Financial services now constitute a kind of tax on the real economy as well as distorting its priorities; short-termism and the search for impossibly high returns are rife. The culture, of which systematic insider trading is part, is having a growing impact on business ethics.
Will Hutton and the Equality Trust are two touchstones for understanding what’s wrong with the bonus culture in banks and, by the way, the MP’s expenses scandal. Hutton hits a nail on the head in today’s Observer. The £38Bn paid to Lloyds/RBS for “restructuring” is equivalent to five times HEFCE annual recurrent grant to all English universities (7.9Bn). Goldman Sachs’ 2009 “remuneration fund” will top £16Bn, and average over £300,000 for each of their traders.
Increased inequality in society contributes adversely to many indicators of social well-being: crime, teenage pregnancy, even obesity (seehttp://www.equalitytrust.org.uk/why/evidence ). Hutton goes on to argue:
“One of the lessons of behavioural economics is that when people think that everybody else is honest, they are honest too. … The converse is true. When people believe that sharp practice, double-dealing and the pursuit of greed are the norms they follow.”
I think we (I align myself with the tolerant, fair minded British public) believe this to be true. I think we believe that if the pursuit of inequality (I win, screw you) were tempered by a pursuit of equality we would all benefit. The banking industry is not a social wealth generator. Even with tax paid (very little because most of the taxable profit ends up off shore) I suspect the net contribution, when the cost of servicing the consequences of inequality are taken into account, is substantially negative.