I don't think there is much dispute that the financial crisis and the recession which has followed which has done so much to destroy the living standards and the future hopes of so many millions of working people in this country, was caused by the criminal antics of the investment bankers, who allowed their greed and their avarice to overcome any sense of prudence and sound banking judgement, they might once have possessed.
This period of scandalous mis-management, downright criminality, bankers' hubris, and coupled with gross regulatory incompetence has effectively brought this country to its knees, and now, thanks to another period of arrogant political misjudgement, it now looks as if we are going to experience an even greater period of financial upheaval. As our Triple A rating starts to take lumps from the global financial markets, as the pound devalues possibly to parity with the Euro, inflation rises, and wages get squeezed even tighter, porky millionaire's son, Georgie Osborne flip-flops around like a beached bloater, desperately trying to persuade us that his policies are working, opening and shutting his mouth, but with nothing of value coming out.
It is obvious to anyone with a modicum of common sense or knowledge of social history that what Osborne and Cameron are really doing is using this financial crisis to wield the weapon of imposed austerity, as a deliberate attack on the Welfare State. They are seeking to finish what Thatcher failed to achieve, which is the wholesale removal of the welfare dependency culture. In so doing they are in grave danger of throwing out the baby with the bathwater, because they are ignoring the real cause of potential future social upheaval!
Amid all this financial turmoil, which is by now completely out of the hands of any of the politicians of any persuasion to do anything sensible about it, a new report 'Bankers and Their Bonuses' is published by the London School of Economics, a study which reveals the growing gap between the fat cats who sparked the financial crisis and the workers who are now having to pay for their mistakes.
The report states among other unpalatable facts that:
Bankers' pay has rocketed 14% during the recession compared to 3.7% for the rest of us. This fact alone should be enough to set alarm bells ringing in Number Ten Downing St, and if I were David Cameron, I would be setting up an emergency meeting with the Commissioner for the Metropolitan Police and seeking assurances that the Met Police were fully equipped and ready for serious public order manifestations come the Summer.
London’s top 1,400 bankers take home an average £2million a year including £568,000 “basic” pay. This an obscene statistic and we are entitled to ask what this bunch of useless parasites do for the benefit of society which justifies their receiving this largesse.
Overall, City financiers received 14.2% more in salary and cash bonuses in 2011 than they did in 2008.
An astonishing £1 in every £7 earned in Britain now goes to the top 1% of earners, but In 1979, before Margaret Thatcher took charge, the figure was £1 in £20.
Inequality caused by soaring financial sector pay shows no sign of slowing. The report notes that “...The sector which in some sense caused the whole crisis is the sector which seems immune to almost any employment effect...Traders earning millions are in some sense not replaceable so they have remarkable bargaining power...” This may well be true from a raw economic analysis, but these traders generate nothing of any discernible social value.
But despite widespread public outrage at the bankers' bloated pay, Barclays’ ex-boss Bob Diamond getting a salary of £1.35million in 2011 – 20% more than his predecessor, David Cameron is bitterly opposed to any measure which would restrict their ability to continue picking up this money. This because he is hostage to the threats made by the banks that they will relocate their operations if they are baulked in their practices. Instead of calling their bluff and saying, "...Fine, we'll miss you...", he capitulates in the face of this crass bullying.
At the same time as caving in to his bloated friends in the City, partly because he doesn't want to put at risk the contributions they make to the Tory party, David Cameron is, perhaps not surprisingly also against raising the minimum wage for ordinary Unionised workers, despite huge backing in the country for such a policy, partly because they don't make any contributions to his party's coffers! Consider the following.
While City bankers' pay increased by 14.2%, average workers outside the City got 3.7% over the same period – equivalent to a 6% FALL after inflation, because prices went up a whopping 9.6% between 2008 and 2011. Unison, Unite and the GMB estimate that the cumulative effect of the local government pay freeze, now in its third year, coupled with high inflation has resulted in a 13% decrease in pay since 2009.
As I truthfully cannot see the need for bankers in these numbers, nor do I genuinely understand quite what they contribute to the common weal, because the vast number of them are nothing more than gamblers, playing with other people's money, or money launderers offering a safe haven to drug cartels, (HSBC), third world dictators or foreign tax evaders (Barclays), market manipulators (RBS) and terrorist sanctions busters (Standard Chartered), I thought I would compare their grotesque salaries with those of certain groups of workers who do contribute to the needs of this country.
