I am going to use a $10 word in today’s post as I am seeing it used more and more often these days. The word is Plutocracy along with fellow traveler Plutonomy. Webster defines it as a society that is controlled by a wealthy few.
While I had sometimes seen the word as an economics history student a long time ago, I first considered it seriously 10 years ago when three Citigroup analysts--Niall Macleod, Ajay Kapur, and Narendra Singh released a research report to their high wealth clients. In it, they described the United States as a Plutonomy. To sum up their position I quote them--“Plutonomies have occurred before in 16th century Spain, in 17th century Holland, the Gilded Age and The Roaring Twenties in the U.S. What are the common drivers of Plutonomy? Disruptive technology-driven productivity gains, creative financial innovation, capitalist-friendly cooperative governments, an international dimension of immigrants and overseas conquests invigorating wealth creation, the rule of law and patenting inventions. Often these wealth waves involve great complexity, exploited best by the rich and educated of the time.”
Ten years later, can you honestly say that these conditions have gone away? The analysts at Citigroup also said that the very wealthy few, while clearly small in number, account for a large slice of income and consumption. They also said the rich minority is “swelling from globalized enclaves in the emerging world.”
Now, those of you who have read this blog for a time know that I have always stated that income inequality will always exist in a free economy. It has to be that way. Some work harder, others are smarter and some are luckier than the average person. Capitalism rewards those who outperform.
Looking ahead the highly regarded Boston Consulting Group (BCG) put out a report last summer that was optimistic about the U.S. economy for the immediate future. They said that the sub-millionaires (many of us) would grow their wealth by a compounded 3.7% per year until 2019. Those with $100 million plus in liquid assets (15,000 people worldwide) will likely see a compound growth rate of 9.1%. Is there anything immoral about this? Absolutely not if the money was earned honestly and taxes were paid.
To those of us who are marketers and not asleep at the switch, it is obvious that a two tier market has emerged that is far sharper than a few decades ago. High priced items such as single malt scotch and luxury cars are doing well while more mundane or everyday products have sluggish growth. I have noticed how mid-level clothing has not gone up much in price in recent years but the quality has declined significantly. No one seems to grumble.
The Citigroup team closed their memorable report by reminding people (in 2005!) that we had one person, one vote in the U.S. They warned that labor might someday fight back and there would be a political backlash against the rising wealth of the already rich. I have yet to see it in a big way as Donald Trump’s poll numbers continue strong as I write. Senator Bernie Sanders of Vermont has struck a responsive chord with those who feel disenfranchised in our Plutocratic society and is polling surprisingly well.
The real chatter that I hear today, even from educated people, is about the upcoming NFL season. So, we could be a Plutonomy but few people seem to know it or care.
If you would like to contact Don Cole directly, you may reach him at firstname.lastname@example.org