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.
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.