THE One Direction backlash has begun. Yesterday, critics reportedly dubbed the boy band’s £25m earnings last year “insensitive” and “grossly immoral”. Not only are millions of Directioners now up in arms, but an economics howler was committed to boot.
Criticisms like these forget why it is that people get rich. Earnings are not a reflection of your moral worth, they’re a product of how much other people are willing to pay for your work. If a lot of people are willing to pay you just a little, you can make a lot of money.
To understand how high pay can be fair, the philosopher Robert Nozick suggested a thought experiment. Imagine a society where wealth was distributed equally. Now suppose a great basketball player, like the legendary US player Wilt Chamberlain, comes along. Everyone wants to see Chamberlain play, and his team charges fans an extra 25 cents to see him.
After the first season, 1m people have paid to see Chamberlain’s games. His income for that season is $250,000 – much more than anyone started off with. Is there an injustice here? Chamberlain is happy and his fans are happy. They could have spent their money on something else, but seeing him added enough value to their lives to be worth that extra 25 cents.
Would anyone say that these earnings were “grossly immoral”? Adding a little bit of value to a lot of people’s lives is a good thing, and if people are willing to pay for that, good for the Chamberlains of this world. Some may prefer Beethoven to Harry Styles, but One Direction’s fans disagree.
The band was also ranked twentieth on the Charities Aid Foundation’s Giving List for their £1m donation to Comic Relief this year. And they’ve paid millions of pounds in tax. (Actually, on this one I have some sympathy for the singer Adele, who once said she wanted to “buy a gun and open fire” after seeing the tax bill for her first album.) Abba was once Sweden’s second-biggest export behind Volvo. One Direction’s global success should be cheered as any British firm would be.
A lot of this also applies to another target of people like business secretary Vince Cable – chief executives. A good chief executive can revolutionise a company, like Sir Philip Green’s transformation of the failing British Home Stores into a billion-pound brand, or Sir Terry Leahy’s guidance of Tesco to become the world’s third-largest retailer.
True, it can be hard to see how much value any one person adds to a large firm. But high pay is often just what someone deserved. Local knowledge is vital, and feedback mechanisms are more effective when pay is decided by individual companies. No government official is better at making that call than a shareholder-appointed board. To Cable and others who pontificate about high pay from afar, Britain’s chief executives might sing a One Direction song: They Don’t Know About Us.
Sam Bowman is research director at the Adam Smith Institute.