Friday, February 15, 2008

Leading By Example

For some weeks now we’ve been told over and over again that inflation is on the rise. Interest rates have gone up, and are likely to go up again. It’s time to refrain from excessive spending, and behave responsibly. Of course, most of this advice is coming from well paid people for whom tightening the belt means going to a slightly less expensive restaurant.

The Prime Minister has called for parliamentarians to do something unusual. He wants them all to lead by example, and specifically he wants them to sign on for a pay freeze for twelve months, by skipping this year’s increase, and not seeking any “catch-up” bonus next year. Predictably, many of the politicians affected have become hot under the collar when their own pay and conditions have come under threat, even the ones who were so keen to undermine the pay and conditions of ordinary Australians with the Work Choices legislation.

At a starting salary of $127000 a year, there’s something not quite right if you can’t make ends meet. Nevertheless, the M.P.s who are upset about this are right when they claim it’s just a stunt. It is a stunt, but it’s a good one. On its own, this pay freeze won’t do a damn thing to stop inflation. But it does do something much more important. It reminds the politicians that the decisions they make every day have a very real impact on ordinary Australians, most of whom are not as well off as the politicians who represent them.

The Prime Minister is also right when he points to the excessive salaries on offer in the corporate world. There is absolutely nothing wrong people being well paid for a job well done, but the pay scales of our C.E.O.s have dramatically outstripped community standards. If an individual has their own capital invested into an enterprise they deserve whatever return they can achieve from it. But we are talking about people who are at the end of the day nothing more than employees, hired to manage enterprises on behalf of their true owners the shareholders. If C.E.O.s expect such handsome returns, they should be putting their own capital at stake, instead of draining the pockets of their employers, as is often the case.

Meanwhile, the rest of us can look forward to higher interest rates, and higher prices, while being told we need to exercise restraint.

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