Goodwin's pension: Labour's failure

The fuss over Fred Goodwin’s pension misses a point - that his payout highlights a failure of New Labour ideology.
The link is obvious once we realize why Goodwin is getting such a pension despite running RBS into insolvency. The problem is not that he was reckless and greedy; we’d all like a £693,000 a year pension. It’s that his greed and reckless was unrestrained. Neither shareholders, nor fellow executives, nor the remuneration committee checked his plundering egomania.
But this idea that there should be no restraints placed upon the powerful is part of New Labour’s mindset. We see this in their proposals to harass people who photograph the police - the point being to remove one check upon the police’s maltreatment of the public. We see it too in Straw’s refusal to publish minutes of the Cabinet meetings about the Iraq war - denying the disciplining effect upon policy-makers of publicity.
The common thread here is that the powerful don’t need restraining because they have our best interests in mind. If only leaders are given enough power, they can guide and protect we mere mortals.
Straw gives us a glimpse into this mindset in this astoundingly fatuous article. He says:

As James Madison said, if people were angels, there would be no need for government. But sadly people are not all angels.

What he omits to point out, of course, is that rulers are not angels either, and that they therefore need checks and balances. Instead, to Straw, it is only the hoi polloi who fall short of angelhood, who need restraining.
Underpinning this is a faith in “leadership.” Common to both Blair and Brown was a belief in the  power of “strong leaders“ to improve schools, hospitals or communities, and - at least before the crisis broke - Brown rarely missed a chance to praise the “leadership“ of businessmen.  But of course, if you believe leaders have such power, you must pay to attract the best of them, and not put any obstacles in the way of their ability to lead.
In this sense, Goodwin’s pension is not about greed at all. It’s about the failure of Labour’s faith in the untrammelled power of leadership. Not, of course, that they are capable of seeing this.  

Comments

[rockinred]

Dangerously socialist don't you think? Which is of course why NuLab wouldn't begin to comprehend. This whole episode also illustrates another aspect of NuLab -that whilst bedazzled by the wonders of big business and the mightiness of its works, they haven't got a clue about how it operates when things get down and dirty. So stick an ineffectual minister in a room with a shark like 'Sir' Fred and guess who's going to come out on top? Incidentally. did he get his K for 'services to banking'? In which case. that's something else to strip him of...

[Mark Brinkley]

Chris, your analysis is spot on. I would support axing Fred the Shred's pension only on condition that El Gordo did exactly the same thing. Somehow I think not.

[dearieme]

When the pathetically feeble social and economic theories of Old Labour were clearly recognised as beyond all salvaging, all that was left to Labour was their bundle of character defects. Naturally they had a certain fellow-feeling for other spivs, crooks, chancers and bullies.

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Straw:

“Can individual rights ever be restricted in the name of the common good? I believe there are times when it is necessary to impose restrictions on some aspects of individual liberty in the interests of wider security. That is one of the central tasks of government. Indeed, as James Madison said, if people were angels, there would be no need for government. But sadly people are not all angels.”

Madison:
“What is government itself but the greatest of all reflections on human nature? If men were angels, no government would be necessary. If angels were to govern men, neither external nor internal controls on government would be necessary. In framing a government which is to be administered by men over men, the great difficulty lies in this: you must first enable the government to control the governed; and in the next place oblige it to control itself. ”

I feel Mr Straw is engaged in selective quotation.

[kinglear]

I would have loved to see the negotiation. Fred's not called the shred for nothing.

[JimH]

Fred missed a trick. He should have offered to match any voluntary pension reductions by Tony Blair and Gordon Brown. Bet we wouldn't have heard much more about it all after that.......

[Bob B]

The Admiral Byng solution so as "to encourage the others" is starting to look increasingly appropriate in this case too and would likely have great populist appeal in the context:
http://en.wikipedia.org/wiki/John_Byng

Withdraw his passport and revoke the knighthood. Shred the Shred. Why would taxpayers want to fund pension rights which some informed commentators have estimated would take nearly £30mn to buy on the open market? The privatization of gains for bankers alongside the simultaneous socialization of RBS banking losses is a sure recipe for replicating the current crisis downstream.

Ultimately, Parliament is sovereign in Britain's constitution. If Parliament can enact retrospective taxation of windfall gains from the privatization of the public utilities - as it did - Parliament can also endorse the removal of particular pension rights in a bank now in public ownership. Dump all the sophistry and the ministerial blame game and let Shred sue for every Pound.

