With talks yesterday by EU finance ministers leading to a France-German consensus to end the bonus culture, there has been a great deal of discussion in the news today about Britain's (Darling's) different take on bonuses, and the relative importance of the City's size. There is also the G20 this weekend, where Brown will hope to persuade France and Germany to keep on supporting the high level of fiscal stimulus we have at the moment. However, with their economies doing well, there is a great deal of worry for Britain with the OECD predicting we will face the worst recovery amongst other leading economies . Osborne has also sided with Germany and France, calling for the fiscal stimulus to be cut. There is however, a worry in this. We have to make sure that we do not reduce the help we give to the economy too soon, as we may well end up with a W shape recession.
The 'back to business' returning attitude in the City is another strong factor that could lead us to having a W shape recession. Anatole Kaletsky wrote an interesting
article around the size of the City, which I however, disagree with. He lists a host of jobs such as cleaners and taxi drivers that relate to the financial sector, and moans about everyone complaining about it being too big. However, I can spot an immediate flaw to his argument. He is defining the financial sector in what many people call too big in too wider terms. Many of the jobs he listed are included within the service sector. The part of the sector most people are annoyed with are the banking and big companies aspects.
I find it a slightly odd argument that to be successful the City has to be big. What about efficiency? What about splitting up the investment and retail banks so that they are not 'too big to fail'? This shows that the City would be successful, and most likely more successful due to efficiency if it was scaled down. In respect to his remarks around Germany, I have to add that their economy is the largest in Europe, and so to make out that a financial tax would not matter as much to them as it would to us is a tad illogical.
Once again the argument of freely available debt is seen in a positive light as he claims that this has meant:
"The growth of Britain’s financial sector may have widened income inequalities but that does not mean it has made British society more unequal."
What a load of rubbish. People do not actually own this money, how can that help lower the inequalities in society? It may in face value, but when you look deeper, inequalities are widening by the day. The economic crisis highlighted strongly how there is a group of elites at the top who control the production, but even if they mess up they will still get that big fat bonus, anyway. The quote above is totally illogical, as is the article.
I agree with Adrian Hamilton's concerns that there is too much focus on curbing bonuses, and that this will not solve everything - as it wont. However, I disagree with how he argues this, as he makes out that bonuses are not involved in the structural changes that would need to take place to allow for change. The most likely reason that many of the more technical problems within the banking sector has not been openly discussed, is precisely because they are technical. It is popularism to only talk of the bonus reform, however, just because it is popularism does not mean it does not need to be implemented. Of cause it does. But so much needs to be changed in the banking and City, but I am increasingly feeling that as with issues such as the environment, there are endless commissions and G20 meetings talking about what needs to be done and who wants what, but in the end of it, nothing will be done anyway. After all, the Labour and Tory leaderships are not principled enough to stick their neck on the line to help tackle the banking problems. Well in the Tories case, it is nothing to do with principles, purely ideological.
More discussions around the financial sector and banking shows how really there has not been much progress in terms of the much needed reform. We have the big bonuses returning, and there has not been the much needed separation of casino and retail banks. Sadly, it all looks like a farse. Little learnt and little done.