An unrepentant banker
Bankers’ bonuses: who’s to blame for the greed?
Bob Diamond, Barclays bank’s chief executive, and one of Europe’s highest-paid bosses, last month faced a grilling from the Treasury Select Committee, a cross-party body appointed by the House of Commons. Those expecting a replay of previous confrontations between MPs and bankers – in February 2009, for example, when the bankers said they were ‘profoundly sorry’ for their role in the financial crisis – were to be disappointed.
Diamond was unrepentant. In answer to questions from MPs, he said it was about time that unfair public criticism ‘moved on’ so bankers could stop apologising and get back to business as usual. MPs wanted to know if Diamond was going to show ‘restraint’ on bonuses this year (no), refuse his own bonus (probably not), act more responsibly and increase lending to business (impossible to do both), accept personal liability for the failing of institutions (no) and if he was ‘grateful’ to ‘the taxpayer’, ie, the state, for bailing out the financial system and keeping him and his whole industry in business (grudgingly, and after much evasion, yes. In other words, reading between the lines, no).
Diamond’s performance added fuel to the fire of the ongoing bankers’ bonus controversy. Ministers in the present government, while campaigning for power, said they were determined to do something about the arrogance and excessive wealth of the bankers. And to be fair, they are doing something. In fact, as Will Hutton puts it in The Observer (16 January), compared with Gordon Brown and Alistair Darling, business secretary Vince Cable and chancellor George Osborne are ‘fire-breathing radicals’, clamping down on tax avoidance, taxing bank profits, setting targets for bank lending, regulating hedge funds and contemplating more banking reform and regulation. But so far, they are being relatively timid about bankers’ bonuses. Why? Now that they have taken power, they, in common with all governments, accept the reality of capital accumulation and their role in it. And that means not doing anything that will frighten the financiers too much.
Capitalists united – and divided
That remains true even in the face of an increasingly numerous opposition. After all, as Hutton says, the issue of bankers’ bonuses is uniting everyone in outrage – ‘from captains of industry bewildered how top bankers can earn so much more than they do to the newly unemployed who wonder what they have done to deserve poverty and hardship while the moneymen pocket millions’. That the state bailouts have poured into the pockets of private individuals, and the poorest and most vulnerable will be left to pay the price in terms of job losses, benefit cuts, and reduced levels of social services and so on, we have already stated (see Socialist Standard, passim). But how come we are also seeing criticism from captains of industry and government ministers and the business press and so on? Not so long ago, bankers could rely on them being ‘intensely relaxed’ about such matters. Why now so increasingly angry and vocal?
Partly it is a fear of social unrest and breakdown. It also reflects divisions within the capitalist class. As a class, the capitalists are united by the need to promote the conditions necessary for investment and business activity. For that, they need, for example, a supply of compliant and affordable labour, a state willing and able to provide socially necessary infrastructure, a financial system to facilitate the processes of capital accumulation, a vibrant consumer market, and so on. On issues such as these, capitalists stand united. But the capitalist also finds himself in competition with his comrades. Capitalists have differing needs and interests depending on exactly how they get their hands on the spoils of exploitation – whether as landlord, financier, industrialist, retailer or state official, for example. In the usual course of things, this is just the stuff of competition, of ‘business as usual’, the undertow of everyday life. But when crisis hits, everything breaks to the surface. As Marx puts it (in Capital, Volume 3, Chapter 15):
‘So long as things go well, competition effects an operating fraternity of the capitalist class […] so that each shares in the common loot in proportion to the size of his respective investment. But as soon as it is no longer a question of sharing profits, but of sharing losses, everyone tries to reduce his own share to a minimum and to shove it off upon another. The class, as such, must inevitably lose. How much the individual capitalist must bear of the loss, ie, to what extent he must share in it at all, is decided by strength and cunning, and competition then becomes a fight among hostile brothers. The antagonism between each individual capitalist’s interests and those of the capitalist class as a whole, then comes to the surface…’
Who wins out in this struggle is not simply a reflection of factional power, as the Marxist academic David Harvey points out (The Limits To Capital, Chapter 7). The existence of surplus value (profit) in money form is ‘the most adequate form of capital’, which means that ‘the moneyed interest enriches itself at the cost of the industrial interest in the course of [a] crisis’ (Marx). This, then, helps us understand the row about bankers’ bonuses. It’s a row about which class, or which fraction of a class, is going to be landed with the costs of the crisis. We see, therefore, that Marxian theory is not esoteric mumbo-jumbo or outdated rubbish, as often claimed, but a powerful explanation for what is actually going on in the real world. If you understand Marxian theory, bankers’ multi-billion-pound bonuses and the row surrounding them no longer look so much like an insane aberration, but a logical consequence of social and economic structure. Bankers are enriching themselves at the expense of industry and workers? Well, OK, that’s what we would expect to happen…
What is to be done?
The question is what is to be done about it. As Harvey says, however the class struggle eventually plays out, however the losses of the crisis are finally distributed between factions of the capitalist class, and between the working and capitalist classes, and whatever the power struggle that ensues, the necessary result will be the destruction of value (closure of workplaces, the laying off of workers, destruction of surpluses, defaulting on debt, cutting of state services, and so on) so that a new round of capitalist accumulation can begin. This is totally irrational and insane from the point of view of human needs, but inevitable and logical from the point of view of capital accumulation.
The film-maker Charles Ferguson, whose investigative documentary Inside Job exposes the delusions and deeds of the bankers during the course of the crisis, says that, ‘Those responsible [for the crisis] blame the system. Or they blame the bubble caused by irresponsible borrowers. Some of them blame low interest rates. In a grim way, it’s actually amusing to watch them blame anyone except themselves’ (Evening Standard, 17 January). The film-maker’s contempt for those who line their pockets and profit from social disaster is justified. But actually, in a sense, it’s the bankers who have got it right. It is the system that is to blame. And we should indeed ‘move on’ – from blaming capitalists who are as much at the mercy of the system as the rest of us, to an understanding of the world we live in and how it works. Politically, that means moving from a demand for ‘regime change’ to one for ‘system change’.