The Bonus Debacle Shows Osborne's Fear Of Bankers

nytimes.com

Oh how the mighty have fallen...well not exactly. The EU's latest proposal to cap banker's bonuses at base rate wasn't exactly the Cleansing of the Temple, despite what Mayor of London Boris Johnson might think. However, it may have been one of the first attempts to curb a venomous banking culture that preceded the financial crisis- its painful effects which are all but prescient throughout Britain and mainland Europe today.

This week, Johnson called for the chancellor George Osborne to fight against the EU's supposedly soviet-esque meddling at a meeting in Brussels. To the Mayor, tougher regulation against banks serves only as a piece of extravagant populism, designed merely to distract. Further, such legislation will either encourage clever bankers to break the rules or, in an Ayn Rand induced nightmare, collectively exile themselves to a new promised land somewhere n the far east, where they can enjoy milk and honey while London delves into chaos.

How, at a time when major banks propped up by public ownership are making considerable losses, have they managed to induce fear into our politicians? Though it might be argued that the Conservative Party have always had a close relationship with bankers- particularly since the Thatcher years, even a Labour party apparently removed from Blair-Brown still finds itself arguing for an economy with a strong financial district at its core. And despite of all the chancellor's talk on curbing the 'culture of greed', the Royal Bank of Scotland has rewarded its employees with a bonus pool of £607 million despite recorded losses of £5.2 billion. More audacious, HSBC has announced a bonus pool of over £5 billion, despite scandals over money laundering and disingenuous interest rate swaps.

Osborne argues that the proposal fails on practical grounds. Despite the thirst for banker's blood remaining rife, imposing caps on bonuses will only encourage them to exploit loopholes- in this case, through increasing fixed pay. Under this mechanism, around 5,000 or so bankers would substantially benefit, while superficially capitulating to public demand.

Yet, even this gesture seems to illustrate how little power our political institutions have in administering justice to the financial sector. In fact, its not all that surprising, considering how many favours our government has conducted for failing banks- all thanks to the tax payers who have thus far received next to nothing in return.

David Cameron used a speech this week to justify the path of austerity, arguing that there was 'no magic money tree' to protect public services or invest in the economy. Yet ironically, he seems to forget about the beanstalk in Downing Street that just keeps on giving- most notably in the form of quantitative easing. This allowed failing banks to be propped up by a substantial influx of cash, under a gentleman's agreement that it would be lent to small businesses and home owners. Instead, it was used to trade equities and bonds- instruments of speculation that have pushed up the values of assets and commodities across the board. Far from the Bank of England's expectations, this act has done little to protect the most vulnerable in society- particularly those with low and fixed incomes- while demanding considerably more of them in tax increases and service cutbacks. At the same time, its seen those banks with significant holdings becoming far more wealthy, and their senior employees receiving rather healthy remunerations in return.

So despite the continued corruption and government tough talk, why have the banks been relatively unscathed? The answer might be found in the structure of Osborne's past economic strategies. For the most part, these have been predicated on old notions of 'trickle down' theory- one which suggests that cutting taxes for big businesses and reducing government services would initiate a private sector led recovery. Yet, by simultaneously cutting public sector services, there seems no vision of a different 'type' of economy, more accommodating of social enterprises, co-operatives and community-driven projects. Nor does there seem to be much encouragement for these ventures, particularly in the UK's most deprived economies. Instead, the rather insidious belief remains- as long as big bankers are okay, they'll eventually help out those beneath them. Rather than smashing the pyramid of social hierarchy, the government has provided it even more support than ever, in the hope that one day the 'masters of the universe' will come and save the day.

Ultimately, the defence of bonuses derives from fear- not simply of a mass exodus of bankers, but a more profound anxiety of an economy without the foundations of financial services. It is this scaremongering that seems not only to have held the government hostage, but also discouraged the creative thinking needed for real long term growth.

The Enigma of UKIP

While we all expected a Liberal Democrat victory in the Eastleigh by-election, the real shocker for most commentators seems to have been a dreaded four-letter acronym that has overstayed its welcome.

The ascendancy of the UK Independence Party (UKIP) to an unexpected second place, has rightly left both the Conservatives and Labour disorientated. It wouldn’t be surprising if an all too gleeful Nigel Farage haunts David Cameron at night. Indeed, even Ed Miliband, whose party leads by over ten points in the polls currently, has recently been flirting with some uncharacteristic policies, most notably an in/out referendum on the EU.