[BenP]

I dont recall Brown praising the leadership of the Trade Union movement. His praise is more selective;

"let me at the outset pay tribute to all of you here – executives, employees, representatives of the financial sector, all 3,100 staff of Lehman’s here in Canary Wharf - for the contribution you and your company make to the prosperity of Britain, the enterprise you show and the difference you make."

http://www.hm-treasury.gov.uk/speech_chex_050404.htm

A logical outcome once you have ditched the working class as the agent of change and embraced Mammon.

[Bob B]

Let's be clear, it's not just NuLab which believes in the transcendental potency of leadership. If the Conservatives win the pending general election:

"12 of England's biggest cities outside London will get a vote on bringing in directly elected mayors"
http://news.bbc.co.uk/1/hi/uk_politics/7893295.stm

The challenging question is why only 12 local authorities todate have opted in local plebiscites for directly elected mayors. Never mind. In the best centralist fashion, the Conservatives will thrust their leadership solution on us hoi polloi - for our own good, naturally.

[Richard T]

Could this be the same Jack Straw who assured the Commons about not handing anyone over the the US for rendition 6 days after it was admitted by his ministry? Or the same man as Foreign Secretary who manipulated information to embroil the country in the Iraq war? Never.

[Richard Lawson]

It might be simpler to let them all keep their pensions and bonuses, but make them accept responsibility for their negligenct actions in buying toxic derivatives that they did not understand. That way the astronomical debts implicit in these instruments will come back to these individuals, they go bankrupt, and the debt is neutralised. Otherwise they will come back to the banks themselves, with theromonuclear consequences for the banking system.

[Bob B]

An excellent idea but I suspect that might need legislation as the senior bankers probably all have employment contracts exempting them for personal liability for banking losses while in office. I'm no lawyer, but perhaps pursuit of damages for failings in fiduciary responsibility might work.

Someone recently pointed out that taking good years with bad years, retail banks don't consistently make significant profits over the long run because the losses in bad times wipe out the profits made during the good times and also because their bankers walk away with the those huge bonuses and payoffs.

It's a bit like the professional football clubs where most clubs make losses while the players get paid fortunes.

Fascinating economics.

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"If Parliament can enact retrospective taxation of windfall gains from the privatization of the public utilities - as it did - Parliament can also endorse the removal of particular pension rights in a bank now in public ownership."

You mean that if Parliament can steal money from an unpopular group once, it can do so again? That is not something I really want to encourage.

[Bob B]

"You mean that if Parliament can steal money from an unpopular group once, it can do so again? That is not something I really want to encourage."

C'mon. The privatization of gains from banking while losses are socialized - as under present arrangements - is a sure recipe for repeating the present crisis downstream.

As it is, the present systemic crisis in financial services verging on on a global scale is a hugely magnified version of the Savings & Loan Association crisis in America in the 1980s and 1990s:
http://en.wikipedia.org/wiki/Savings_and_loan_crisis

I learned about that years ago from a well reviewed academic text: Donald Campbell: Incentives (Cambridge UP, 1st ed, 1995) and 2nd edition was published in 2006. Sadly, financial service regulators were incapable of learning from past mistakes.

Try Lord Turner, chairman of the FSA:
http://business.timesonline.co.uk/tol/business/industry_sectors/banking_and_finance/article5738444.ece

[Bob B]

Cutting off the Shred's pension from RBS would be good for him as well as everyone else:

"Large inequalities of income in a society have often been regarded as divisive and corrosive, and it is common knowledge that in rich societies the poor have shorter lives and suffer more from almost every social problem.

"But in their new book The Spirit Level, Richard Wilkinson and Kate Pickett draw upon thirty years' research to demonstrate that more unequal societies are bad for almost everyone within them - the well-off as well as the poor."
http://www.thersa.org/events/our-events/the-spirit-level

[reason]

Read David Brin (the transparent society). Accountability has to be reciprocal!

[rolex gmt]

And a lot of it reflects a switch from bank deposits to securities; foreigners “other investments” in the UK, http://www.watchgy.com/ mostly bank deposits, fell by £143.2bn in Q1. And of course there’s no guarantee such buying will continue.
http://www.watchgy.com/tag-heuer-c-24.html
http://www.watchgy.com/rolex-submariner-c-8.html