Hospital medical and surgical consultants earn between £70,000 to £95,000 on NHS pay scales. It is true that some, not all, of them can earn more money privately, but the NHS commands their primary time and indeed, a vast number of them are committed to an NHS ethic which demands a great deal of their commitment.
Senior House Officers, the workhorses of the hospital medical fraternity earn between £26,000 and £36,000 a year. The starting salary for a qualified state registered nurse is just over £21,000 a year.
Teachers, the people who are hopefully going to ensure that future generations can enter the workplace with the skills needed to maintain this country's future as a functioning democracy earn, in London, £27,000 when they start, although that figure is significantly reduced outside London. After 6 years in London they will be earning £36,000. This is not enough money to be able to buy even a small flat at today's inflated property prices.
Police constables starting on the beat, and the only people who will provide the line of resistance to the urban rioters who are building up their numbers and stoking up their anger for a series of targeted riots and public disorder situations in the near future, are going to have their salaries reduced, under new Tory plans. Mrs May, the Home Secretary, said the starting salary for police constables in England and Wales will be cut by £4,000 to around £19,000 in the first major overhaul of police pay and conditions for more than 30 years.
She told MPs she was accepting the recommendations of the police arbitration tribunal which would help “modernise police pay and conditions so that they are fair to both officers and the taxpayer”.
Quite how reducing pay for the men and women who do this increasingly dangerous job is making it fair for them is beyond my understanding, but we should watch the way in which the politicians will demand the police manage the civil unrest which will soon become a leitmotif of public dissatisfaction with Tory policies.
Even Chief Constables in the major urban areas, Greater Manchester and West Midlands earn only £175,000 a year, while the Commissioner for the Met earns £240,000. These sound like good salaries, but compared to the earnings of some cocaine-stoked Short-Sterling Options trader, they are chump change!
The Fire Service earn on average between £18,000 to £35,000 for active ranks, and the inner cities will be looking to them to do their bit when the warehouses and the shops selling training shoes are in flames, and the mob is gathering to indulge in a bit of free shopping!.
The purpose of providing these comparisons is to demonstrate the ludicrous disparity in salaries between just a few of those men and women who really do provide society with essential services, and without whom ordinary daily life in this country would not function, and the salaries of those bloated, criminogenic banksters whose actions have done so much to damage this country and which savage the reputation it once had, for integrity and honest dealing, but no longer.
As a remarkable example we can review the case of Lloyds Banking Group, whose latest news on pay is a case study in greed.
A recent report in the Daily Telegraph reports the following.
"...The loss-making Lloyds Banking Group is poised to reignite rows over executive excess and rewards for failure by giving a £1.4m bonus, on top of £1m basic salary, to its chief executive, António Horta-Osório.
The remuneration committee of the bank, which was bailed out with £21bn from the taxpayer in 2008, meets next week to recommend the payout despite Lloyds being expected to report a loss for 2012 of more than £500m..."
So, that's a good start. They are facing a huge loss but still they want to pay bonuses. What is wrong with these people, what parallel universe do they inhabit. By what standard of fairness or reasonableness does Horta-Osório. deserve another penny on top of his already grossly over-inflated salary?
"...Lloyds bank, which remains 40% state-owned, would not comment publicly and insisted privately that no decision had yet been made about the chief executive's payout, but sources confirmed that a figure of around £1.4m was under consideration, to be paid in shares and deferred until the taxpayer broke even on its stake..." Without tax-payer's money, the employees of this bank would be out of work, in a sense, they are public sector workers too!
Lloyds is understood to have taken soundings from the government on the payout to ensure it will not face immediate opposition from ministers.
However, other critics pointed out that the UK's financial regulator has just fined Lloyds £4.3m for delays in compensating customers for mis-sold PPI policies while they also complain the executive bonus and wider remuneration structure is too opaque.
