By Edward Willis.
Plato, Aristotle, JP Morgan, Franklin D Roosevelt and Jeremy Corbyn – it seems an unlikely lineage. Whilst Islington politician Corbyn is widely reported to have divorced his wife for wanting to send their son to a grammar school, the Stagyrian philosopher Aristotle is most renowned for his private tutorship of Alexander the Great. And whilst both Corbyn and Morgan found something to admire in Cuba (for Corbyn it was Fidel Castro, for Morgan his beloved Hercules Club cigars) their views on banking might be hard to reconcile.
Yet it was into such unlikely company that Jeremy Corbyn strode on Radio 4’s Today Programme, as he announced his intention to bring an old idea, the maximum wage, to modern Britain.
Uniting that slightly ragtag bunch of thinkers is a desire to address growing income inequality, preferably by harnessing the incomes of the richest to the salaries of the lowest earners. For Plato, the desirable ratio was four to one and his pupil Aristotle favoured the only slightly wider five to one.
Two thousand two hundred years later, and five thousand miles west, US president Franklin D Roosevelt proposed not a ratio structure, but an absolute maximum income of $25,000 (or around $350,000 in today’s terms). In fact, Roosevelt’s supertax appeal of 1942 was not founded on philosophical idealism so much as the need to pay for an increasingly costly war against fascism.
What Roosevelt, Plato and Aristotle’s ambitions share is that none came to fruition. It is true that a wartime US Congress eventually adopted a still unrivalled 94% tax on incomes of higher than $200,000, but this was not considered a lasting solution to the moral quandary of income inequality. Instead it was a temporary necessity to be tolerated, the latest in a line of tax hikes that had become common among powers beggared by battle. During the First World War in Britain for example, tax rose progressively from 1914 to a now low sounding 30% peak, whilst following the US engagement in 1917, taxes in America rose at the same time as personal allowances were subject to swingeing cuts of up to two thirds. Even Plato and Aristotle would have recognised this phenomena, since the Athens of their own time reserved the right to levy an eisphora, an emergency tax on higher earners in time of war.
There is an interesting, and perhaps counterintuitive aspect to the maximum wage. For Corbyn, as for Plato and Aristotle, salary limits are conceptualised as an instrument of social policy to at least as great a degree as they act as a financial tool. For Aristotle in particular, wage inequality was not just unnecessary but damaging to society, since extremes of poverty and affluence were a distraction from the “natural” order of society where wealth ought to be a means to achieve virtue rather than an end in itself.
As Aristotle expressed it “states are unstable that are filled with those who have no share of political power and are poor”. In his mind, the point of the maximum wage was not about impoverishing the rich of Athens but rather ensuring that everyone could share in its wealth. For a society to function to the best of its potential, wealth should be, like other parts of the state, a field where citizens were equal. To this end, income parity had tangible advantages for members of both sides of the financial spectrum. Nor was the positing of a maximum wage the only instance of Aristotle turning his mind to fairness. Equity, not equality was the key, as evidenced in his discussion of the purity of Spartan democracy. Aristotle perceived that whilst dress and education were communal in Sparta, the mess system which required all citizens to contribute equally to the shared meals, risked excluding the poorest from “the ancestral defining principal of their system of government”. It was the impact of poverty on contribution to democracy, government and society that Aristotle conceived his wage ratios to try and combat.
Following the Aristotelian argument, addressing income inequality can offer a dual benefit. For the rich, more dispersed wealth would lessen the lure of the kinds of vices and distractions that are so often the trappings of monetary accumulation. Similarly, and perhaps even more importantly, for the poor, greater wealth would mean more time to educate themselves in politics, and thereby participate more fully in the life of the polis. In this sense the maximum wage can be seen as a direct response to what Aristotle saw as the more oligarchical aspects of Spartan society. Though the idea remained theoretical, an awareness of the practical pitfalls of income inequality was ever-present in Ancient Greece. As Plutarch remarked generations later, long after the power of Greece had ebbed west to Rome “an imbalance between rich and poor is the oldest and most fatal ailment of all republics”.
How popular Corbyn’s ideas will prove is hard to assess. Today, only Cuba has a national maximum wage, whilst Egypt’s attempt to introduce a similar policy in the public sector is dragging its heels in the courts. Switzerland rejected an executive pay cap on the basis of a 12:1 ratio by a two-thirds majority in a referendum in 2013.
If Corbyn’s motives are ancient, or at least more in line with Plato and Aristotle than Roosevelt, then his logistics are very twentieth century. JP Morgan, often labelled “America’s Greatest Banker”, famously limited remuneration in his own organisation on the basis of a twenty to one ratio. The current CEO of his bank, James Dimon now pockets a compensation package of $ 27m. Under JP’s rules, this would mean junior employees being paid a minimum of $1.35m.
Corbyn’s gambit, propagated by US Democratic Primary candidate Bernie Sanders in the 1970s and 1980s, would impose JP Morgan’s original 20:1 ratio to any firm awarded a government contract, thus potentially forcing a serious rethink at companies like Capita and G4S whose chief executives earn upwards of two million pounds.
However, the ultimate goal of such a policy, its telos as Plato and Aristotle would have it, is not an economic but a social revelation – the political unshackling of a society through greater wealth equality. Whether maximum incomes can achieve this, or whether it is the best way to do so, remains to be seen, but that end goal appears a laudable one as the societies of thinkers old and new become more deeply divided.
Edward Willis writes on a number of topics, including history, politics, sport, literature, film and television. A History and French graduate from the University of Exeter, he currently works as a business manager for Sports Marketing Surveys Inc. He can be found as @ewgw28 on twitter or contacted on Edward.firstname.lastname@example.org