Tuesday, December 29, 2009
Wednesday, December 23, 2009
Sorry I'm sure "oldies" isn't the appropriate term for anyone in or approaching retirement but I can't bring myself to say "seniors". It's a bit American and forever associated in my mind at least with the phrase "senior moment". Anyway I just published an article entitled The Many Advantages of Growing Older in Spain and the bus pass gets a mention. The idea of the article is to list some of the discounts you can get as you grow older in Spain, like the famous pensioners' bus pass in Britain. Spain have equivalents of course and they can be used for a wide range of things aside from bus travel, such as discounted activities (wine-tasting anyone?) , cheap spectacles and lower entry to museums and events. The main train company Renfe offers a "Tarjeta Dorada" to the over-60s which offers discounts of up to 40% on it fares. Get the card at any main station for 5€ on presentation of a NIE or residencia. For details of this and other benefits including weblinks see the main article.
Saturday, December 19, 2009
Thursday, December 10, 2009
Greedy bankers lining up at the bonus trough when the rest of the country is still in recession and the government is drowning in red ink was bound to cause outrage. Noone is listening to the City’s dwindling band of defenders protesting about bonus taxes and the damage they will do to what remains a prime export earner and revenue generator. But the arguments about bonuses are more finely balanced than the government would have us believe and besides they are, as they were intended to, deflecting attention from the real problem which is government economic policy, both past and present.
The case against the bankers
At first glance the case for taxing bonuses seems overwhelming: the bankers caused a recession which has blown a huge hole in government finances so why shouldn’t they help repair the damage particularly as the bonuses they have “earned” were only possible because of government bail-outs and guarantees. Look harder though and you will see that the first part of this argument is almost wholly untrue – the banks are not primarily responsible for our current economic difficulties and the appalling state of the public finances is almost wholly the fault of the government.
Before getting onto the blame game, let’s look at the second part of the argument which is more persuasive because it is true that the banking system would probably have collapsed in its entirety but for state support and taxpayers deserve some return for the bail-outs done in their name. However, if the banking sector is to pay up, it would be fair and rational to (1) tax the banks themselves rather than their employees and (2) tax the banks that benefited from state support most.
They don't want justice, they want blood
There are two problems with this approach in the eyes of the anti-bank lobby. Firstly it is the state-controlled banks like RBS that received the bulk of the support and their paying more tax is self-defeating and pointless. Secondly this group’s real intention is to punish “greedy”, “reckless” bankers themselves and thus only an attack on “rewards for failure” bonuses will do. The problem with this argument is that of all the tens of thousands of people employed in banking and due to be paid a bonus there are unlikely to be more than a handful who fit this description. Most of them work for hedge funds, insurers, investment banks that did not fail and had little if anything to do with the crisis. The handful of banks like RBS and HBOS that failed spectacularly did so because their senior management made some very poor decisions and most of those responsible have been sacked. Most employees were not greedy or reckless and if their employers want to pay a share of their profits to them rather than to its shareholders, they should be free to do so.
The government has to hit the right targets for the right reasons
The government should use its influence with the banks it owns or has stakes in to make sure bonuses, if paid at all, are fully justifiable. Perhaps a tax or levy on the banking sector generally could be justified as recompense for the funding support that the sector received when the credit markets froze. If there is a general feeling that the rich should pay higher taxes then raise tax rates for all high earners. Why should a bank clerk on £50,000 a year pay a higher tax rate than Jonathon Ross who earns 10 times that every month? There is little justification for a general attack on City bonuses but yet there is a lot of public anger to be assuaged. Why? Where does the sense of outrage spring from and is it justified?
Is the City a curse or a blessing?
The City line is that the financial sector is a great asset to the
The economy needs an effective financial sector to allocate resources efficiently, support investment and manage savings and transactions, but it does not need the swollen, dominating force that the City has grown into today. To the extent that the City has grown to accommodate the financial activities of other countries and capture international business, that is a positive for the economy but a large proportion of the growth in the significance of finance to the
Who's to blame?
Now we arrive at the heart of the matter: the blame game, which the government seems to be winning because it is not widely held to be responsible for the recession. The public anger about bonuses shows they accept the bankers’ appointed role as the villains of the recession. The “they got us into this mess” line of argument has it that up until last year everything was fine with the economy thanks to prudent management by the government and Bank of England. Then those reckless bankers came along and caused a credit crunch which in turn caused a fall in house prices, businesses to be starved of loans and unemployment to soar. This conveniently absolves the government of blame but is also absolute nonsense.
Yes more boom and bust
In reality the
The buck stops with government
If the City got too big and outgrew its useful purpose this is because government policy encouraged it do so. Highly paid bankers are easy targets, and certain bank bosses have been rightly pilloried, but blaming City workers for
Up to their old tricks
Current government and Bank of England policy is not much different today: practically zero percent interest rates, quantitative easing and the rest are designed to flood the financial sector with money in the hope that some of the easy credit will flow through to the rest of the economy via the housing market and then the consumer. Of course banks are making profits (and paying bonuses) in this environment of free money but, as during the boom years, it is a direct result of government policy.
Look beyond the scapegoats
Look beyond the scapegoats
I said at the beginning of this post that the bonus question was a distraction from the real issue: failed and failing policy. The government has used low interest rate policies to keep the economy going for years and is trying similar tricks to lead us out of recession. This is the real reason for the shape of our economy today. Is it any wonder that we have an economy dominated by finance, property and retailing at the expense of industry, engineering and technology? Should we be surprised that science graduates flock to work in banks? Are we to wonder why we import so much while our exports shrivel? Is it a mystery why the
Other economy posts and articles by this author:
Sunday, December 6, 2009
- The pound has stayed on its knees
- Many Brits have packed up
- Of those that remain many are struggling with their mortgages, reduced pensions, lack of work etc
- The steady flow of new arrivals needing property, goods and services has slowed to a trickle