lost jobs and the rest. Greece is falling apart and Ireland is suffering. Worse is coming.
Your standard BBC Bimbonews allows various propagandists to present the business-as-usual drivel. We need to find ways to subvert this dross and get to the real arguments that aren’t hopelessly confined to academic journals. We are committing our children and their children to debt peonage because we are dumbly satisfied that these mega-payments can be earned, and it really beggars belief we are better off by paying the piper. If we had Daleks exterminate them all overnight, the system would be running again in days if not hours – sadly much as it always has. Munich did not finish off Manchester United.
One would expect, had these bwankers been creating real wealth, that there would be plenty of it around for public services and pensions. Instead we face austerity whilst the rich grow richer. I conclude they were never producing real wealth and merely stealing in a complex fraud. There have been massive rises in productivity and we should be living easier. We’re being stiffed and can’t even talk about it, rather like abuse victims. One can hardly imagine Albert Einstein saying, ‘I smarter than you bastards, give me all your money’!
“I conclude they were never producing real wealth and merely stealing in a complex fraud.”
This is the heart of the matter, Neil. Basically, the bankers, brokers and fund-managers (Masters of the Universe, as Tom Wolfe sardonically called them in his hilarious novel “Bonfire of the Vanities”) have stolen all the increases in general productivity and then put it about that this is their due. In fact, they’re nothing more than parasites and panderers.
Albert Einstein did not have to say that he was smarter than you bastards, he was fast enough to have left the country beforehand, Francis. Not all parallels have to eventually or necessarily meet – unless they get bent, of course. Compare this: http://colorlines.com/archives/2012/02/who_picks_the_oscars_94_of_academy_voters_are_white_77_male.html
Good point Gabby. IT poses a great threat to the establishment because it would remove things from their mad, stuffy control.
I’m obviously in total agreement Francis. I worked on the fringes of AI in university projects in the 80s. We hoped then to routinise finance and accounting – much along embodiment of work lines as we’ve seen with many skills (robots learning human skills). I spent a lot of time teaching in cooperatives then too. In the end, the only reason banking isn’t just a utility is that the machines won’t cheat.