Monday, January 30, 2012

Envy, lies and the gutter of politics

If you want to know what Ayn Rand meant when she described the "drooling beast" in The Fountainhead, one need only look at the events of the past few days in the UK.  For in those days the Labour Party, Liberal Democratic Party and much of the media circled on the government appointed chief executive of the Royal Bank of Scotland (RBS) - Stephen Hester - whilst he was out of the country on holiday - because of reports he was to receive a bonus of just under £1 million in shares.

A witch-hunt of envy, hatred and smearing appeared, as MP after MP called on the government to intervene in the decision of the board of the company to breach his employment contract.  They sniffed blood, goaded on by the leftwing press and media, with the extreme leftwing "Occupy" movement displaying its usual ineptness of analysis by blaming RBS for the budget deficit.   It ended when Mr. Hester returned home from holidays to find his image and name all over the media, and him feeling like a pariah, understandably, and deciding to refuse it for the sake of a quiet life.  The braying left cheer on a small victory, but their true colours are shown not for their stupidity, but their clever, fact-evading, power-hungry bating of class warfare and old fashioned envy in their pursuit of populism.

In 2008, the British Labour Government decided to rescue the RBS, which was weighed down under debts and investments that were going to cause it to go to the wall.  The reason to save it was not to protect depositors, for a deposit guarantee system already existed to ensure anyone with less than £75,000 in deposits had them protected.  No, it was because Gordon Brown wanted to save the jobs, investors and the debtors to the bank, and he feared that letting it fall was worse than saving it.  So he did, by the government pouring in billions of pounds it didn't have, to essentially buy a majority stake in the bank.

That stake was put into an arms-length company so it would be run as a commercial enterprise, and Stephen Hester, previously chief executive of British Land (and having had a successful banking career before then), was appointed CEO with a salary of around £1 million, with bonuses if he successfully turned the company around.

The ownership of RBS and the appointment of Hester had all been by the Brown government.  Until this year, his salary and indeed his previous bonuses - under government ownership - had not been a political football.  This year it has been, and it is all because of a new fever of class envy, stoked hypocritically by Ed Miliband and the vampiric Labour Party, keen to lie, smear and hound for the sake of cheap headlines and gutter press coverage.

RBS has been turned around, in terms of its balance sheet.   It is now profitable, whereas it had lost billions when he had joined.   In other words,  Stephen Hester has been responsible for leading the bank into a state where it financially self sufficient.   Through his leadership, taxpayers have been saved many more billions of pounds - which helps put his £1 million salary in perspective, and indeed the around £960,000 bonus - in shares - that would only be available in a year's time.  Particularly when you consider that the salary and bonus are subject to 50% tax.  

Yet when it came out that he was likely to get this bonus, out came the wolves.   What easier way to stire up anger and envy than to point out to the lumpen proletariat half truths and distortions.  

So what were these half truths?
- "Why get a bonus for leading a bank that needed bailing out"? The fact that he was appointed BY the Labour Government AFTER the bailout to rescue it was blanked out.  You see the standard leftwing view is that they are all guilty - bankers are, after all, the scapegoats for everything.

- "This comes straight from the poor who are suffering from the cuts".  Unadulterated nonsense. It comes from a bank that is making a profit.  Taxpayer money is only from the investment, which of course was a decision by the government of the day.  

- "The bank hasn't delivered on lending to small businesses".  Well yes, maybe it hasn't loaned as much as politicians wanted it to,  but hang on.  Wasn't the fact that it had overstretched itself a primary reason why it was thought of as needing bailing out in the first place?  Do you want a bank that lends prudently, is profitable and safe, or do you want a risk-taking bank that might get burnt?  For financially illiterate (and power and attention seeking) politicians this contradiction is ignored and willfully evaded.

- "The share price is lower than when it was bailed out".  Yes it is.  However, this is common across the banking sector and reflects two trends that are outside Stephen Hester's control. One is the announcement of new heavy handed regulation that imposes significant costs on the banking sector (which politicians approve of) and the Eurozone crisis, which was caused by the sorts of overspending practices the Labour Party speaks with a forked tongue about (cuts are bad, except we know we need to do them, but wont say how, but the Tories must be doing bad cuts).

- "The government as major shareholder can "do something"".  Well yes, it could, it could sack the board and override its decisions.  However, if you were a private shareholder of the bank would you keep your investment in such a politicised bank?  What else would politicians do to it?  Forget that Labour happily let Hester get his salary and bonuses after he joined, it's just decided in 2012 to pursue him.  Government interference in a board of a bank set up specifically to run commercially so it could be privatised would be contrary to how it had been set up.

- "It was because of people like him that we now have a deficit crisis".  No it's not.  The budgetary crisis in the Eurozone, US and elsewhere is because of statist politicians addicted to spending money they aren't collecting in taxes.   This enormous lie is becoming part of the leftwing storyline about the crisis, and needs to be confronted head on as often as possible. 

What was left out?

- The success in turning around the financial results of the bank, and the scale of it.  What nasty little vindictive Labour MP could turn around a paper stand let alone an enormous bank?  Bear in mind these are people who gleefully supported Gordon Brown selling gold when it was the depths of its price and voted for ever increasing budget deficits.   The ignorance is palpable.

- Half of the bonus goes to the Treasury in tax.  Without the bonus the Treasury is not better off.

The government did badly out of this, politically, because it noted that his bonus was half that of last year's and because it insisted that interference would be more damaging (and it would have been).  It wasn't helped that the Chairman decided to forgo his £1.4 million bonus, but more appallingly this was all going on whilst Stephen Hester was on holiday overseas - so was unaware of the campaign of aggressive envy going on back in the UK.

So he has decided now to forgo his bonus, because he feels like a pariah.  What he has learned is that this is the price you pay for politicians selecting you, in good faith, to do a job, and do it well.  The same politicians who backed him to the hilt when they approved of his selection and his employment contract, are now baying for his blood, like the nasty, power hungry vindictive hypocrites that they are.

He could have told them to stick their job and that as far he is concerned they can go to hell, as he could walk into a job elsewhere with ease and without the hassle of petty little MPs surrounding him like hyenas.

As Allister Heath of City AM said today, "nationalising RBS was a monumental error; no bank must ever (be) bailed out again", but the real problem is that the bailout has changed the cultural and philosophical debate around capitalism and the role of the state.

In 2012 that debate will be central to politics.  At the moment it is characterised by the largely ignorant opposing capitalism but largely clueless about what else to do, but also an almost equally inept business sector incapable of arguing the moral as well as the empirical case for capitalism.

What the Stephen Hester bonus issue has shown is that politicians on the left are sinking their teeth into the old Marxist rhetoric of class and envy, with much of the press and media keen to ride on the back of it all.   By contrast, the politicians on the right are almost entirely incompetent and incapable of responding with anything other than some quiet arguments about practicality.

This year there needs to be a sound, loud, confident and intelligent fight for capitalism, or these sorts of mindless attacks will come again and again. 

By the way, you're no more likely to find intelligent and consistent moral defences of capitalism at Davos than you are in Pyongyang.

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