Tuesday, August 25, 2009

Politics Of Envy (cont)

We already have big redistribution

Pol was back on an old favourite this morning:

"A high pay commission would change the climate of what is socially acceptable by challenging the self-serving myths of mega-earners... With powers to investigate, it would make transparent who is earning what and why, ending secrecy: information has transformative power. I would go further and make all income tax returns public documents. The initial shock would be salutary, as it threw daylight on earnings and wealth. When so few people know where they stand or what others earn, how can voters judge questions of fair distribution?

...No one suggests some national pay scale of merit from street cleaner to superstar, but it's time politicians stopped being bamboozled by bog-standard bankers blagging their way into billions "because I'm worth it". Call their bluff, before the bubble blows up all over again."

To the left, the bursting of our financial bubble is a lifeline. It surely shows once and for all that bankers are not worth their exhorbitant pay, and that they only get it by exposing the rest of us to hideous risk as guarantors.

Well, actually we agree with the bit about bankers exploiting our willingness to stand as ultimate guarantor - which is why we would change the rules of the game by splitting high street banking from the casino, and restricting our guarantee to high street bank deposits (see this blog).

But beyond that, pay can only be sensibly determined by the marketplace. End of.

These days you may have thought that principle was pretty well accepted by all want to live in a modern prosperous society. But not by the left it isn't.

When it comes to incomes, the left have never given up on the Marxist idea that the cake somehow arrives already baked from the bakery, and all "society" has to do is distribute it in equitable slices.

Their latest idea is to harness the politics of envy even more directly than they have in the past. According to some recent focus group research published by the Joseph Rowntree Foundation, most people have no idea what top earners get, and have "a strong tendency to overestimate the number of people who earn higher levels of income". For example, whereas only 10% of us actually get a paid above £42,900 pa, most people apparently think it's much more. Focus group members are shocked when they discover the truth:

"I don’t believe that, I just don’t believe that. I don’t think that £42,000 is in the top. I would obviously have thought there is more than 25 per cent of the country earn more than that."

Hence the left's calls for a High Pay Commission: if only The Facts could be got out there, then people would see just how unusual - and therefore outrageous - all those City fat cat packages truly are, and would demand action. They might even demand maximum wage legislation (39% of JRF focus group members already pronounced themselves in favour).

Ah, if only that cake really did arrive fully baked - life would be so much easier.

But in the real world, someone has to get up at 4am to mix the ingredients and pop it in the oven. And he's not very keen on having his cake sliced away at the whim of the commissars.

Which is why the hedge fund managers are already heading for the exit. According to today's Wall Street Journal (HTP JW):

"A stream of hedge-fund managers and other financial-services professionals are quitting the U.K., following plans to raise top personal tax rates to 51%. Lawyers estimate hedge funds managing close to $15 billion have moved to Switzerland in the past year, with more possibly to come.

Richard Jordan, a partner at law firm Thomas Eggar, said: "I would say that 40% of my work involves advising people on ways to leave the country. We have reached a tipping point, in terms of hostility to the U.K. tax system."

One of his clients has just received a dividend of £2.5 million from his business. "He said to me, I'm going to be start being charged £1.3 million on a payment like that. It's time I thought about leaving," Mr. Jordan said.

Recent research by accounting firm PricewaterhouseCoopers suggested that married bankers earning £250,000 a year in the U.K. would retain less of their income after 51% tax than their counterparts in Paris, Frankfurt, Singapore and Dubai."

Sounds like divvying up the cake is going to be the least of our problems.

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