RDN on BBC R4 PM on bankers’ bonus culture
Ahead of George Osborne’s opposing or accepting (there are mixed signals as to his intentions at this moment) the European Parliament’s desire to curb the relationship between pay and bonuses for bankers, I was asked to discuss the idea with Ann Pettifor. (I was batting for the Institute of Economic Affairs and she for the New Economics Forum, so it was a nearly perfect face-off.)
I breezily said that it didn’t matter whether bankers earned their money as wages or bonuses. After all, what matters is what signals their contracts send them (go for quick returns or build the long-term health of their banks are obvious alternative possibilities).
I won’t speak here to what AP said (you can check it out if you fancy). But I did say there had been too little fear in the world of banking (amongst regulators, customers, politicians, the media and treasuries, for instance) and that we need to have a system in which banks can fail safely if they are useless. I also said that “the bonus culture” which people say they hate may indeed need reform so that it stops sending perverse incentives. But bankers earning shed-loads of money was not in itself a problem.
I may have said, and certainly meant to, that parliamentarians should have a horror of getting into micro-management and that the public should have a horror of talking banking down. British and European banks will have a big enough problem surviving the intense competition they face round the world without being burdened by the kind of regulatory or management thinking which wouldn’t be much good in a primary school (see my review of the movie Monsieur Lazhar) let alone in the money jungle.
I did say something to the effect that right across capitalism and government, my generation has failed to build the character of persons and of institutions, and that fixing that matters. As Bernard-Henri Lévy said early on in this crisis: capitalism hasn’t failed us, we’ve failed capitalism.