Sunday, October 18, 2009

Plutonomy: A Love Story

If you saw Michael Moore's film: Capitalism, A Love Story, you will be aware of the "plutonomy memo." The internal Citibank memo is presented as a smoking gun that reveals that the moneyed class is intent on sucking up all the wealth that it can (while selling the rest of us of as "dead peasants.")

The Financial Times on Friday featured an interview with the memo's author, Ajay Kapur, an analyst who formerly worked for Citi, who insists his purposes were far from nefarious or secret. Kapur is a researcher whose team was "clinical about our subject and made no moral judgments about whether [plutonomy] was a good or bad thing." Kapur has just issued a new plutonomy report.

The essential thesis is that plutonomies arise when there are factors such as “disruptive productivity gains, financial innovation, capitalist-friendly governments, overseas conquests and dopamine-heavy immigrants, the rule of law, patent protection and great complexity exploited by the wealthy of the time”.

This description has applied to countries such as the US, UK, Canada and Australia recently: in the US, for example, the top 1 per cent control almost a quarter of the wealth. And that has big implications for consumer spending or global financial flows.

For while economists tend to watch factors such as unemployment to predict consumption, Mr Kapur thinks this can be misleading because it is the elite rich – not the middle class – who tend to drive consumption.

Now as a non-plutocrat, it seems to me you have a couple of options for approaching the information that wealth seems to pool at the top. (I am making the executive decision to rule out sitting around being apathetic and dreaming of the day you will win the lottery as an option.)

You can get angry at the unfairness of this and fight for a more even playing field on which to partake of the consumer pie. (I am a professional metaphor mixer, don't try this at home.) That is, for example, the approach of the folks at Naked Capitalism who are inviting people to protest during the American Bankers Association annual meeting in Chicago October 25-27. You could run for office, write letters to your legislators and so on.

Or you can look at the 1%, and say, "Let them eat cake!" That whole consumer life is not all it's cracked up to be. Call it simple living, downshifting, being green, being thrifty. Leave the uber consumerism to the uber capitalists and focus on living your authentic life and being the best darned broke person you can be!

It's possible to mix both of these options and find your own balance. The important thing is to change your tune from "if I were a rich man," to "sha-la-la-la-la-la live for today."