It seems bankers are about as popular as Lord Voldermort at the moment. And bankers’ bonuses are being greeted as if they were a curse from the dark realm.

RBS is on the front line. It made a £3.6 billion loss last year, and as you will also recall had £53 billion of taxpayers’ money pumped into it.

Oh yes, one more thing, it lost £24.3 billion in 2008.

And yet it is paying out £1.3 billion in bonuses.

Can this be justified? Most of the arguments for and against are pretty straightforward. But look a little deeper, and the arguments become more subtle and a lot more interesting.

It is galling. Banks and their reckless ways created an economic crisis. Our money was used to bail them out. Our tax bill will probably rise, and now, whilst most of us struggle to pay the next gas bill, some staff at the banks will be raking in the bucks.

Meanwhile, as bankers are bailed out, other businesses go bust without a hint of a rescue. You can see why Billy Bragg is not paying his taxes in protest, and penning lyrics for songs few us will want to listen to.

On the other hand, as we are all shareholders in RBS, we want it to be worth lots of money. That way the bank can be sold, netting the exchequer a hefty cheque, and in turn reducing our tax bill.

And for the bank to make a tidy profit, it needs the best staff, and the best staff are expensive.

More to the point, not all of RBS is a disaster. Some chunks of the bank are profit making machines. We want these parts to grow. It is not the fault of staff in these divisions that Fred Goodwin blew billions.

Without the good bits of RBS, the bank would be in even more debt, so the good bits need nurturing. Does a gardener working with a garden full of weeds deliberately destroy the few healthy plants? Of course not. These are the plants that are encouraged.

On the other hand, we now know it takes time to calculate how effective a banker’s activities have been. No one can justify paying out massive bonuses for an idea that seems good to begin with, but turns out to be bad. To put it into gardening terms, supposing a new plant evolves that looks as pretty as a picture at first, but then in time turns into a monster of the garden, a virulent weed that sucks all the goodness out of the soil. The gardener may be seduced by the plant in its early days, and make the mistake of nurturing it, only later to find the garden is awash with ugly weeds. It seems unlikely the gardener will make the same mistake twice.

Yet by agreeing to the RBS bonuses, is Alistair Darling akin to a gardener who doesn’t learn.

In his book, The Trouble with Markets, Roger Bootle compared the banking business with airlines. You may know, it is often said that airlines just don’t make a profit in the long run. There is even a book out about it called, Why can’t we make money from aviation? Mr Bootle suggested that it may be like that for banks, too.

In other words, all banking profits are short term only, and banks are destined to eventually lose more money than they make.

Remember comments from Lord Adair Turner from the FSA, who said that much of what banks do is “useless”.

The City’s success also hit UK manufacturing. It is known as the Dutch disease, after North Sea oil pushed up the value of the guilder and made Dutch business uncompetitive. During the 1990s and noughties, the City boomed, sterling soared, and exports wilted. Returning to the gardener, it seems that in this way the seeds for an unsustainable economy were sowed.

On the other hand, assuming globalisation eventually goes back on track, the world’s major financial centres will eventually be worth a lot more money than they are today. The likes of RBS and Lloyds could be worth a fortune to us taxpayers.

To say banks don’t contribute to the economy is clearly nonsense.

Indeed, it may well have been that the emergence of a banking sector is what charged the Industrial Revolution. By freeing up money that would otherwise be lying idle, banks provide the lubrication for all wealth creation.

Besides, as has been argued here many times, it is far from clear that banks and their greed really were the cause of the economic crisis.

Banks may or may not be destined to fail eventually, but without them we would be scuppered. And that means they need the best talent.

The next question we may ask is, how difficult exactly is it to be a banker? They earn massive bonuses, but could other people earning a fraction of a banker’s salary do the same job? You may recall, there was a film called Trading Places, starring Dan Aykroyd and Eddie Murphy, which explored exactly that idea. It would be fun to see that experiment played out for real.

There is also a view that the whole emphasis we put on money and bonuses as a way of rewarding staff is wrong. In an article in this morning’s FT – It is time to treat Wall Street like Main Street – a couple of university professors, George Akerlof and Rachel Kranton, who also penned the book, Identity Economics, said that: “We take pride in jobs well done, and we celebrate people such as Sully Sullenberger who, after ditching his plane in the Hudson River, checked the cabin twice for remaining passengers before being the last to evacuate. As he explained: ‘I was just doing my job’.” They continued: “High salaries attract and keep talented, hard-working people, with specialised skills. But fair compensation should not be confused with outsize bonuses. In identity economics, performance pay demonstrates bad faith. It tells employees they are not trusted to do the right thing. Rather, incentives have to be right. Acting in your own interest and not in the interest of clients is a failure to carry out the duties of office, to fulfil one’s fiduciary duty. While principles and responsibility sound lofty and idealistic, they can be taught, followed, institutionalised and enshrined in law. We see it every day in fire stations, on factory floors, in surgery rooms and schools. It is time to treat Wall Street like Main Street.”

Every few years we go through a phase in which greed is seen as all that is evil. Greed is the emotion that motivates the villains of fiction, the Lord Vordermorts and Saurons. In the 1990s we looked back at the 1980s, and squirmed at our greed. But then as the 1990s boomed, we became just as greedy as ever.

In the film Wall Street, Gordon Gekko, played by Michael Douglas, said “greed is good”. Now, comments like that are seen as the stuff that crises are made from.

Keynes once said that: “Capitalism is the astounding belief that the most wickedest of men will do the most wickedest of things for the greatest good of everyone.” Adam Smith said: “It is not from the benevolence of the butcher, the brewer, or the baker, that we can expect our dinner, but from their regard to their own interest.”

And yet Keynes also said: “Avarice is a vice, that the exaction of usury is a misdemeanour and the love of money is detestable.” Adam Smith also said: “How selfish soever man may be supposed, there are evidently some principles in his nature which interest him in the fortune of others and render their happiness necessary to him though he derives nothing from it except the pleasure of seeing it.”

Maybe, however, the best response one can make to Gordon Gekko’s “greed is good” comment, can come from the lips of JK Rowling’s Hermione Granger: “You have got the emotional response of a teaspoon.”

© Investment & Business News 2013