The bank has been shamed for defrauding its customers through its dodgy PPI policy cheating, but they have failed to pay the compensation they owe their clients, so they have been fined again, and yet they want bonuses for bankers. There is no other business sector in the world that could demand this kind of special treatment for repeated failure and expect to get it! It claims to be working hard on business lending, but, as Lord Oakeshott has said; "Lloyds are making the right noises on net business lending but there is no evidence of it yet in the official funding for lending figures. It's a taxpayer controlled bank so Mr Horta-Osório's contract should be totally transparent with any bonus deferred until Lloyds has delivered for British business,".
Most analysts are expecting the bank to announce pre-tax losses of £544m for 2012 after having set aside £2bn in the year to compensate customers mis-sold PPI policies. The equivalent statutory loss for the previous year was £3.5bn.
Only in the corpulent world of City banking would bonuses be paid for failing to make profits, and for hanging on to criminal proceeds and not recompensing victims, but like their counterparts in the mafia crime families, the banking godfathers still expect to keep on receiving their due, it's a matter of respect!
The LSE Report 'Bankers and their bonuses' makes some unpalatable conclusions. It states;
"...The Occupy movement brought a new saliency to the issue of income inequality. Their key slogan – “we are the 99%” – dramatically highlighted the sense that a small elite have been the main winners in the decades leading up to the crisis. Top percentile workers have substantially increased their share of the income pie - in the 1970s they took around 6% of total UK income but by the end of the 2000s, this had risen to 15%.
On this measure, we have returned to levels of inequality not seen since the Inter-war years. But one key difference is that the high-income group used to be the rentier-class enjoying returns on their fixed capital. Now, the high-income group are primarily high-wage workers enjoying returns on human capital.
Among these high-wage workers in the UK, bankers feature heavily. In 2008, 28 percent of all top percentile earners in the UK were London bankers. But this dramatically understates their importance in the rise in overall wage inequality during the last decade.
We estimate that somewhere between two-thirds and three-quarters of the overall increase in the share of wages taken by those in the top percentile have accrued to bankers. More remarkably, the financial crisis seems to have been so far little more than a blip for the pay of bankers.
If we focus on all those workers in the top percentile, their average wage rose from £277,800 in 2008 to £284,100 in 2011, a rise of 2.3% and their share of the overall wage bill fell, as the mean wage for all workers rose by 3.7%. In contrast, the bankers in the top percentile saw their average wage rise from £325,100 to £353,100, a gain of 8.6%.
From an equity perspective, the remarkable gains to those at the top of the income distribution over the last few decades, may call for higher marginal income taxes. The appropriate level at which to set such tax rates remains a matter of intense political and economic debate.
Salary and wage inequality leads directly to social inequality. These pay figures have a direct knock-on effect on house prices, community values, and rents, and inflate the costs of housing and everyday living for the hundreds of thousands of other people who don't receive anything like these sums. These pay scales fuel inflation because goods and services in these communities are priced to reflect the kind of returns the wealthy will be prepared to pay, but which squeeze the marginalised lower paid immeasurably.
Such conditions stimulate further criminal activities like fraudulent food mis-labelling as manufacturers struggle to keep processed food prices in line with social expectations, and therefore use cheaper or socially unacceptable forms of food to fill their products. The fraudulent labelling of processed meats in prepared foods containing horse meat but described as beef, is an example of the direct outcomes of wage inequality. Poorer people struggle to pay the costs of premium products sold in high-end outlets with elevated social class aspirations, and resort instead to cheaper products sold in down-market retailers, who, in turn have to source their products from increasingly dubious suppliers. This phenomenon provides yet another turn in the inflationary spiral.
Young people who have trained to work as teachers, nurses or police officers find themselves priced out of whole sectors of otherwise normal social housing areas because of the prices demanded to meet the deep pockets of socially worthless bankers, thus creating a series of sterile yuppie ghettoes, impacting the levels and value demands on local education and associated local community services, and attracting an increase in outlets which sell greater volumes of expensive clothing, designer accessories, bespoke kitchen fittings, and a host of other elitist products, but which create, in turn, a disincentive to social inclusion and community sustainablity.
Grotesque wealth, and particularly such wealth which shares nothing of value in its creation, breeds social inequality which fuels envy and jealousy. The have-nots will be increasingly forced to observe the possessions and life-styles of those who have, and we will reap the whirlwind of social disaffection and class warfare.
The fire next time (with apologies to James Baldwin), will not be easily extinguished, but we shall know who to blame!