Better dead than Fred
The recent bout of hand-wringing over bankers' bonuses conforms to the general pattern of bourgeois hypocrisy, argues James Turley
Who’d be a banker? The post-Christmas period has seen yet another iteration of an increasingly tiresome annual ritual - an outburst of partly genuine, partly manufactured outrage at the extremely generous bonus packages meted out to those at the top of the banking sector.
This year, however, the scandal has an added sweetener - Fred ‘the shred’ Goodwin, top dog at the Royal Bank of Scotland as it barrelled towards collapse, has had his knighthood revoked, putting him in the esteemed company of Robert Mugabe and Nicolae Ceausescu, among others.
The logic is simple - Goodwin was knighted, in the characteristic syntax of the British honours system, for “services to banking”; but at this point, it is fairly clear that those “services” amounted to driving the financial system to the brink of collapse. The British establishment has granted itself the benefit of hindsight, re-evaluated his “services” and found them to be rather different to its initial estimation.
Still, this has not been an uncontroversial move. Many dispute whether stripping Goodwin of his knighthood is strictly concordant with the letter of the law; it is possible that he might get the decision overturned on judicial review, although he might think better of making yet another public spectacle of himself under the circumstances. Others cry in horror at the precedent set - are we now going to see every other ennobled banker involved in the financial crash stripped of their honours? (Perish the thought ...)
The underlying rationale for this decision is quite obviously political expediency. No name is so closely associated with the innumerable failings of the financial system as Goodwin’s; the persistent inability of any relevant authority to bring him to book on anything is an increasing source of embarrassment to a government (and, indeed, an official opposition) viewed as thoroughly compromised by high finance.
The timing, likewise, is no massive surprise. Fred Goodwin’s ‘debasement’ (such is the official term for knighthood-stripping) comes after the annual bonus farrago focused almost completely on events in the RBS boardroom. Stephen Hester, Goodwin’s successor, was awarded £1 million worth of shares as an annual top-up; chicken feed by banking standards (more typical is the £100 million carved up between the three top executives at Barclays), but then RBS is no ordinary bank. It is 82% owned by the taxpayer.
Public outcry reached fever pitch; the Labour Party threatened to force a Commons vote on the issue; and eventually, Hester waived the bonus. He had not anticipated the scale of public outcry, he said - which would appear to mark him out as either extraordinarily cynical or totally removed from reality. The official job of corporate executives is to deliver shareholder value. Since he was parachuted in to steady the ship in the wake of RBS’s part-nationalisation, the value of the bank has halved. Can Hester really have imagined that the great collective shareholder that is the British public would react well to a substantial reward for no obvious positive achievements?
One body that did not come out of this well is the coalition government, which - like its Labour predecessor - made no apparent effort to rein in bonuses at banks in which it owns what is technically, though very obviously not in practice, a ‘controlling’ share. David Cameron and his front bench wrung their hands in the most vague and cowardly imaginable way, hoping it would all blow over. The issue of executive pay was left entirely to the relevant remuneration committees, staffed - as they almost always are - by people with a vested interest in keeping executive pay in general at the lavish end of the scale. Something had to be done to regain the initiative for a government that still, in spite of everything, likes to project an image of moral backbone.
So those who fret about an honours holocaust in the banking sector need not trouble themselves. There will be no deluge after Goodwin - because Goodwin is the very dictionary definition of a scapegoat. The poor man has been dumped on to absolve the guilt of those who defend the general conditions for obscene boardroom payouts. The latter will continue - although the word in the City is that they will have to be repackaged to avoid this clockwork-regular annual scandal in future.
Such a repackaging effort would be prudent, particularly at RBS and HBOS, where the government owns a 43.4% voting share. One should not be too harsh on Hester for the decline in RBS’s stock price, which was surely inevitable under the circumstances - but, given the furore over the government’s sale of Northern Rock at a considerable loss to Richard Branson, the very much more considerable losses to be made with a quick sale of RBS or HBOS do not make them tempting options. This farcical pseudo-nationalisation situation is likely to continue for a couple of years at least, and further headaches will inevitably result.
Get over greed
Lurking in the background is a notion that has become somewhat commonsensical - we are now in such dire economic straits because of the greed and callous irresponsibility of the financial elite in the years leading up to the crisis. David Cameron and Ed Miliband alike talk of the need for a more “responsible” capitalism, to restore some sense of moral fibre to a system with serious and very visible difficulties. Needless to say, this is empty phrasemongering.
The anger over bankers’ bonuses has more to it than the cheap demagogy of a Cameron or Miliband, of course. After all, the latter only attempt to manipulate a public mood that is already there. It can take rightwing forms, as in the US Tea Party’s opposition to the ‘socialist’ bank bailouts on those shores; but most commonly it finds expression in a primitive leftish feeling that those at the top live in an utterly different, morally corrupted world, from the rest of us.
There is some limited justification for this view - which is that empirical studies in fact confirm that well-paid City types simply have no idea how the vast bulk of the population live, down to imagining the average wage to be around £80,000 and other such basic factual misapprehensions; nor, largely, do they have any comprehension of the obstacles to success in a capitalist world that pertain to those further down the social food chain. Anecdotes about City slickers’ hookers-and-blow orgies abound - and, after all, what else is there to spend your share of £100 million on?
The conclusion drawn from this premise - that individual greed and ‘casino capitalism’ got us into this crisis - is equally widespread, but not so easy to credit. The most visible representative of this view is the Occupy movement; the ‘1% versus 99%’ sloganeering is clearly enough not a class analysis, but a position that draws a line between the super-rich corporate elite and honest, ordinary folks. Inasmuch as Occupy can bring itself to make positive demands at all, they invariably amount to tinkering with the financial sector - the Tobin tax being a popular example.
The problem is that capitalism needs credit to work at all; the vastly different turnover times of productive processes even in the same industry ensure that a ready supply of credit is necessary to stop supply chains grinding to a halt, and the maintenance of basic infrastructure requires governments to run deficits. The bankers have not accomplished some kind of coup to get the power they have, but are afforded it by the nature of the system; and the hypertrophy of fictitious capital that imploded so spectacularly in 2007-08 is equally a quite normal feature of the business cycle. It is not the greed and profligacy of bankers that has ruined capitalism, but capitalism that has made bankers greedy and profligate.
The far left, equally, is not above a little opportunistic banker-bashing. In part, like Cameron, Miliband and Occupy, it is trying to tap into the public disgust at the obscene amounts of money these people pay themselves for wreaking the havoc they do. The bonus, however, is that it ties neatly into the opportunist politics invariably advocated by the likes of the Socialist Workers Party, Socialist Party in England and Wales et al. After all, if the problem is simply a deranged financial sector, why should not the left-Keynesian fantasies offered up by such organisations have some traction on society?
At a time when the world bays for his blood, it is the task of Marxists to argue that Fred Goodwin is an irrelevance - it is the capitalist system which needs ‘debasement’. It is a difficult case to make at the best of times; but incomparably more difficult is the task of fixing a system which is fundamentally driven towards crisis and disintegration.