“I do think it is rather unattractive that so many young people, when contemplating careers, look at the compensation packages available in the City and think that these dominate almost any other type of career.”
I think he is right, and that this is a problem. The biggest (economic) rewards are clearly to be found in the financial sector. We shouldn't be surprised therefore if many of the brightest minds end up working there. The financial sector also benefits from huge economies of scale. Getting a small bet right on a huge amount of money can make you very wealthy. In addition the sheer scale of the payoff will likely reinforce the idea of brlliance at work. If I call a coin toss correctly you'd correctly see it as luck. But imagine I call a market move correctly and make £100m, doesn't that pull you towards the view that I must know what I am doing?
This must form a self-reinforcing circle of belief. Very well-paid people taking decisions that generate enormous amounts of money (albeit off the back of even more enormous sums of money) make us more likely to view their pay as being deserved. (Amazingly some on the Right regard this as 'wealth creation', but that's another story.) People who question who question the level of skill when the cash is pouring in are likely to be given short shrift.
Meanwhile working in the place where the ideas and opportunities are generated is also far more appealing to many than working at trying to ensure that the whole system functions effectively - the regulators. Regulators inevitably get left behind by the financial sector and are constantly playing catch-up. Not only are they unable to match the salaries of those they regulate, and hence must use other means to attract staff, but also they will always be reacting to innovation (and less positive developments) in the financial sector.
In addition the cyclical nature of crises, and responses to them, mean that regulators will tend to be either seen as over-prespecriptive or off the pace, depending on where in the cycle we are. Here's what Howard Davies and David Green say about it in their new book:
"There will be some kind of damaging incident which leads to demands for regulation to be tightened. Inevitably, this takes time to agree and implement. By this stage, the circumstances that led to the change in regime will have faded in the collective memory and the new rules may come to be seen as excessively bureaucratic and damaging to business efficiency. There will then be regulatory liberlization, which may well just be implemented when the next crisis hits. As a generality, regulation will be permenently out of alignment with public opinion."
The outcome of all this is, as King suggested, that the City looks like an exciting place to work, with potentially huge rewards on offer. In contrast regulators end up being portrayed as killjoys who don't quite 'get' what the smart people in the City are really up to. And more broadly, let's be honest about this, the labour movement is even further behind in understanding what goes on in the City, and how to respond to it. As such we are cast as dinosaurs, and rarely even feature in debates. When we do appear unfortunately it is often to make moral arguments dressed up as policy responses.
This suggests to me that the process of financialisation is likely having significant cultural impact as well as an economic one. As the financial sector has emerged as a significant force in British society, for businesses and the rest of us, with it may have come certain ideas. For example, is a lack of financial knowledge/awareness becoming seen as a personal failing, a lack of responsibility akin to not taking care our physical sselves? And are we becoming more in awe of those who manage to make money from money?
This keeps leading me back to the same point - we need to develop an effective capacity on the Left to respond. The financial world can be complex and it can be slow, boring work finding out how it operates. But unless we take the trouble to do this we will remain irrelevant, and our impact non-existent. And more broadly we will allow the financial sector to shape culture in a way that celebrates its success (above other occupations and activity), whilst 'critiques' from the labour movement will continue to read like sermons from another age.