In September 2006 Citigroup published a report which they have been trying to suppress ever since. It was on what they called plutonomy - an idea they'd been hawking around for a while and which was summarised in the Wall Street Journal in 2007 as follows:
Ajay Kapur, global strategist at Citigroup, and his research team came up with the term “Plutonomy” in 2005 to describe a country that is defined by massive income and wealth inequality. According to their definition, the U.S. is a Plutonomy, along with the U.K., Canada and Australia.
In a series of research notes over the past year, Kapur and his team explained that Plutonomies have three basic characteristics.
1. They are all created by “disruptive technology-driven productivity gains, creative financial innovation, capitalist friendly cooperative governments, immigrants…the rule of law and patenting inventions. Often these wealth waves involve great complexity exploited best by the rich and educated of the time.”
2. There is no “average” consumer in Plutonomies. There is only the rich “and everyone else.” The rich account for a disproportionate chunk of the economy, while the non-rich account for “surprisingly small bites of the national pie.” Kapur estimates that in 2005, the richest 20% may have been responsible for 60% of total spending.
3. Plutonomies are likely to grow in the future, fed by capitalist-friendly governments, more technology-driven productivity and globalization.
The first page of the report - now pretty much only available via the Real World Economic Review as the original has been hidden from view - looked like this:
The Global Investigator
The Plutonomy Symposium – Rising Tides Lifting Yachts
➤ Time to re-commit to plutonomy stocks — Binge on Bling.
Equity multiples appear too low, the profit share of GDP is high and likely going higher, stocks look likely to beat housing, and we are bullish on equities. The Uber-rich, the plutonomists, are likely to see net worth-income ratios surge, driving luxury consumption.
Buy plutonomy stocks (list inside).
➤ Plutonomy stocks at a premium, but relative pricing power is key.
➤ Our Plutonomy Symposium take-aways.
The key challenge for corporates in this space is to maintain the mystique of prestige while trying to grow revenue and hit the mass-affluent market. Finding pure-plays on the plutonomy theme, however, is tricky.
➤ Plutonomy and the Great Conundrums of our age.
We think the balance sheets of the rich are in great shape, and are likely to continue to improve. Don't be shocked if the savings rate worsens as equities do well.
➤ What could go wrong?
Beyond war, inflation, the end of the technology/productivity wave, and financial collapse, we think the most potent and short-term threat would be societies demanding a more ‘equitable' share of wealth.
It's almopst laughable but for three things.
It's true.
It's what these people think.
Their wealth has recovered even if no one else's has.
So the opprtunity for the game to start again already exists.
And note that last paragraph - there's knowing game of suppression of others in this strategy. This is class warfare. Make no mistake about it.
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It’s been going on three hundred years here, this war. The difference between then and now is that now it’s becoming overt. I’m not sure if this is a consequence of over-confidence or desperation. Perhaps the upbringing that Cameron and crew experience makes them over-confident and so they increasingly think they can run the place without benefit of democratic discussion or rule of democratically-determined law. Perhaps more sober heads realise that the system which supports them, based as it is on that a) banks create money from nothing and that’s the money supply and b) very few people understand this, realise that in this the information age people are going to find out about it (as is happening) and that’ll be the end of the gravy train so they’ve nothing to lose by going for broke. Perhaps it’s a little of both.
We’ll see.
BB
And for just 300 great british pounds, you too can join them, honest
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Is this it? http://jdeanicite.typepad.com/files/6674234-citigroup-oct-16-2005-plutonomy-report-part-1.pdf
And here’s another viewpoint I often return to: http://t.co/49GvGvi
Or is it this: http://tiny.cc/mds1b
In 1964 the distinguished economist J E Meade published a little book called ‘Efficiency, Equality and the Ownership of Property’, in which he pointed out a fundamental contradiction between the price which an ‘efficient’ economy would pay for labour (which he defined as equal to the marginal product of labour) and the return that was due to the labourer as a member of and participant in society. Meade suggested that what was then called automation would make the contradiction worse by causing output per head to rise relatively to the marginal product of labour.
He states (p 26)
‘Most discussions about the social and economic problems
which will arise in an automated world run in terms of the rise
in real output and real income per head of the population.
What, we ask, shall we all do with our leisure when we need
to work only an hour or two a day to obtain the total output
of real goods and services needed to satisfy our wants? But
the problem is really much more difficult than that. The
question which we should ask is: What shall we all do when
output per man-hour of work is extremely high but practically
the whole of the output goes to a few property owners,
while the mass of the workers are relatively (or even absolutely)
worse off than before?’
He goes on to say (p 33)
But what of the future? ………..There would be a limited
number of exceedingly wealthy property owners; the proportion
of the working population required to man the
extremely profitable automated industries would be small;
wage rates would thus be depressed; there would have to be
a large expansion of the production of the labour-intensive
goods and services which were in high demand by the few
multi-multi-multi-millionaires; we would be back in a super-
world of an immiserized proletariat and of butlers, footmen,
kitchen maids, and other hangers-on. Let us call this the
Brave New Capitalists’ Paradise.
It is to me a hideous outlook. What could we do about it?’
Unusually for an economist, his predictions of 1964 seem to be being borne out. The solutions he puts forward — basically a democracy of property ownership or a socialist state – now seem hopelessly utopian. But are there any tolerable alternatives?
The “[corporate] co-operative governments” are bound to corporate co-operation through a revolving door, identified most notably by Galbraith. The psychopaths/sociopaths who write such documents (as that above) end up as advisors to governments and then move back into the global financial giants. Citigroup advisors to Obama would be an example.
I think the global giants are less closeted as they can now afford to be. Increasingly stressed and soon to be decreasingly educated (I concede that education, particularly in the social sciences, has an ideological bent anyway), the masses don’t have time to source such documents and in time won’t understand the consequences of them anyway. Add the political diatribe through all media outlets and there’s the heady mix of misinformation, ignorance and self-loathing Citigroup and alike feed off to keep socialist governments out.
And of course, anybody who brings up the political agenda of groups such as Mont Pelerin or documents such the Powel Memo or the one above is made out to be a lunatic.
The ownership of the people by capital is not a new thing in Britain; it’s been around since the year 100. If it wasn’t for the two world wars we probably wouldn’t even have the luxury of dissent – which we are now losing judging by Art Uncut’s treatment at Glastonbury and the threat of increasingly Draconian anti-union legislation.