Monday, 22 February 2010

The bankers and their bonuses are a symptom, not the disease

Today, BBC News reported that "the chief executive of Lloyds Banking Group, Eric Daniels, has decided to waive his £2.3m bonus for 2009." The decision was taken "to prevent a row over bonuses" and "follows the decision by Stephen Hester, chief executive of Royal Bank of Scotland, to forego his 2009 bonus."

These acts come amid concerns that a row over bonuses would "distract attention from the "excellent progress" made by the bank over the last year." However, they do not seem to have been enough to calm the anger over bank bonuses and the disparate treatment of rich and poor through the financial crisis. Though they have made headlines, these waivers have not convinced even mainstream pundits.

Writing for the Guardian, Nils Pratley sums up the sentiment on offer;
We are supposed to cheer the generosity and common sense of Eric Daniels at Lloyds Banking Group in waiving his bonus this year. Forget it. The appropriate response is astonishment that the bank's remuneration committee could decide that Daniels deserved a "full pay-out" of £2.3m in the first place. What does the chief executive of Lloyds have to do not to earn top marks?
The Financial Times, meanwhile, offers several reasons why "this latest round of self-denial [won't] satisfy a baying public." In the first instance, there is the fact that "the executives volunteered their pay cuts, which deprives the hanging-and-flogging wing of the anti-banker campaign of the satisfaction of being able to tear the notes out of their grasping hands."

Less facetiously, we have the fact that "other directors, and bankers below board level – particularly investment bankers at RBS and Barclays – will continue to receive large bonuses, albeit deferred and subject to clawback." Not to mention that they offered the waiver not out of any altruistic sentiment but as a way "to “depoliticise” the bonus issue." The fact remains that "if you want to curb recklessness and excess, it is wiser to rely on carefully calibrated regulation and keen oversight by wary investors than on top bankers’ public acts of humility." But there is more to it than that.

The media has been very careful to build up a picture wherein the injustice of the financial crisis lay in bankers bonuses and, in the same vein, MPs expenses. In essence, the message was that we should look to greedy individuals playing the system if we want to find fault. This ignores the fact that the system itself is inherently unstable. Capitalism, built upon the inflation of capital which doesn't actually exist within a fragile and largely mythologised free market, cannot exist without crisis.

Indeed, capitalism is crisis.

There is no point pretending that, by curbing those greedy bankers, we will solve the problem and restore prosperity. We live within a system where profit is privatised and loss socialised, where the gap between rich and poor is ever widening, and where social mobility is a pale illusion. If we are to challenge that, then focusing all of our anger and energies on the bankers is not enough. We need to challenge the system and the institutions that created the bankers. We need to challenge capitalism.