Back in 2005, Citigroup literally sent a memo to rich clients called Plutonomy explaining this particular phenomenon and why it’s great for business.
It’s basically a step-by-step guide to how the economy gets split between the ultra-wealthy and everyone else. The craziest part is how openly they talk about it. Far from warning about it, they were telling their wealthy clients how to profit from it.
The memo starts by saying that plutonomies like the US, UK, and Canada are economies driven by the spending of the rich. They straight up say that in the US, we should stop talking about the American consumer because that’s a myth. There are only rich consumers and the rest. The rich are few in number but they take a gigantic slice of the pie, while the vast majority of us are the non-rich, the multitudinous many, who only get a small bite.
They break down the numbers, pointing out that the top 1% hold more wealth than the bottom 90% combined. But the real kicker is that all the stuff economists panic about like low national savings rates, high consumer debt, and massive trade deficits aren’t real problems from their point of view. They’re just a natural side effect of a plutonomy. When the super-rich get a huge chunk of the profits, their personal financial decisions like spending a ton on luxury goods and borrowing against their assets completely distort the entire country’s economic numbers. The memo says that everyone is freaking out about global imbalances, but they aren’t worried. It’s just how it works when you have a plutonomy.
So how do you build and maintain a plutonomy? The Citigroup analysts lay it out. You need a cooperative government that keeps taxes on capital gains, dividends, and inheritance low. You need a wave of technology and financial innovation that boosts profits. And you need globalization, which is fantastic for global capitalists but bad for regular workers, especially those on the lower end. They even note that the government was playing right into their hands by making dividend tax cuts permanent and changing the estate tax.
They address the risk of a social backlash. They use this twisted logic saying that as long as enough people believe in the “American Dream” and think they might get a chance to join the club one day, they won’t try to disrupt the system. The threat only becomes real if people give up on that dream and decide to just divide the existing pie more evenly. But their conclusion was that a backlash wasn’t coming anytime soon because the economy was still growing, making people feel better off in absolute terms, even as they fell further behind relative to the rich. That’s starting to change since the pandemic.
It’s insane to see all the current economic anxieties such as the wealth gap, the feeling that the system is rigged, the political divisiveness, all laid out so coldly and clearly almost 20 years ago in a document meant for the one percent. They were actively encouraging it and explaining how to make money from the whole process. It really makes you think.
I don’t want to be a top 10% earner, I literally just don’t want to overdraw again this month :(
This is why so many products seem to be geared towards affluent people. Business are going after less sales with much higher margins.
I’ve seen the term “plutonomy” (like, an economy for plutocrats) to refer to this. At this point almost all economic activity involves the rich, because the rest of us don’t have enough money to amount to much.
its crazy to think an entire country can be built to satisfy 10% of it’s citizens.
even crazier that this is the norm.
This has been the norm throughout most of history.
The last few years maybe, at least since agriculture enabled standing armies, but not for most of human history, which has frequently been egalitarian and communal
True but it is new to the American experience since World War 2.
A Brief History of Income Inequality in the US
For further reading I’d highly recommend the book A People’s History of the United States by Howard Zinn.The US has always been built to satisfy the top.
Its no wonder the country is fragmented and polarised when 90% of people are not seeing any benefits from the status quo. The middle class is being wiped out.
The “middle class,” ie the small business owners and sole proprietors, are largely falling to far-right populism as they are pressed downwards by decaying capitalism into the working class. That’s why marginalized groups are being targeted by fascism, the spoils of Imperialism are drying up so imperialism is being brought inward to a domestic underclass of laborers.
This reminds me of the in-group/out-group structure used to describe conservatism. Once the out-group (a particular minority, typically) has been eliminated, a new out-group (another particular minority) is identified and thusly marginalized/crushed until they’re gone…and the next out-group is identified etc. in this case the small biz owners/proprietors voting conservative thinking it’ll get them a seat at the table when it’s really just gonna be a chain around their neck at best. They will be the minority that’s targeted one day.
That’s what puts the “con” in conservative–everyone in the group believes they are always going to be part of the in-group, even when they are easily-identified minorities… Perhaps today wasn’t the day they got demoted to the out-group, and participating in the joyous dismissal of the most recent out-group leads them to the even deeper belief of their permanence in the in-group… Until one day when they get their very own jpg of pikachu and ICE is coming for them this time (งツ)ว
my own family is a microcosm of this: half of us are white passing and that half married white people, so now they’ve voting maga and somehow refuse to believe that their own mexican heritage and surnames won’t have any impact on how they’ll be treated after they’re done with the rest of us brown people. it gets much worse when you consider that they have closeted queer children/grandchildren; they’ve put in efforts to eschew the customs that we all grew up with; and even one of them still isn’t an american citizen.
the in/out-crowd mindset is also infectious; my parents stayed true to their leftist/liberal political leanings until my white passing siblings were able to influence them w the relative affluence afforded from my siblings’ small business owning in-laws. it took a come to jesus talk with my mother to convince her not to vote for trump in 2016 and it was a lost cause for my father; both told me that we’re no longer mexican because we’re “better off” than my cousins/aunts/uncles.
last xmas was the feather that broke the camel’s back for me: my siblings’ abandonment of our xmas customs allowed me to visit those cousins/aunts/uncles (who were not at all white passing) and the main topic of discussion was how crazy republicans have gotten and how white people are becoming that way too; meanwhile i had to learn the hard way w my sister that night that these subjects are “not appreciated” with my immediate family and part of me feels stupid/slow for not picking up on it as quickly as my siblings did.
now i’m able to recognize that my brown siblings have been using their in-laws living in latin-america as an excuse for not visiting for holidays in the last decade+ and i’m going to have to cook up an excuse of my own since i’m no longer married. lol
The actual utility is that the “petite bourgeoisie” as they’re called are essentially turned into witch-hunting footsoldiers to root out leftist organization. This allows the ruling class to freely lower living standards, wages, etc domestically in order to raise profits. It’s a temporary but brutal solution.
Wow, even worse than i thought 🫠
Yep! Has happened everywhere that fascism has taken hold, and has happened in a pretty much permanent state in the US Empire from the outset. Capitalism necessitates expansion to fight falling rates of profit, which is why developed countries imperialize others. It isn’t just for more, it’s for any profit. When there’s nowhere else to plunder, and you can’t exploit workers overseas even more, and profit rates are still falling, you turn to domestic reasons. Turn off the treat printers, stop bribing your domestic working class, take the mask off and murder dissent while you treat your domestic working class the same way you treat the international working class.
Capitalism can’t escape this cycle. It even causes wars, that’s why Nazi Germany kicked off World War II; it needed new colonies. Europe only opposed it because the Nazis were daring to colonize Europe and not just the global south. Only socialism, where we move beyond production for profit towards producing to satisfy needs, can solve this.
