Bankers, bonuses and “brains”
LEVEL PLAYING FIELD
The Hindu, 24 October
At a fringe meeting at last month’s Conservative party conference, one of the speakers began a defence of British bankers’ bonuses (£7 billion this year) by observing that “When God gave out brains, he didn’t give them all out equally, and so we have to live in an unequal society.”
The speaker in question was Stuart Fraser, a multi-millionaire stockbroker and leading light in the City of London Corporation, which governs the “square mile” of the financial district as an autonomous enclave within but separate from the Greater London Authority. It runs its own police force and controls its own very considerable assets (including Hampstead Heath and Highgate Wood, far from the City’s borders). Successive local government reforms pursued by administrations of all political hues have left the City’s peculiarities and prerogatives intact. Uniquely its electorate is made up not only of the 9,000 residents but of another 24,000 for whom it is a place of business, among them a substantial number of the nation’s wealthiest people. These are the people who elected Fraser and for whom it is his job to speak.
Back in June 2008, Fraser described the gathering financial storm as a “phoney crisis”. But that’s not the only reason to wonder – if we are to accept Fraser’s coarse terminology – where he was “when God gave out brains”. Can he really believe that the distribution of wealth corresponds to the distribution of intelligence? Does he think that FTSE-100 chief executives – whose average reward last year was £3.2 million – are 741 times more intelligent than people living on a state pension and 277 more intelligent that those living on the minimum wage? Does he think that the richest 45,000 people, the 0.1% of the population who control one third of the country’s liquid assets, also possess one third of its collective intelligence?
Probably not. In the end Fraser’s comment is another illustration of one of the very few constants in human history: the beneficiaries of the social hierarchy always believe they are where they are by right – whether derived from God, heredity, hard work or “brains”. They believe they are entitled to their wealth and power, and that this wealth and power reflects their own superiority. In order to sustain this illusion, to bolster their sense of entitlement, they’ll buy into any theory and disregard any fact.
Fraser, like many others who consider themselves blessed with it, treats human intelligence as a uniform commodity that is “given out” in measurable quantities. But surely it’s clear that this protean capacity has many and varied manifestations and always exists, in any individual, in partial, selective forms. The world is not divided between the “brainy” (or as the Americans say the “smart”) and the “stupid”. There is no “intelligent” person who is not capable of the gravest stupidity.
One result of thirty years of neo-liberalism is the a widespread assumption that if you’re unhappy dominating or exploiting your fellow human beings it must be because you’re stupid or incapable. Since, according to Fraser, we are unequal economically because we are unequal intellectually, it follows that the only reason for failing to make tons of money is intellectual inadequacy.
The bonus-driven banking praised by Fraser was a critical factor in driving the world into recession. In repackaging bad debts with good ones, the bankers aimed to make something out of nothing, value not from investment, jobs or innovation but from sleight-of-hand. The toxic debt spread through the larger system, leading to a credit crunch and recession, which in turn led to deficit growth and the current attack on public spending. And yet there is no accountability. Billions in bonuses were paid and never returned, regardless of the long-term unsoundness of the deals that secured the bonuses. The government bail-out ensured that bankers’ salaries and pensions were protected. Of all those who had a hand in creating the financial crisis, not one has suffered a meaningful fall in his living standard because of it. The same cannot be said for the far greater numbers who neither promoted nor benefited from unregulated speculative accumulation but who have paid for it with jobs, wages and now vast reductions in social support. It’s often argued that those who take the greatest “risk” deserve the greatest reward. But as we’ve seen in recent years, the rich use their wealth and political clout to ensure they do not pay for their mistakes: the burden is shifted on to the wider public.
That is what is happening now in Britain. In order to shave some £85 billion off the deficit in the coming four years, the government is proposing unprecedented cuts in public spending, accompanied by reorganisation in the provision of health, education and housing that will exacerbate inequalities and further segregate the rich from the rest.
£850 billion was found to bail-out the banks. But we’re told that health spending will have to shrink by some £20 billion (close to 20%) in the next four years. Over the same period, corporation tax will be cut by 4%, bankers will award themselves about £35 billion in bonuses, and through tax evasion and avoidance, the rich will withdraw some £280 billion from the public purse. Any proposals to ensure that the rich pay something closer to a fair share in tax or that bonus-driven banking be restrained are met by Fraser, in his role as mouthpiece for the City, with threats to pull out of the country and feeble arguments like the one he tried out at the Conservative fringe meeting. It seems that what’s required for success in Fraser’s world is not so much “brains” as indifference to the consequences of one’s actions for other people.
Now the financial institutions whose solvency was propped up by government threaten Britain and other countries with a downgrading of their credit ratings should they fail to implement public spending cuts and privatisations. The result of these policies, should they run their course, will be that the top 20% will acquire control of a larger portion of national wealth while the bottom 50% lose out. I’m sure there will be no shortage of “intelligent” people telling us why this is the natural order of things.
Many of those who glide through our institutions and media with the halo of intelligence owe their success to a determined lack of imagination. The capacity for glibness, the ability to regurgitate received wisdom is not the same as an ability to analyse, discriminate or innovate. The higher stupidity of the rich is not a reflection of anyone’s innate intellectual capacity or lack of it but of a blunt insensitivity to the wider human environment.
