Leading Article: Unusual skills that attract rare rewards

A STRIKING feature of the soaring financial markets of the past six months has been the staggeringly high earnings of City dealers. Attention has recently focused on the dollars 1m-plus end-of-year bonuses paid to senior staff at Goldman Sachs and Salomon Brothers in London. Yesterday this newspaper highlighted the remarkable profits and earnings - reckoned in some cases to be around dollars 35m ( pounds 24m) last year - achieved by the managers of so- called hedge funds, which in effect place large bets on the movements of currencies and interest rates.

It undoubtedly takes an unusual skill to play the futures markets successfully. Those huge earnings are related to strictly measurable profits achieved. If top managers did not receive what they saw as a fair reward, they would transfer their skills to a different organisation. Nevertheless, earnings on this scale strike many people as excessive, especially when many talented people are out of work, prompting the question whether anything should - or could - be done about them.

The answer seems to be no. These City operators are to inter-

national finance what Madonna, Arnold Schwarzenegger, Paul McCartney and Luciano Pavarotti are to the world of entertainment. Top-level entertainers earn millions because millions of people are prepared to pay to see them perform. Operators on the futures markets arguably give pleasure, albeit of a different sort, to the millions whose pension funds benefit from their activities.

To impose penal tax rates on very high earners would simply drive them abroad, thus severely damaging the City's role as the premier centre of international finance. It may be that one day the market itself will extract its own terrible revenge. The notional amount of futures traded on exchanges around the world each year is dollars 140,000bn. If dealers were suddenly wrong-footed by an unexpected movement of interest rates, panic and financial disaster could ensue. That would take care of the dealers - but would ruin many others. Little wonder that central banks are concerned that these markets may be running out of control.

The best long-term way of bridging the growing gap between high- and low-paid must be to increase the educational level, skills and opportunities of the majority.