Cutting banker pay

Maybe its my bolshy tendencies, or more likely my ethnic background, but I have an instnct that massive payand wealth disparities are a sign of a sick society. While I have respect for entrepreneurs who have built lasting businesses and gotten rich doing so, the paydays in the finance sector over the last three decades have been, to my mind, sickening. And with the current financial meltdown, even some longtime and sympathetic industry observers are beginning to look at it the same way, and finding the testicular fortitude to dismiss the usual hogwash about how lower pay would lower performance:

I've now reached the point at which I simply don't believe people when they say that lower pay for bankers will result in worse performance -- especially since it looks very much as though it was higher pay for bankers which was at least partly responsible for much of the present crisis. Let's bring down pay, a lot, and see whether performance really falls.

The financial system went for decades, quite happily, without monster paydays: why can't we go back to those days? No one thinks we need to pay the Treasury secretary lots of money to make sure he's "working hard"; why are bank CEOs any different? And insofar as lower bank salaries would drive America's best and brightest into other sectors of the economy, that would surely be a good thing.

A massive, across-the-board pay cut in the banking system -- to levels which would still be incredibly generous by normal-America standards -- might result in a mass exodus of employees and a radical downsizing of the banking sector. But that's going to happen anyway, this would just achieve it without layoffs. And the outcome can't really be worse than what we've seen to date.

I don't know how you legislate this except through taxation, but as a matter of political ethics, this is just about common sense and democratic decency. The argument for much greater pay equality is fundamentally about political justice. And just as Salmon dismisses as nonsense the argument that lower pay would lower performance, I dismiss as nonsense the claim that higher taxes compromise the liberty of the rich.