Wealth stays with us a little moment if at all: only our characters are steadfast, not our gold
The word bonus: if you take it to its Latin root, it means something good. The OED will tell you it refers to an addition, usually to pay, in consequence of have done something good or exceptional.
So that is why the national press – tabloid and broadsheet alike – have been banging on about the fact that some of the banks that taxpayers’ money is bailing out are still paying out massive bonuses to their staff, some of whom, it is argued, were the ones which got us into this fine mess in the first place.
Well, I can see they may have a point (and even if they don’t, it makes good copy and good copy sells papers) as it strikes one as well, not quite cricket, to be pleading near-insolvency at one point and then, having taken the hand-out, giving huge sums to employees the next, simply because you promised them at an earlier time in their employment that you would.
There is, of course, the issue of contractual obligations. If a bank has been silly enough to write a bonus structure into an employee’s contract then they might be expected to honour it, unless they have actually gone belly-up. And most people with that kind of salary package and those bonus structures tend to rely on them. Unwise perhaps, but, understandable.
The government’s bail-out of the banks is massive and we, the UK taxpayers, are going to be paying it off through our taxes for the rest of our working lives, no matter who gets into power at the next few elections.
So it would be nice to think that the money could be used where it will do most good: getting the economy flowing again. We are in for an extremely rocky ride over the next 12 to 18 months – I don’t know a single forecaster who expects things to improve before 2010. There will be more redundancies, there will be more companies across the supply chain going to the wall.
We need to know that money going into banks is going to come out again in the form of loans, overdrafts and mortgages – not massive bonuses – and we need those loans, overdrafts and mortgages to be made available at sensible interest rates. There’s anecdotal evidence of some smaller companies’ overdrafts being arranged at interest rates that would sit more comfortably being quoted by a man with a pit-bull and tattoos rather than a pin-stripe suit and tie-pin.
Debt, when properly managed, is what keeps the economy going: companies borrow, they invest, they reap the rewards of that investment in higher sales, they pay back and so on. It’s just when debt is mismanaged on a spectacular and worryingly global scale that it all goes wrong.
There needs to be money made available so that business can get going again: companies need to be able to extend their overdrafts, individuals need to be able to buy houses. But this won’t happen if too much of the rescue package money stays with the banks and their employees.
Incidentally, the International Monetary Fund has come up with a series of measures to help sort out the global financial crisis. The fifth of which is ‘to improve understanding of how economic policies had contributed to repeated ‘bubbles’ that hurt economies when they burst’. Talk about stating the blinking obvious.
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This comment first appeared in BMJ’s November issue.