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December 10, 2010


Ian C

A brilliant post, and right on the money (literally).

I do wonder about the political logic, though. Is Osborne really trying to 'go too far'? Or is he boxed in by a combination of lack of willpower to go after the banks and lack of analysis of the wider impacts on his electorate of the student fee policy? The expenditure of political capital looks more stupid and ill-thought-out than calculated.

Is this the start of the break-up of the long neo-liberal alliance of the plutocracy and the middle classes. One hopes so, but it still has not happened even in the USA under much worse squeezing of the 'squeezed middle' than we have had so far.

Dick Pountain

Great post. Another way of saying "accumulation by appropriation" is "predation" (as in "The Predator State": Galbraith, or "primitive accumulation" (as in "Afflicted Powers": RETORT.

Carol Wilcox

Don't forget that the most precious asset which capitalists have appropriated is land - our common heritage. Land values are created by the whole community. All land rent should be collected for public benefit. Have a look at how much of this super-wealth is actually represented by landed property. In the UK less than 1% own 70% of land by acreage - and probably by value as well.

Paul Sagar

Bloody excellent post.

Just goes to show the power of ideas and ideology: who would doubt that Tories in Parliament don't even consider the possibility that what they are doing is somehow incoherent or contradictory? So enthrall to their dominant political ideals are they; these, ultimately, are what Adam Smith called the Men of System - politicians who are so enamoured with a specific programme that they cannot see the danger and recklessness of that programme. As Smith warned, they are amongst the most dangerous men of all to have in power.


The 50% tax rate comes in to play here. If the treasury haven't included bonuses in their forecasts, then the government is in line for an additional £4.1bn in income tax and national insurance (according to the CEBR).

However if the treasury have included these bonuses in their forecasts, which would seem sensible, then diverting the money to the shareholders would net the government, say, £4.6bn (since we only own shares in 2/3 the major banks) less a £4.1bn drop in tax revenue - precious extra money; and the problem of where to cut persists.

The politics at work here is that of the carnivore extracting the weak member of a herd: protecting health, schools, and defence has meant other areas face disproportionate cuts. Presumably it never occurred to Osborne et al that students might object; I'm glad they have the backbone.


Will, that you had to make reference to "eminently non-Marxist observers" suggests we have no way of expressing succinctly a perspective which does not require a beard... (Paul mentions Smith, a Marxian sans Marxism.)

Harry Shutt deserves a mention here as his critique echoes Harvey but is much more helpful on recommending reforms, unlike Harvey who is a little vague on what particular reforms it might help us to champion - company law and other arcane subjects.

Given Freeman's point about the doubling of the global labour-force available to capital, we are likely to hear a lot more "squeezed middle" - and this squeeze is likely to be violent.

Luis Enrique

bonuses certainly are a fiscal issue. Under the current configuration of taxes, if by magic the financial sector stopped paying itself so handsomely, and filling the Treasury's coffers in the processes, at least in the short run we'd face a big taxation shortfall.

it's a nice point that if bankers had paid themselves less the banks might have been in a better position to withstand the crisis, but it's pretty amusing to see people arguing retrospectively for higher bank profits. Can you imagine a left-winger, or anybody else, standing up any time before 2007 and saying: "these banks need to be paying out less revenue as salaries and bonuses, and retain more as earnings. Cut costs and raise profits! What do we want? More profitable banks!"

But paying bankers less and making more profit wouldn't have been enough, they'd also have needed to resist paying out those higher profits as higher dividends. i.e. they'd have needed to accumulate equity, raise their capital/asset ratios, precisely as is being pushed for by reformers (and implemented to some extent by Basel III).

I keep repeating myself with the following, but the question that needs addressing is not why bankers pay themselves so much, but why banking is so lucrative in the first place.

Revenue = profits + costs. Cost are mainly salaries and bonuses. Mucking about with how banks split their revenues between profits and salaries is of secondary importance, what matters is why revenues are so high.

The answer to that has to do with how bankers appropriate money from the rest of the economy and how their revenues are, to an extent, illusory ... but is also a very long and complicated answer that requires breaking down the various things that banks do.

for what it's worth - which is not much, because it doesn't stand a chance of being implemented - the reform that would resolve much of the above is Larry Kotlikoff's Limited Purpose Banking. Under that system bankers wouldn't make out like bandits and banks wouldn't go bust. Downsides include (probable) higher costs of borrowing for firms, consumers having to pay directly for banking services (ATMs, online banking) that we current get for "free" and savers being more exposed to underlying risk.

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