The plot of the morality play set in motion by the United Kingdom’s announcement of a 50% tax on bankers’ bonuses has now taken form. And it is a play that holds an important lesson about how politicians are managing – or mismanaging – demands for financial reform.
British Prime Minister Gordon Brown and French President Nicolas Sarkozy, once at odds over Sarkozy’s criticism of Anglo-Saxon capitalism, have reconciled: predictably, France followed Britain with a bonus tax of its own. Equally predictably, the UK banking community responded by playing the “we’ll take our marbles and go home” card (“home” meaning New York, Honk Kong, Zurich – anywhere but London). A Bank of England executive then responded with the “good riddance” card, saying that, “given the costs of carrying that financial system around, it may be a price worth paying.”