Should Blair get half a million?

Norman Geras doesn’t think Tony Blair should get £500,000 for his new job:

I don’t think anyone should be able to earn £500,000 or more a year, not in any job. There’s something wrong with a society in which they can do so while there are children living in poverty. The news about Tony Blair’s new position with JPMorgan Chase doesn’t, therefore, prompt any admiration on my part.

I agree with him about Blair, but not in the general case.

As I pointed out in an earlier post, firms (and therefore people) get wealth either though making something people want or through rent-seeking. The first is legitimate and deserves to be well-paid, the second isn’t and doesn’t.

So which is it for Blair? We’ll start by noting what his new employers say they’re paying him for:

Tony Blair is to take a job with JPMorgan Chase, the international financial services and investment banking group […] Mr Blair would advise the bank on global political issues.
Jamie Dimon, chief executive of JPMorgan Chase, said Mr Blair would be “enormously valuable” to the company. “There are only a handful of people in the world who have the knowledge and relationships that he has.”

Actually, lots of people have knowledge on global political issues. There are millions of intelligent and well-educated people who read a quality newspaper every day, take the trouble to keep themselves informed, and are likely to have as good a grasp of world affairs as Blair has. JPMorgan could hire most of those people for a lot less than half a million quid.

So why is Blair really being given such an exorbitant salary? One reason is, as Jamie Dimon says, “relationships”. Blair is mates with lots of world leaders and can put a good word in with them for JPMorgan. That’s rent-seeking.

I suspect there are two other reasons: (i) as deferred payment to Blair for being nice to JPMorgan when he was PM, and (ii) as advertising to current world leaders that when they retire, if they are nice to JPMorgan when in office, they will be given a big wad of money too. That’s also rent-seeking, and it’s easy to imagine why Jamie Dimon might be shy of suggesting it as a reason, since bribery is illegal in most countries and he might go to prison if he was honest about why he’s employing Blair.

Geras finishes:

If earning such money is what the rules of the game allow, what the ‘competitive market economy’ […] accommodates day in and day out just like that, then why not for Tony Blair as for whoever else – movie stars, pop singers, footballers…? It’s not as if this involves Blair in a hypocrisy, a betrayal of his egalitarian principles since, so far as I’m aware, he’s not attached to egalitarian principles.

Movie stars, pop singers and footballers make lots of money if lots of people like their acting, singing or footballing: they are making something people want. As for what “the rules of the game allow”, if there was less opportunity for rent-seeking in Britain, the UK economy would be better off and therefore so would the welfare of its people, so maybe we should think about changing the rules of the game.

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