Wednesday, November 07, 2007


For several months now I have been trying to put my finger on exactly what about Polly Toynbee's attitude towards high-pay for bankers and CEOs I find so distasteful.

Her argument is that it is morally incorrect for footballers, directors, and bankers to be paid quantities of money so much greater than other people, whilst these "other people" include many who experience poverty.

Daniel Finkelstein wrote in a recent article:

"...what all these people have missed is that wages are not a statement about status or a measurement of moral worth. They are a price for a service..."

He makes the point that if you personally disapprove of how much someone is paid then you do not pay for their services.

In the case of footballers' salaries you do this by not purchasing Sky, watching ITV, attending matches or buying club merchandise.

In other words the market, through the invisible hands of supply and demand, will decide the salary of each person based on the demand for the services that person can provide.

Toynbee would rejoin that markets are prone to failures and that the massive bonuses for company directors are an example of this. The directors can influence how large their salaries are and each year the amounts paid increase, as the directors decide they'd like more and more money for their troubles.

In the case of large public companies shareholders would presumably take action against any directors that paid themselves too much. It is the shareholder's prerogative to ensure the director is providing a good service for a fair price.

I prefer the materialistic logic behind Finkelstein's argument to the self-righteous moralising behind Toynbee's.

The problem with Toynbee's arguments is that her methods and goals always seem to require greater state-intervention. I don't believe "the free market" is any better than the state at deciding who gets paid what, but I respect the point that things are the way they are because our current system sort-of-works.

And our economy is still growing and the world is becoming a more pleasant place to live.

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