Banker bashing
Money has always been an issue for me because my parents struggled with it all the time. The fact that we lived in a “posh” locality in Bombay is because they inherited the flat, not because they could pay for it. Shaped by the ideas and movements of the sixties, they chose idealistic vocations and are well known in their specialist circles. We are proud of them and proud of being their children. But financial insecurity has always been a part of our lives. My father tells me that there were times after I was born they didn’t have money for food or milk for me and friends would step in to help. I don’t ever want to be in that position when I have children.
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I don’t understand economics always. But I can see that global capitalism is an unfair system. I can see that some people who do valuable work are remunerated very little for what they do. People like school teachers, nurses, cleaners, criminal lawyers ( I am not talking about the highly paid QCs but the vast majority of footsoldiers who get paid a pittance for doing a vital job) and charity workers. People who do the “real” work, in contrast to investment bankers who appear to deal in a world of make believe and abstractions.
Some bankers have, in the past few years, earned enormous amounts of money, beyond the realms of imagination while the cleaners in their office buildings were forced to stage protests to receive a fairer wage, receiving £5 and hour and working more than one job while their bosses lost track of how much money they had.
Now the markets are in meltdown, the future of investment banks is being questioned. And people are taking the opportunity to vent their spleen against bankers. 5,000 people lost their jobs in London when Lehman Brothers folded, and many are rubbing their hands in glee. The bankers deserve it, it is being said, for their unmitigated greed. Now they know what the rest of the world lives like.
The truth of the matter is, that while a few earned millions, the rest did not. They did earn good salaries, but that is no reason for the level of vituperation being directed their way. A lot of these bankers, do live in the “real” world, supporting families and doing things that other people on other jobs do.
Our resident banker has supported educations, provided shelter, put food on the table and enabled members of his family to perform voluntary work. Because of him, a cleaner earns a living wage, a musician is able to teach and I am able to learn music. Because of him someone was able to get their sick mother treated in hospital and several abandoned dogs have had better lives. The list goes on. The web of activities that this one person supports helps keep a lot of people going.
Everyone should be able to have the opportunity to support themselves and their families. Wealth really should not be concentrated in the hands of a very few, whether they are bankers or not. If something is wrong with the system, it does not mean we start attacking individuals willy-nilly.
We live in a capitalist world, and even if we don’t like it, some of us choose to work as part of the system, unlike what my parents did, because we want to survive and look after our families. Yes, a lot of bankers are greedy, but I see greedy people of all professions all around, who wouldn’t mind some millions for themselves.
I’m not arguing the banking system shouldn’t be reformed or regulated, or trying to defend investment banking-but a little less joy over people losing their jobs wouldn’t be remiss.
Thank you so much for this. I’ve been toying with the same idea for a week now. Feel like slapping the grin off people’s faces.
I completely agree. It’s shocking to see the frogs-in-the-well mentality – “I will not work hard/ educate myself or try to reach a better economic status, but I’d love you to reach mine” kind of thinking
This reaction as you correctly say is because some professions are percieved to be ‘cooler’ or ‘flashier’ than the others, the media too seems to have its favorite industries. Consider this : When the auto or airlines industry tanks every media writer thinks there are a bunch of idiots sitting out there and they know better than them. When the same media or people talk of the financial industry there is always an inherent awe that is assoicated. Again in terms of perception generalization does come to play.An auto industry press across the board keeps going on about how Honda makes better cars while the rate of repairs on a particular brand of Ford might be far lower. This is the power and persistence of perception.
So while I am aware of the domino effect and its implication I do think that this perception altering of the investment banking industy is one good outcome that will come out of these unfortunate happenings.
Hi,
Just making a small point. The salary of an individual for any job depends on many factors:
1) The skill set required for the job (If it requires very high education, then it should compensate for that). Ex. Doctors are highly paid.
2) The appeal of the job (A job that appeals less/has low job satisfaction has to pay more for retaining employees). Ex. BPO/Call-centres pay more than usual.
3) Value addition provided by job (If the employees learn nothing more to advance in career, the job has to pay more. Slightly different from #2). Ex. Assembly line workforce.
4) The skill pool for that job (If there are many people with the requires skills, it is always possible to find a cost-effective, aka cheap, deal with an employee). Ex. Daily wage laborers and cleaners don’t earn as much because there are so many people available with the skill sets.
5) The risk-factor associated (If the returns in a job are uncertain, then it has to pay more). Ex. Investment banks and futures trading companies.
I request you not to look down on the i-bank people just because their contribution to society is behind-the-scenes. It is these people who make sure that your money doesn’t lose its worth even with the high inflation taking a big bite off your cash.
Of course capitalism isn’t fair, but it is the fairest of all possible system. It ain’t just economics, it follows from common sense and psychology as well.
