Allister Heath's City A.M editorial (in response to the Governments new bank Levy) is so good it deserves quoting at length:
'Please bear with me, dear reader, as I try to recount what passes for common sense at the Treasury. “The banks” are back in the black, so they can afford to pay more – and given that they remain weirdly enamoured with London, they will put up with ever-higher taxes and continue as if nothing had happened. There will (of course) be no adverse effect on lending volumes, interest rates charged, the cost of services (such as advisory or fundraising work), the employment of staff in London, dividends paid to institutional shareholders or anything else that matters. The only changes will be that profit and compensation will be reduced (with no negative effect on the incentives of shareholders or staff, obviously, and no knock-on effects) – and that the government will collect more money. A faultless scheme, the budgetary equivalent of perpetual motion.
The Labour party agrees that taxing banks doesn’t have any disadvantages or unintended, perverse consequences: it just thinks the UK should do even more of it, and specifically tax profits and bonuses even harder (the government doesn’t really disagree; it hints it will do that if the Merlin talks collapse). It’s a firmly entrenched new consensus, shared by most of the media and virtually all of the public, who want banks “to pay their fair share” (a moving target, but one which it increasingly seems to mean close to 100 per cent of profits and pay). As Voltaire’s Candide might have put it, it’s all for the best in the best of all possible worlds.'
It is truly a shame that there doesn't seem to be anyone in power who understands the first rule of economics (incentives matter). Furthermore to any financiers regretting the funding they have lavished on the Tory party, there is a party here in LPUK that doesn't go in for banker bashing and actually understands how economics works in the real world.
Why is it?
1 day ago
3 comments:
I'm afraid that I have an instinctive reaction against payment of bonuses - any bonuses. In most jobs, people are paid a wage or salary and are expected to perform the duties for which they have been engaged. I fail to see why someone should then be paid additional money just for doing their job. If someone performs well, then maybe they can expect a raise in their wage/salary. If they fail to do their work effectively, then maybe they should be sacked. The problem with banker bonuses, I feel, is that their expectations have to be managed. Currently, all bankers assume they are entitled to a bonus and at levels that people have previously received. The way to solve this problem is to reduce their expectations of payment beyond their wage/salary. If that can be done, then I feel most of the angst about losing 'key' people would cease to be an issue. And governments are quite proficient in managing expectations, aren't they?
It is truly a shame that there doesn't seem to be anyone in power who understands the first rule of economics (incentives matter). Furthermore to any financiers regretting the funding they have lavished on the Tory party...
What utter cockwaffle.
Of course those in power understand incentives, and of course the financiers funding the Tory party likewise do. The funding by the financiers is the incentive required to have the Tories do their bidding -- d'oh! Or are you deranged enough to believe that recent governmental actions wrt the banks have been anything other than generous to a fault?
Further, if you think that any banker would be attracted towards a political party espousing the monetary reform proposals put forward by LPUK -- which would largely remove fractional reserve banking -- then you are completely off your rocker. Such policies would largely stop banks from 'creating money from thin air', and would have a huge impact on their current (fraudulent) activities.
@John in Cheshire- the firm I used to work at paid an annual bonus if it made a proft, a good way to motivate staff IMO. In any case it is up to a firm and its shareholders to decide wage/renummeration policy, is not something governments should be meddling in.
@whatever- thank you for your kind words! It may be that politicians undertsnad the effects their actions have (esp. if are long term and therefore likely to occur when they are out of office), but I doubt most understand the possible 'unseen' consequences (the book Freakanomics is full of examples of these)
As for bankers opposing the party's line on monetary reform- this may be the case, but that we would then not interfer subsequently might be enough to counterbalance.
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