In another world
Alistair Darling's pre-budget report includes a 'supertax' on bankers' bonuses. James Turley calls for more
The bankers are at it again. In spite of their new status as national hate-figures and pariahs, which has even extended - if only in words - to the political establishment, the rapid approach of the festive season has once again seen the leading figures in the financial industry awarding themselves obscene sums of money as bonus payments.
Particularly vexatious from the point of view of bourgeois politics, once again, is the Royal Bank of Scotland. RBS is 70% state-owned, after the financial crisis provoked an enormous and very public rescue effort from the Labour government. Needless to say, this did not have anything to do with Gordon Brown looking through his Lenin and being suddenly energised about bank nationalisation; it was a direct response to a catastrophic failure of the banking sector in general and RBS in particular.
In response to this litany of disaster, RBS has apparently decided to award bonuses totalling £1.5 billion, to be distributed among hundreds of its investment bureaucrats (and, yes, that would be the very same investment division whose full insertion into the trade in dodgy derivatives was the direct cause of the parlous state of the institution today). The exact details are unclear, as RBS has not made any official announcements; yet several executives have not only failed to deny even the more lurid rumours, but have publicly defended the decision. If equally distributed among all RBS’s employees, it would come in a shade under £9,000 - about half to two-thirds of the basic starting salary. Between the likely 500 or so recipients, it is £3 million each - good news for Edinburgh’s cocaine dealers, if not for the rest of us.
The primary argument made by RBS people in defence of their bulging wallets is a return to profitability after the dark days of 2008, when the fall of Bear Stearns and Lehman Brothers in the US triggered a global financial crash and left even the most firmly established banks seriously shaken. RBS, obviously, was not among the latter - it recorded one-year losses of a staggering £41 billion. This year, apparently, it has all been sunshine and lollipops - a modest (by boom standards) profit of £6 billion is used to justify the enormous bonus package.
Whether the best imaginable destination for this money is the pockets of the already very wealthy is one problem which simply does not enter into the consideration of this increasingly eccentric arm of international capital. There is a more immediate problem with this justification, however - the books have been fairly nakedly cooked. RBS sneakily changed the way it records profit and loss, dividing its investments into ‘core’ and ‘non-core’. The core investments, of course, are the profitable ones - the ‘non-core’ ones are those that the bank aims to offload. By weighting its accounting in favour of ‘core’ investments, RBS is fraudulently representing itself as far more profitable and healthy a concern than it actually is. Robert Peston, the BBC’s economics pin-up, notes that, with a wave of the magic accountancy wand, first-quarter losses of £160 million were transformed into a juicy £3.6 billion. The audacity of the thing is almost admirable.
It is also one step too far for HM government though. As expected, Alistair Darling’s pre-budget report included a one-year-only ‘supertax’ on bankers’ bonuses. Details remain unclear at this point in time - and with financial policy the devil truly is in the details, which will be pulled apart and raked over by legions of lawyers and accountants with an eye for the smallest loophole. This fact, we should remember, was frequently cited by Tony Blair as the main argument against increasing the top tax rate to pay for little things like free education. Now even the City minister, Lord Myners, appears to have an appetite for the fight.
He was drawn into the fray after the banks caught wind of the proposed supertax. It provoked widespread opposition in the city - the British Bankers Association called the measures “populist, political and penal”. These people should probably invest some of those millions in a dictionary and look up the word ‘government’, whose job it is to be “political”.
“Populist” implies that Labour grandees are stirring up anti-banker sentiment in a demagogic fashion, when really they are being pulled along reluctantly by a very powerful and well-rooted popular sentiment that exists independent of them. Given that both they and the bankers are under the impression that we live in a ‘democracy’, it is difficult to find fault with that - in a real democracy, we would be able to fire MPs who wavered on the issue faster than you can say ‘Fred the Shred’. As for “penal”, anyone would think banking executives were being loaded onto a box-car to Siberia rather than having their £3 million Christmas bonus skimmed by the treasury.