I can’t comment on the specific example you gave (of cleaners demanding fair wage) because I am not in a position to judge the value of their work. But what I can say is that the minimum wage is one of the worst economic policies that a government can come up with, for it makes all the people whose job isn’t worth the minimum wage unemployable. For example, taking the case of brick-hauling job at a construction site. If it has been fairly determined that the hourly wage for a laborer (hauling ten round trips of bricks per hour) is $6, the minimum wage ordinance makes all those who are not able bodied and can carry only five round trips unemployable. In a free market, these people would have success in finding work, but not under this stupid ordinance. I gave an easy (black & white) example for understanding, but the world is full of such examples.
i dont know bout global, but indian economy is always decided by those ppl who have more money. and they always design the economy is such a way that they earn more money. Thats why there are huge differences between ameer and gareeb ppl. Otherwise, in UK or US, bank managers and truck drivers have almost same salary standards.
One person I know had guilt-filled glee about Lehman Bros. because her brother would return to India from London.
Looks like a lot of people are going to do that, and for some that will bring a lot of happiness. Hope he’s able to find some other work soon!
I agree with you, there’s plenty of misplaced schadenfreude going around. I suppose the silver lining is that most of those laid off are highly educated and smart enough to find other jobs.
Please note that of the 5000 people who lost jobs at Lehman Brothers in London are not all Investment Bankers. Almost half of them are regular salaried employees who work in different departments like IT, HR etc. These people have families to take care of and mortages to pay for, for which they depend on their salaries.. I work at Lehman Brothers in New York, so I understand their situation.. I am happy today because my job is saved by Barclays buying part of Lehman here.. I wish the best for my colleagues in London and India
Yes, it is unfair to be gleeful at the misery of thousands. And yes, there are greedy people in every profession, but… the reason people are upset at bankers (see bottom for which bankers people are upset at) is that they seem to belong to a protected class. The US Government lets airlines fail – thousands lose their jobs, they let the internet bubble burst and many, many startups fail – thousands lose their jobs, they let all sorts of industries and all sorts of people lose their jobs. But not bankers. They “seem” to belong to a special group. If banks mess up, they should be allowed to fail – that is the free market. And yes, Lehman was allowed to fail, but others were not. So, why is that?
And now, the ones that have been saved – their mistakes are being paid for with tax payer money. At a time where children can’t get an education. At a time when infrastructure is crumbling. At a time when that money is *so* critically needed. And given all that, there isn’t even a guarantee that salaries will be capped! There is no guarantee that the CEOs of these banks will not get paid $5 million bonuses. Well, there should be – they are now government employees!
I hope people are upset at all bankers. They should only be upset at the “super-rich” bankers. The guy who rakes in several millions in bonus, lives amazingly, eats at the finest restaurants, goes to the best hotels and when crap happens, wants to be saved by taxpayer money. I have yet to see *one* head of a bank stand up and apologize and take responsibility. I find that… mind boggling.
As for the angry mob, I’m not part of it. I am amazed sheer gumption of the top brass, but anyone below that can’t be held responsible (as commenter “mt” says – many are in IT and other jobs too). The people who have been let go will have a very hard time finding jobs and that sucks – for them, the people who depend on them and the ecosystem they support – none of whom caused this mess. That is very sad.
But I hope this comment serves to explain why people are upset at the top brass. And have every right to be.
Shripriya, As fas as I understand Goldman and Morgan were not failing. They had in fact announced profits. But because of rumour and fear they were being forced to fail. I absolutely agree with you that CEO salaries should be capped, and that money is critically needed for other things.
Sorry, that should have read – “I hope people are NOT upset at all bankers”…
“But I can see that global capitalism is an unfair system. I can see that some people who do valuable work are remunerated very little for what they do.”
People are not rewarded for the value of their work (even if value to society can somehow be objectively defined). Career salaries/compensation is solely a function of supply and demand. The greater the supply of workers in a field then the lower the pay will be.
It has nothing to do one way or the other in judging social worth. It has all to do with the amount of supply for a worker with a particular skill set compared to the amount of demand employers have for such an employee. Sure, there are things that can effect supply, like if it takes more education for a particular skill set then there will relatively be less people with that skill set and therefore those who are there can demand higher pay. But if just for the sake of discussion there was a particular career that demanded lots of costly education, but for whatever reason there were lots of people who obtained that education, then indeed the pay for that career will be lower.
great post MG – i just left a comment at Lekhni’s too. most of the i-bankers and finance people i know – are actually quite humble. either way – a little less joy at another’s loss is always good. funnily i’ve seen this happen in other strange ways – a lady who couldn’t conceive, rather gleeful when her neice (conceived in a shot) was born deaf. people are strange and cruel….
This is an excellent article!
Thank you