'A rational government should shut the City'
A report released this week argues that City bankers destroy £7 of value for every £1 they are paid by their employers. The authors of the A Bit Rich report estimate the cost of the recession at £2.7 trillion, or £668 per banker. Reasoning from that premise, they conclude that bankers have a negative effect on society. Chris Giles writes in the FT:
[The] report stems from standard public economics theory that the government should step in if people’s value to society is remarkably different from their private value to an employer. The government already steps in, taxing everyone to ensure many jobs with high social value happen where those services would not be provided otherwise….
The authors assume the financial crisis and recession would not have happened without City bankers engaging in risky, opaque and complex transactions…. If the figures are accurate, a rational government should shut the City. Naturally, the City disagrees and so does the Treasury, which sees benefits in properly regulated activity in the Square Mile.
The NEF has never made an effort to appear conventional. It grew out of an international conference called The Other Economic Summit, held in opposition to the 1986 meeting of the G7 in Tokyo. Founder Jonathon Porrit is an Old Etonian, trained as a barrister at Oxford University, whose father once declared the welfare state ‘uneconomic’ in his post as Governor-General of New Zealand. With over fifty employees, most of whom are trained academics, the NEF has grown since its days as a gathering of friends in Mr Porrit’s Lambeth flat. Some would say that it is now reputable.
Yet at the same time, it is a pity that this report had to come from an organisation like the NEF. It raises important issues that deserve to be debated intelligently but which risk being drowned out by squabbles over agenda and the incessant mentioning of ‘the environment’ that is a legacy of Mr Porrit.
The authors calculate that the providers of essential services, like nurses and hospital cleaners, can receive as little as 10 per cent of the benefits they provide. From the FT again:
Eilis Lawlor, head of the valuing-what-matters team at the New Economics Foundation, said: “Pay levels often don’t reflect the true value that is being created. As a society, we need a pay structure which rewards those jobs that create most societal benefit, rather than those that generate profits at the expense of society and the environment”.
Yes, it is true that while the conclusion might come through reason, the premise that the value of nursing or banking can be accurately calculated might be false. The point is academic. The effects of the way we choose to value services, on the other hand, are real. Bankers are not the first to threaten to leave the UK. In 2007, 5,000 nurses tried to leave for Australia after finding their services undervalued here.
Should we reconsider the value of services like nursing? That is an important question, and it should not die along with the intellectual defeat of this report. The sad truth is that as long as the focus remains on banking, it probably will.
