John Kampfer’s criticism of the FSA’s decision not to issue binding restrictions on bankers’ bonuses is deeply unpersuasive.
Having reminded the reader that the economy’s doomed, regulation’s brilliant and Fred Goodwin’s greedy, he starts his argument by complaining that:
Britons have long displayed a curious deference to people who are paid far beyond their worth.
Who is Kampfer to decide how much an employee is worth? Is an open labour market, competing for workers on the basis of their productivity, not a better determinant? Britons have indeed displayed an acceptance of the pay arrangements agreed between private firms and their workers, and rightly so. Next is the inexplicable statement that:
The only argument ever used for our largesse is the usually fictitious “brain drain”
Why on earth should the payment that a bank makes to its employee (nationalised banks excluded) be considered “our largesse.” It is the largesse of the owners of that bank, and it’s nothing to do with us.
With reference to the brain drain, he then asks:
Would a finance director at, say, Salford or Southampton really up sticks and head for Stuttgart or Stockholm if he or she was told they were overpaid?
Well, simply, yes.
Then follows the most patently untrue statement of the lot, that:
Excessive wealth has not produced an incentive to improve the nation’s lot.
Wealth (‘excessive’ or otherwise, whatever that term means) has been the incentive for countless improvements to the nation’s lot throughout our history. From Arkwright to Branson, the entrepreneurs, businessmen and professionals of this country have been driven by the lure of wealth to innovate, produce and employ.
Bonuses are a good way to attract and retain the best talent, and encourage efficient behaviour among employees, generating profit for firms, and wealth for the nation as a whole. More importantly, bonus schemes in the private sector are voluntary arrangements between firms and their employees – the government has no business intervening. There is no reason, beyond envy, to stop them.