What links Jeremy Clarkson, the rise of the robots and economic inequality? An unkind observer might say that the connection is all too obvious but there are subtleties worth exploring.
In a move that sparked speculation about the future of two giant companies, the chief financial officer of investment bank Morgan Stanley, Ruth Porat, moved to the same job at Google. For a reported annual salary of $70 million.
The world of finance is in retreat. Or, to be precise, significant parts of finance are either shrinking or restraining their vaulting ambition. Winston Churchill complained that he had failed "to make finance less proud". Regulators have finally found ways to begin that task.
The seekers of instant gratification may be frustrated by a lack of jailed financiers, but should be impressed by the quiet way in which the burden of regulation is reshaping global finance.
One of the more obvious effects is that banks still aren’t lending very much. That sounds good to those worried by high levels of debt, but it is a serious source of concern in a world lacking economic growth. If banks can’t grow their lending, bankers don’t have much to do.
Other forms of finance are also under regulatory attack. Investment banking isn’t what it used to be either in terms of excitement or salary. Which is why the move by Morgan Stanley’s chief financial officer is described as symptomatic of a broader trend, one that sees superstar talent now more attracted to Silicon Valley than Wall Street.
Another Google announcement this week saw a link-up with medical devices firm J&J aimed at developing technology for surgeons to operate with robotic assistance. Presumably this means the world will soon need less surgeons.
Google spends tons of money on lots of half-formed ideas, which is one of the reasons, perhaps, it thought it needed a new head bean-counter.
While spending on R&D has yielded huge profits, the last few projects – Google Glass for instance – have come up short.
The injection of financial discipline into Google was welcomed by financial markets. I’d be happier if it announced plans to spend even more of its $78 billion cash pile.
The world is chronically short of investment spending of all kinds, partly because of chief financial officers who are paid an inordinate sum of money to say no. Even I could design a robot to do that.
Gilded lifestyles
Salaries of $70 million will undoubtedly allow members of the 1 per cent club to maintain their gilded lifestyles. Indeed, executive pay is often described as a key driver of increasing inequality.
The truth is more prosaic. In a devastating critique of Thomas Piketty's theories about the causes of inequality, MIT economist Matthew Rognlie says flawed corporate capitalism has not played much of a role. Instead it's got everything to do with house and land prices: this is where the action is, where the real money – and real sources of inequality – lie.
Sort out inflating property prices and you sort out a lot of inequality. We really do need a site-value tax. Inequality is often described as “winner takes all”. Even if your job as an accountant isn’t taken by a robot you won’t make any serious money until or unless you get to be a chief financial officer. And even here it looks like it is much better to be a technology chief financial officer than a financial firm one.
In the media, Clarkson is another member of the 1 per cent who get to walk away with most of the cash. The producer whom he allegedly assaulted is almost certainly not a member and probably will never be. Could a robot successfully present Top Gear? More likely a robot will one day run Google's finances.
Is any of this new or was it ever thus? What is new is the scale of the global rise of the house price. That’s where the attention of policymakers should be focused.
Meanwhile technology is booming, not least because of the rise of robots. It’s where graduates and chief financial officers want to work, ahead even of investment banking.
Growth of technology is another reason to be optimistic about Irish economic prospects. Our disproportionate share of these companies will continue to generate jobs and taxes at a surprising rate for the foreseeable future.
