Are City Mega-Bonuses Healthy Or Obscene?
Investment banks are paying out billions this year. Has capitalism gone mad, or is this just the price of the City's success?
City bonuses invariably generate unseasonable rancour and envy among those not part of the charmed circle. This year, the furore has been deafening. Even the Daily Mail is drawing parallels with Versailles, circa 1788, and who can blame it given the sums sloshing around.
Never before has a single trader been singled out as trousering £50m, the sum allegedly paid to Driss Ben-Brahim of Goldman Sachs, from a total bonus pot of £8.3bn. Last year, Goldman's big guns competed to buy the best helicopter or yacht, what'll it be this year? Football clubs?
Goldman is not alone. Many other investment banks are paying out record amounts, as are hedge funds and private equity firms, but the timing isn't great. Waves of enrichment are supposed to benefit society as a whole, but the fact that cleaners at Goldman are threatening to strike over increased workloads for no extra pay is hardly a ringing tribute to trickledown economics.
These bonuses are enough to provoke nostalgia for the punitive taxes of the late Sixties, but what would that achieve other than to send the banks fleeing to New York?
We voted for Margaret Thatcher and her successors to make this economic bed for us... We have no choice but to lie on it. Those of us who find it fairly loathsome might as well stop whistling in the wind and move to Denmark.
Yet there are already signs that greed is getting the better of City high-fliers: witness the silly sums being paid out in takeover deals. It would only take one or two spectacular collapses for confidence to drain and the whole gravy train to shudder to a halt. But would we really wish that on ourselves?
Financial services now account for nearly 9% of our GDP and the City's role will become more important as globalisation bites.
There's no doubt these city bonuses are pernicious. The middle classes are being priced out of decent homes and education, and bright young people have little incentive to slave away on a relative pittance as doctors or engineers. But controls would be unworkable and heavier taxes would drive out talent.
Huge bonuses are the price of a successful financial sector; the problem is that it is the rest of us who pick up the tab.
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