Even this petulant complaint pales against another suggestion, attributed to Bill Dodwell, a senior bureaucrat at accountancy firm Deloitte - “We have had calls from bankers asking about what action they might take under the Human Rights Act. There’s never been a precedent.” Just as well for the more level-headed guardians of bourgeois society - a ‘precedent’ that declared the state’s ability to collect taxes illegal would be the shortest imaginable distance between today’s Britain and the total collapse of the entire political and economic order (in favour of generalised chaos, needless to say, not socialism).
When arguing ‘rationally’ for a position abhorrent to almost every political and moral compass from Daily Mail Toryism to Class War anarchism fails, it is good practice to resort to threats. Finance capitalists are prone to respond to any attempt to clip their wings by threatening to fly the nest. If the City of London does not gratefully accept every twist of the financial markets and nod through fat bonus cheques, then the bankers will find somewhere that will. “It’s a bit like the transfer market in football,” Stuart Fraser, head of policy at City of London Corporation told The Independent. “The talent will simply go.”
This is not the first time bankers and their allies have compared themselves to football stars - it is perfectly fitting that the only comparison they can find is with people who have become extraordinarily wealthy by being exceptionally good at kicking a pig’s bladder around a field. In reality, however, these threats often turn out to be empty; there is not much of a percentage in abandoning one of the world’s financial centres. Finance capitalism, though transparently international, is not (as its defenders and reactionary detractors often argue) ‘supra-national’ - ie, entirely unconnected to the vicissitudes of the system of states.
This is in fact made perfectly clear by the course of the crisis - it broke out first in America and the UK, the two busiest hubs of financial activity in the world, but brought many more peripheral countries to the brink. The City and Wall Street will remain important enough to attract ‘talent’ - until a serious and as much military-political as economic shift transfers global hegemony to some other power bloc (a possibility that does not look exactly imminent). Where are all these bankers going to go? Dubai?
Myners has called their bluff. “The board of directors of RBS has apparently threatened to resign if they don’t get the bonuses that they want,” he told the House of Lords, “but I think that’s rather a silly line for them to adopt and actually a very unpatriotic one and I think the nation finds that act indeed shameful.” The bankers should pay attention - if there’s one man who knows about avoiding tax, it is Myners, who used to be part-time chairman of Aspen Insurance Holdings, a company based in Bermuda which, according to The Times, avoided more than £100 million a year in tax.
It is important not to approach this question in a moralistic fashion - though the almost total incompetence of the bankers in gauging public opinion somewhat invites it. These are not peculiarly corrupt or sociopathic individuals - their dubious consciousness stems from their living in a wholly different world from the rest of us. For a book exploring the great chasm between rich and poor in Britain, Polly Toynbee and David Walker assembled a focus group of bankers, who were shocked to discover that the average wage was less than £200,000 a year (it is about a tenth of that), and that over 90% of us are on less than £40,000. For these people, a not insubstantial wage of 40k is unimaginable poverty.
Rather, we have to confront the political issues involved. There can be no question - the nationalisation of the banks is an immediate economic measure which should be high up the agenda for any Communist Party. Nationalisation is not a panacea in itself, as is obvious from these developments at RBS. A nationalisation that puts the banking system under the democratic control of the masses, however, is a necessary measure for revolutionaries.
It is an immediate demand for now simply because it is the masses who suffer for the fraudulent machinations of high finance - it is our savings which get wiped out, our homes which get foreclosed. We have the right to demand that our livelihoods are not contingent on the health of ‘casino capitalism’.
It is also a minimum demand for a future proletarian regime. The reason is simple - even the most comprehensively successful revolution will not be able to abolish capitalism in toto overnight. What the revolution has to achieve is the transfer of political power from one class to another, and a corresponding transformation in the state apparatus - the necessary preconditions for building any kind of socialism that is not a new Khmer Rouge. For as long as vestiges of commodity production remain, that production will require some kind of a credit system. Financial capitalism is categorically not simply parasitic - it is unproductive, true, but that is a technical distinction within Marxism rather than a moral one. Credit is equivalent to lubricant, and keeps the machinery of commodity production going. And it is not simply production - there will be consumer-level banking functions to be carried out as well.
Meanwhile, as long as capitalist rule is maintained, this necessary and vital part of it will be doomed to plunge the system into chaos time and again.
- Guardian December 7.
- The Independent December 8.
- The Times March 22.