A Tale of Two Industries: Banking and Everyone Else

"It is time to stop bashing the bankers," proclaimed David Cameron, the UK Prime Minister and his equally posh and privileged sidekick, George Osborne, the Chancellor of the Exchequer (i.e. UK Finance Minister) The war on Bankers and their obscene salaries and bonuses is over and they must be allowed to get on with their jobs. If I were an economist this suggestion might seem fair and sensible: Perhaps the best way out of this crisis is to allow the most profitable companies in the free market economy to make as much money as possible, thus increasing average GDP per capita faster. Except median happiness and wellbeing of the populus is not determined by mean GDP and if this were a free-market economy the banks would have all gone bankrupt when the credit crisis reared it's ugly head (taking the rest of the economy with it) and have only been enabled to continue paying ever more enormous salaries because of external support. Making the rich even richer at the expense of everyone else may increase GDP and make 1% of the population a little happier while 99% become more miserable.

The banks collapsed, with dodgy collateralized debt on their balance sheets that, even now, hasn't been adequately stress-tested to prove the banks really are solvent and have been propped up using taxpayers' money and newly printed money (created with QE: Quantitative Easing), which was directly injected into the banks to keep them alive. The real value of money has been reduced, so everyone in the world, except those who work for financial institutions have been impoverished. The people who were most responsible for causing the problem have been rewarded massively and everyone else is worse off. This is not restricted to our own country. Most of the current unrest in the world was catalyzed by poverty caused by escalating food prices as the effective value of the dollar was pushed down by QE, while at the same time greedy soft-commodity traders in Chicago, London or wherever, are getting rich on the proceeds of their speculation on food price derivatives. Not everyone who works for a bank is evil or corrupt, far from it, but they have benefited massively from the credit crisis that a few of their colleagues helped to create. The sense of entitlement and denial of any responsibility is annoying, but the constant threats that if they aren't given their bribes they will leave the country is quite intolerable.

In the U.K. the effects of austerity measures are just beginning to be felt, just as the banks are announcing bigger than ever pay awards and annual bonuses. The cuts are being implemented by the Conservative, Liberal Democrat coalition government (The Tories being funded more than 50% by banks) and will affect millions in the form of job-losses, effective pay cuts and welfare benefit reduction. Some of these cut are necessary and even sensible and in our current situation there would be no way to spend our way out of the problem, because the UK would lose it's AAA rating and our debt would become unaffordable. But allowing the financial services to pay their staff so much more (e.g. 50% or even 100% more since the crisis began in many cases) is completely intolerable, especially when banks are offsetting the pre credit-crunch losses against the recent QE and tax-payer assisted profits to reduce their corporation tax-bill and refusing the pay dividends to their shareholders (many of whom are pensioners) One of the arguments for letting the banks get on with their work unimpeded was that this would generate additional tax revenue and boost the economy, but if they are refusing to pay tax and stealing from pensioners, I don't see how that will work. The constant threat that the bankers will leave London if taxation is increased hangs over the heads of the government, because other industries (such as my own) have not been nurtured and have mostly been allowed to migrate to India, China and Taiwan etc. leaving the UK dependent on a small number of massively overpaid people in The City.

It was bad enough when the people who changed the way we live by designing and developing fast broadband, mobile internet, smartphones, big screen TVs and made it all affordable, were earning less than the people who charged excessive fees to manage your money (and still under-perform the market) but now, after the Credit Crunch, even the "back office" staff, who do the bankers' admin can earn more. Many of my ex-colleagues have moved abroad or are contemplating IT jobs in The City because they will earn far more. Many scientists, engineers and generally clever people I know in the U.K. are losing their jobs, having their funding cut or just not getting pay rises, as are nurses, teachers, police, soldiers and lots of other useful members of society. This really is a tale of two industries: Financial services and everyone else.

Related Article Published on Helium: Anger Over Banker Bonuses