Poor people, rich banks

• The media are filled with populist complaints that social welfare is being cut while a couple of the big banks (Royal and CIBC) report record-breaking profits in excess of a billion dollars each
• are these complaints justified? -- the knee-jerk reaction of the professional (like me, for in my past life I was a chartered accountant) is to explain that banks are made up of thousands of shareholders each of whom receives his or her small dividend cheque as compensation for the investment of their small personal savings -- it's only the accumulation of these quantities of individual shareholdings that make the banks look big and therefore bad
• furthermore, their profit figures may be comparing apples to oranges (bigger banks today consolidated with their new stockbroker subsidiaries etc. compared with smaller banks in the past)
• still, one is concerned with the question of social justice -- and are big firms of consultants and accountants doing bad things if they are co-authors of the message that bank profits are really for everyone's good (creating economic opportunity etc.)?
• in a recent article in The Canadian Forum , Ed Finn (of the Canadian Centre for Policy Alternatives) quotes Richard Barnet (Global Dreams ) as follows: "The world's 358 billionaires now have a combined net worth of $760 billion, equal to that of the bottom 45% of the world's population." -- what has gone wrong in this picture?

Profits vs. Wages

• I can remember as a young CA (fresh from the final exams) sitting at a dinner at my old firm (then Clarkson Gordon) beside Walter Gordon and some other senior partners and commenting (with youthful presumption) that in all my studying for the recent exams I had not been able to figure out the theoretical relationship between profits and wages) -- I think they were amused at the naivety of the question -- but I still can't figure it out -- if a plumber earns $20 an hour, should a shareholder earn 10% on capital? 5%? 30%? or is the question irrelevant?
• the classical answer is that interest (or any rent on capital) is compensation for abstinence -- but I've always had trouble with this answer because the lender gets to eat his cake at the end of his fast -- there's no difficulty in seeing why a borrower would be willing to pay interest -- what I have difficulty with is why it is socially just for the lender to receive it -- one can argue that a dollar today is worth more than a dollar two years hence when the loan gets repaid, but that is to assume the time-value of money, which is to assume the justice of an interest regime and is therefore begging the question which was to be proven
• the following is another stumbling attempt to answer this question -- though I suppose for such questions the standard economic schools have long-standing, and better organized, answers

Your views?

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