Home > Uncategorized > “On Second Thought, Let’s Not Go To Camelot”

“On Second Thought, Let’s Not Go To Camelot”


King Arthur: On second thought, let’s not go to Camelot. It is a silly place.

from Monty Python and the Holy Grail

A common theme of this blog is, has been, and always will be my incredulity at the folly (and in particular the economic illiteracy) of our elected representatives. So I am always amused at the irony when I make a business-related trip to Washington DC, even though there are in fact some sane people in our nation’s capital. Six, to be exact.

The irony is made more delicious by the fact that I am riding on a mode of transit that is only economically viable with massive taxpayer support. I suppose that still doesn’t narrow it down enough, since arguably that would include air transport (the recipient of massive infusions on a regular basis but especially since 2001), rail, and even autos (who pays for the roads?). Now, I suspect that all of these would exist even if government support was zero – assuming the disposable income was put back in the pockets of the taxpayers to spend the way they wanted to – but the distribution of transit I suspect would look very different.

In this case, I am on Amtrak. The next level of irony is that I am trusting someone else to steer without second-guessing, which is unusual for me. In my defense, the engineer doesn’t really have a lot of discretion to change the route.

Which leads me to a more tangential thought: I am comfortable with the train because the path is constrained, I prefer a less-discretionary system of jurisprudence, and I am sympathetic with the argument in favor of a mechanical rule to replace discretion in the setting of monetary policy. But, contrariwise, I tend to resist strict rules-based – versus principles-based – accounting standards (although that is mostly because I am skeptical that the rules-makers can keep up with accountants’ innovations), covet the messiness of capitalism compared to the quasi-socialist protectorate we are edging towards, and of course regard the brief breadth of the Constitution to be its great strength.

Is there something fundamentally inconsistent with being toward the strict constructionist side of the debate about the interpretation of the Constitution, and at the same time admiring the spare construction itself? I don’t think so – it is similar to saying that core ethical principles should be inviolate while recognizing that even someone who is strictly guided by such principles must make interpretations of their applicability to the current circumstance, and it’s not always clear (save the President or save the speeding train full of people?)

But, as usual, I digress. (Which is another example of how I stray from being strictly rules-based.) I meant to write about the folly of the economic illiterari who run the governments of the Western world, about which we have another reminder over the last couple of days.

First Alistair Darling, the Chancellor of the Exchequer (that’s in the UK, fellow Americans), announced that banks will be hit with a 50% surtax on any bonuses they pay to their employees in excess of 25,000 sterling. This is incredible. London was in the process of wresting the title of top financial center away from New York. From my own limited and anecdotal experience, I can tell you that headhunter calls for jobs in the UK compared to jobs in the US have been steadily increasing since roughly 2001. And now, the UK attacks its biggest growth industry with a maul. That seems crazy. As the title of the article linked to above suggests, it isn’t clear why a banker – and let’s face it, the employees actually end up paying most of the levee since bonuses will be smaller – would now prefer to work in London compared to, say, Singapore, New York, or Dubai…well, scratch Dubai for now.

Paris also would stand to gain from an outflow of talent from London…except that they celebrated the obtuse British move by replicating it as Sarkozy’s government is going to impose the same tax on their own banks.

This looks like a clear win for New York, if you believe that America’s legislators will embrace the opportunity for long-term growth over the chance for a cheap buck. Do you? I don’t. But maybe they will be too busy attacking private equity managers to match the mugging of European financial types.

Are these people out of their minds? Aside from the warm, fuzzy feeling that comes from roasting highly-paid executives, bankers, and investors on a spit, do these people really not understand that flushing the hard-working, smart people out of banking and private equity is about the worst possible thing you could do, long-term, for the economy? How many bright young minds coming out of college will go into finance now, knowing they will have to work even harder and even longer to make less money? Why not be a lawyer instead?

Is it too late to turn my train around and go back home?

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Categories: Uncategorized
  1. Mke
    December 10, 2009 at 10:31 am

    Well, not to be a nitpicker, but I think one of their points is exactly to disincent bright young minds from what most of them believe is a “socially useless” profession. And having been in London the past 2 1/2 years, I’m quite certain the influx of mediocre young minds overwhelmed the bright ones in the past 5 years.

    That being said, I see the main problem as driving away capital here, not talent. The financial sector is (well, was) something like a preposterous quarter of the British economy, if you count the ancilliary business generated for lawyers, accountants, restaurants, hotels, travel, etc.

    The really sad thing is that this is on top of a 50% top tax bracket, a 12.8% National Insurance contribution, and 17.5% VAT. So the rate of tax on the last dollar of spent marginal income over ₤40,000 is 70.3%. How’s that for onerous?

    I won’t be starting my fund here, that’s for sure.

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