If you believe Nigel Farage – and considering his charisma, it would be easy to – it seems like UKIP could become the new king makers of British politics. This assertion has given a new found confidence to UKIP activists. Indeed, talk of ‘quick action’ on immigration and the inhuman
‘Eurocrats’ in Brussels has made the Purple Peril a formidable force to reckon with.

Conventional wisdom from the strategy hacks at Tory HQ suggest the UKIP surge is the inevitable product of Cameron’s modernisation push. As Colonel Bob Stewart, Tory backbencher commented to the BBC, there was “widespread dismay among the rank-and-file about the direction the party was taking and warned the leadership could not afford to ignore their concerns”. To such people, Cameron needs to scrap the fluffy, light touch liberalism that he has attempted to adopt if he’s to win come 2015.

The problem with this analysis is that it rejects what by-elections actually represent. In fact, if Cameron steps back from the advice of strategists and rebel backbenchers he’ll find that UKIP aren’t as threatening as he’d imagine.

Rather, it might be worth Mr Cameron watching the final episode of Charlie Brooker’s Black Mirror series, which aired a few days before the Eastleigh by-election on Channel Four. In the episode, named “The Waldo Moment,” a similar by-election takes place in a fictional town.

Deemed a ‘safe’ Tory seat, the usual candidates crop up: Liam Monroe, the inevitable Conservative winner, Gwendolynn Harris, the career politician and some Lib Dem who no one knows. The twist is that a fourth candidate, Waldo, the foul mouthed, computerised blue bear also runs, throwing a spanner into the inner workings of the political machine.

Waldo’s crude observations of his political opponents immediately make him popular with the electorate. He easily surpasses the Liberal Democrat, and after an appearance at a Question Time-style debate, crushes the Labour candidate too. This isn’t done through better policies (of which Waldo actually says nothing on) but rather in the way he exposes his opponents – as career politicians who believe they’re too good for the public.

Indeed, Waldo’s strengths are not in his capacity to become a better political representative, but a perfect characterisation of ‘anti-politics’.

This isn't too off the mark for UKIP. As Lord Ashcroft’s polling results showed, 83 per cent of those voting UKIP did so as a protest vote. 40 per cent of these voters did so in a practice of tactical voting, while one third of these voters suggested they were likely to vote Tory come 2015. And while some did vote UKIP based on policy, these issues mainly focused on the issue of immigration, rather than the party’s flagship issue, the EU.

What should be noted, particularly to UKIP activists, is that recent successes in by-elections are not indicative of cultural revolution. Rather, UKIP are being used as a protest vote against main political parties.

Furthermore, while Mr. Farage may like to see himself as somewhat of a moral crusader, he probably represents a public sentiment of ‘anti-politics.’ Yet, even if this analysis is wrong, and UKIP will see large gains in 2015, Mr. Farage should heed some lessons from the Lib Dems. By-elections are one thing, but general elections are far fiercer. He’d do well to drop the showmanship, and create some long term policies.

The MAdness of it all

 

To all freshers, there will come a time in your final year, probably during the spring term, where you’ll go through an existential crisis.

Like many of my colleagues, you might try to hide from it by seeking refuge in the confines of the library, in the belief that industrious note-taking will drown out those annoying thoughts of looming unemployment. The strategic amongst you might attempt to avoid the crisis through the pursuit of vocational extra curriculars, hoping that your sudden attendance at Law Society meetings might deceive the gatekeepers at Clifford Chance. And if you’d rather not be haunted by the prospect of moving back to your sleepy home town, cheap vodka is always good for temporary amnesia.

There is of course another route of escape from the brutalities of the real world without the hangovers: the master’s degree.

Indeed, for those of us who were seduced by the charms of Romantic literature and Medieval History in secondary school, only to be deemed incapable management consultants by the grand wizards at Ernst & Young, the option of a masters certainly seems a lucrative distraction.

But there’s a catch. For the luxury of an extra year in the bubble, you’ll be looking to pay on average anywhere from £5,000 to £18,000 on tuition alone. Though it might be easier to get into the ultra-competitive universities, ‘brands’ like the London School of Economics (LSE), herald tuition fees of over £20,000 for their flagship courses. And if you aren’t one of the lucky few to receive research funding, most of this is likely to come out of your own pocket.

Unlike protests against undergraduate fees, the extortionate cost of MA courses has widely gone unchallenged. Rather, many prospective postgraduates justify the costs on the basis that brand strength will increase their chances of employment. Others, despite acknowledging that pursuing this route will add to their student debt, hope that a masters will provide a better means to differentiate themselves within an extremely saturated job market. As a postgraduate recruiter once told me, “These days, it’s next to impossible to secure a job with a BA. Just like in Europe, MAs are becoming a necessity”.

