JP Morgan, the American banker, believed that the head of a company should not earn more than 20 times those at the bottom. As recently as the mid-1990s, our experience in Britain was not a million miles from that: in 1998, chief executives earned 47 times the average pay in the companies they ran.
But today their earnings have rocketed out of sight: in 2013 the average pay of a FTSE chief executive was 143 times the average in the company.
For several decades in the middle of the 20th century, when the socialist dogma of equality was still taken seriously, the differentials gradually reduced. But from 1980 on, that trend was reversed. Now the acceleration of top pay seems to be out of control.
Many people understand the severity of the problem, but no one knows what to do about it. Shareholder revolts have failed. The Government shows no appetite for intervening. Even the crash of 2008 failed to put a dent in the trend, thus confirming J K Galbraith’s still-pertinent aperçu: “The salary of the chief executive of the large company is not a market reward for achievement. It is frequently in the nature of a warm personal gesture by the individual to himself.”
We may grow accustomed to the increasing signs of disparity all around us, the explosion of the market in luxury goods and properties, but for young people, the result is growing disaffection. Way back in the 1930s, J M Keynes called income inequality one of “the outstanding faults of the society in which we live”. That is truer than ever today. Finding an effective way to reduce it is one of the greatest challenges of the age.