Labour Uncut has a sad piece today on the subject of why Labour needs to back the financial services sector. Sad because it’s clearly an example of a wasted opportunity.
The author of the article, a successful entrepreneur, argues a number of things which – as a very humble ex-worker in a bank at the eye of the 2008 storm – I really must take serious issue with. He does fairly say, for example, that:
[...] it’s not just British bankers who are busy corrupting their national standards of decency and fairness either. The Spanish bankers are also at it, with Santander and BBVA dishing out eye-watering bonuses that will have many City types wondering what exactly their overseas brethren did to end up with both the weather and the cash.
Without mentioning that the new right-wing Spanish government has placed a €600,000 cap on the executive salaries – never mind bonuses – of those who work at Spanish banks which have received public funds over the past few years.
He then goes on to point out that (the bold is mine):
It’s hard not to recoil when looking at the sheer magnitude of some bonuses and then the gap between top and bottom.
But here’s the problem. Words are powerful, especially on a subject as emotive as this. Attacking injustice is fine, but “bankers” has become a term of abuse that is applied without distinction and as a result ends up tarring everyone working in financial services.
And here I agree unreservedly. I remember what it was like when a staid, boring and underpaid profession as my own – my remuneration was always less than the average national wage, even when for example I had responsibilities as complex as checking documentation for signs of potential money-laundering – became the kind of profession one simply didn’t admit to in polite company. From being the glue which kept society together to a pariah on the face of the planet is not an easy series of steps to take.
However, it is when the author of the article under discussion goes on to say the following that I really take issue (again the bold is mine):
The UK is an acknowledged world leader in financial services. Just as in the past the UK was a leader in making cars, ships and textiles. Hundreds of banks and financial institutions from all over the world flock to Britain because it was and currently remains the best place to do business.
But there’s nothing that pre-ordains this will always be so.
If a future Labour government goes to war with finance in pursuit of a mythical rebalancing of the economy, the cost will be felt in the dole queues and in Britain’s international competitiveness.
As if these costs weren’t already being felt precisely because of the recent products, processes and behaviours of a financial services sector which – even now – tends to believe self-regulation would be the answer?
I have, in my job at the bank, witnessed the kind of waste that goes on in all large corporations. From unhappy experiences in IT-system commissioning to dreadfully overpriced display units designed to improve internal communication; from a specialised computer mouse costing an arm and a leg, with the aim of protecting an arm and a wrist from the pain of repetitive-strain injury, to a plush hotel room in a city far away from home for a perfectly honest charity event everyone was too embarrassed at the time to properly publicise; from 50 percent bonuses for middle managers, whose job it was to implement opaque salary policies and end-of-year distribution curves designed to make objectives impossible to achieve, to unnecessary overtime payments for projects poorly managed and husbanded … these are surely not the signs of an industry which currently deserves our support.
Neither fair in remuneration nor measured in its ability to manage change constructively, the real customers of the banking industry happen not to be the personal ones like you and me … nor the sole traders … nor the small- and medium-sized businesses … but, rather, far more importantly, the managers at the top of the tree.
All the admirably good and hard work of the call-centre staff, the branch personnel and the sales people who suffer every day of the week means nothing in the face of the fact that these behemoths are evermore structured to make money for their leaders.
I agree with the initial thesis that we shouldn’t be bashing an entire industry simply because the people at the top are behaving without a single fibre of moral propriety. And the solution to the problem can, perhaps, quite unconsciously, be found in this final quote (once again, the bold is mine):
Actions have consequences and the Labour leadership would do well to pause before endorsing policies that will scythe into one of this country’s truly world class industries. As with Britain’s past industries, it doesn’t take long to lose the edge and fall back.
The Labour party needs to take a deep breath and consider the hundreds of thousands of people whose jobs are at stake in finance. We need to remember that financial services have a key role to play in the future growth of all our industries. And most of all, we need to develop balanced and strategic policies for the financial sector, not simply hop onto the banker-bashing bandwagon.
“As with Britain’s past industries, it doesn’t take long to lose the edge and fall back.” That’s a quote and a half – and should make us think far more profoundly. What is it about British industry and its hierarchical structures which makes it so prone to the vagaries of elements beyond businesspeople’s direct control?
Cogitate on the answer to that one – and you may discover the way forward for our wider society.
A blame culture, ours? It starts from the top. Leadership is, after all, as I saw commented the other day, much more a question of providing the right kind of facilitating work environment than micromanaging people’s creativity out of existence.
Sustainable 21st century business surely requires people at the top to centralise far less their responsibilities on themselves. This does mean, of course, that they will become less indispensable – and, therefore, cheaper to employ. But until this is done, British business will continue to be at the mercy far more of government legislation and external factors than its own long-term and internal securities and structures. Only when both power and earnings are transferred to the people who actually add daily value to a company will company culture and differentiation from the rest of the marketplace become more positively entrenched – and the impact politicians can have on the future health of a sector become, equally, far less significant.
Labour’s attitude to British finance shouldn’t be the key to improving the ability of the sector to perform, whatever the framework. That key, instead, lies within the sector itself. And if the market were truly free – as, indeed, I believe it should be – the sector itself would already realise this.
Whilst a monopoly of top executives continues to run the financial services sector in the UK, we will get a stream of complaints from these top-heavy and highly uncompetitive companies unhappy with the legislative and regulatory constraints of the British economy.
It’s high time they realised they need to sort out their problems by sorting out the way they manage their businesses.
You don’t need to pay someone million-pound bonuses to know how to cut the livelihoods of tens of thousands of workers. For that kind of money we need far more imagination.
So up your game lads and lasses. And transfer that power!
Update to this post: some background reading from the Guardian newspaper has just come my way – an interview with Stephen Hester from the Royal Bank of Scotland on the subject of the furore surrounding his recent bonus award. It also provides an alternative viewpoint to some of the issues I raise above. Well worth your time.