If this assertion holds true, then we truly live in a rather sorry state of affairs. Rather than a university education empowering students, the necessity of advanced degrees seem to illustrate how the higher education industry has profited from student vulnerability. Far from a platform of social mobility, course fees and maintenance costs price out those students without the access to funds. Master’s degrees are no longer predicated on academic advancement, but rather utilised as a ‘cash cow’, in which university administrations can plug funding gaps and cutbacks. Such an industry capitalises on the fears of anxious students, manipulated into believing that only through the pursuit of a masters qualification can they even stand a chance of securing a career outside of Poundland.

This isn’t to say that master’s degrees are entirely worthless, but for postgraduate recruiters to sell their courses on the basis that it ‘enhances’ graduate employment prospects are disingenuous. Such a proposition ignores the higher value most employers place on work experience and internships. Students applying for an MA should do so on the basis of their passion for learning, rather than the fear that an absence of two extra letters on their CV will keep them stuck stacking shelves.

Marx Resurgent : An Interview with Bhaskar Sunkara

To most, Marxism might seem an outdated term. But to Bhaskar Sunkara, editor-in-chief of Jacobin magazine, it might just hold the radical solutions needed to tackle the ailments of our age.

The magazine has just released it's ninth print issue, and since launching in 2010, has attracted 3,000 digital subscribers, over 250,000 web hits a month and is a regular feature on US news networks such as MSNBC and CNN. Prominent contributors to the magazine have included American literary theorist, Walter Benn Michaels and the cultural philosopher Slavoj Žižek- Impressive, considering that Sunkara is a recent college graduate only in his early twenties.

Distancing themselves from the stuffy, high-brow intellectual rigidity found in the New Left Review, Sunkara suggests that Jacobin offers “a completely different venue from what existed before. It has a vibrancy and accessibility that is extremely rare on the 21st century left”. And with op-eds boasting blunt titles like 'Burn the Constitution', the publication has not shied away from controversy. Rather, it relentlessly exerts radical critiques on issues ranging from workers' unions, labour rights and the failures of American democracy.

Yet, far from advocating the dogmatic orthodoxy often associated with Marxist political thought, Sunkara believes that the magazine offers a platform in which the modern structural compositions of capitalism and liberal democracy can be effectively challenged. Asked about the social purpose of the publication, he says “I established Jacobin to both assert the relevance of and modernize the Marxist class analysis and traditionally socialist ideas about the necessity of working class organization”.

In addition, he believes the popularity of the magazine lies in its engagement with the public; Alongside a sleek, minimalist design, it's writing “is clear and accessible, and we approach our polemics in a way that is good in faith, but unrelenting in criticism”. 

Being an independent publication, much of its reputation has been built from the ground up, through contributing to debates and political activism. In particular, Jacobin's presence in the Occupy Movement in 2011, truly put it at the forefront of the intellectual left- securing its position as a force to be reckoned with.

While Sunkara associates himself politically as a 'socialist', he's aware of the problematic nature in the usage of this term. Associating more toward the philosophy of Ralph Miliband- the British socialist academic and father of current Labour leader, Ed Miliband, he acknowledges the diversity of leftist thought evident today, suggesting that “'socialism' has warped into some type of floating signifier for many”. Regardless of the term's possible misappropriation by both the Right and the Centre, he notes an array of statistics suggesting “people under 30 have positive impression of “socialism” than “capitalism”, and while some may be confused by the nature of modern socialist thought, an association with the welfare state probably means “they know it’s better than the brutal form of capitalism our generation has been subjected to”.

But in an America notoriously suspicious of anything remotely Marxist- still carrying with it the cultural baggage of Cold-War Mcarthyism, can a publication like Jacobin truly go beyond a marginal readership? Sunkara argues that “ Despite the political defeats of the neo-liberal era, there is still an active working class that generally votes left, has been at the vanguard of anti-austerity efforts, and remains poised to potentially re-emerge as a political force” .

At the same time, movements like Occupy are indicative of a wider discontent with the way that both society and governance operates, as well as a desire for real change, beyond presidential campaign slogans.

Sunkara hopes to “maintain momentum and consolidate Jacobin’s position as the leading magazine of the American left”, and this year will be publishing books and continuing public activism. Yet, while he may remain in New York, he maintains that Jacobin always had an international outlook; “We’re socialists and internationalists, our intention was never to focus domestically”.