A lesson from history on how to deal with greedy bankers

One of the most striking trends in the early 21st century is the rise in income inequality in developed economies. Oxfam’s recent announcement that the 85 richest people on the planet own as much between them as half the world’s population combined had analysts scurrying to check its accuracy.

But while economists argue over which indicators give the most reliable view of the disparity between rich and poor, all concur that the gap is widening.

This would have worried administrators in the Byzantine Empire, one of history’s most effective states. Despite a reputation as a regime based on smoke and mirrors, diplomatic manipulation and scheming in the palace corridors, Byzantium has the rare distinction of having survived for a thousand years.

While its size fluctuated in the 11 centuries after Emperor Constantine built a great city on the Bosphorus that quickly became known as Constantinople, Byzantium’s success was based on an army of skilled bureaucrats, responsible for the smooth running of a sophisticated administration.

There was keen interest in keeping society fair. The Byzantines were at pains to ensure that justice was not just for the wealthy. Squadrons of judges were trained to help adjudicate disputes across the empire using imperial edicts, case law and common sense.

While this gave them considerable standing and influence, they were kept honest by the fact that bad decisions often reached the ears of the authorities. Appeals could and did get as far as the emperor himself, who was rarely amused by miscarriages of justice.

The stigma could have dramatic consequences for the family of a judge if he was found to have perverted the course of justice. The same went for any third party who tried to buy his favour. Punishment was swift and severe.

To Byzantines, it was all too obvious that the interests of the rich did not align with those of the state. So the wealthy were viewed with suspicion in Constantinople and the provinces. If you became rich, you could expect to have your affairs examined closely by the equivalent of the tax office.

The point was not just to make sure you were paying your taxes. Rather it was to mark you out as someone to keep an eye on– and to make sure you behaved well as a citizen and as a person.

The wealthy were all but presumed guilty of seeking to exploit the poor. Small wonder: a raft of legislation issued in the tenth century shows that rich landowners ruthlessly took advantage when land values plunged after a particularly severe winter, leaving poor landowners short of cash and vulnerable to low-ball offers and rough tactics, aimed at persuading them to sell at heavily discounted prices.

Where today regulators set up enquiries and fine banks for interest-rate swap and PPI mis-selling and Libor-rigging (with fines paid from the billions of pounds in government bailouts), Byzantium’s authorities acted rather more decisively.

Those found to have abused their position had their heads shaved, marking them out as having put their own interests first. They were then publicly flogged, as an example to others who might be thinking of “stuffing their wallets with the money of the people”, as one tenth-century author put it. In one case, there were howls of derision when a member of the elite swapped his life of public service for one of being a ‘greedy entrepreneur’.

Being a businessman was not the problem – being greedy was. This early medieval ‘master of the universe’ cornered the grain market. As the price rose, people began to starve. Money was being forced from the pockets of the poor to the rich.

Men who behaved like this – seeking short-term profit at the expense of others’ well-being – were detrimental to the long-term health of the empire. They had to be dealt with.

In Byzantium, that meant sanctions that would also help focus the minds of today’s scandal-hit bankers: making excessive profits led to the confiscation of all assets and, possibly, exile to somewhere rather less salubrious than the capital. That was enough to make businessmen think twice about where their profits came from.

There, curiously, lies the least-heralded aspect of Byzantium’s success. Unlike western Europe, where an aristocracy arose of independently wealthy families empowered by assets passed from one generation to another, in the eastern Mediterranean, something close to a modern meritocracy evolved – precisely because the gap between rich and poor was kept relatively narrow.

Birth was no barrier to success: sons of pipe-makers could become emperors, and bright sons of modest background could become political heavyweights. This did not happen by accident: for meritocracy to work, the income equality gap had to be monitored at all times.

After all, some Byzantines had sympathy for the greedy entrepreneur from a thousand years ago: it was hardly his fault that he filled his own pockets, they reckoned. It was just too tempting. Much like the bankers who pushed us to the abyss in 2008.

• Dr Peter Frankopan is director of the Centre for Byzantine Research at Oxford University, and author of The First Crusade: The Call from the East, published by Bodley Head (£6.99).

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