Written By: - Date published: 2:29 pm, November 18th, 2009 - 45 comments
Categories: capitalism - Tags:

plutocracyIn Michael Moore’s Capitalism: A Love Story (which is excellent, btw) he refers to two 2005 Citigroup memos about ‘plutonomy’ economies and political structures designed with the primary purpose of further enriching the rich. They’re stunning, not only for their frank admission that capitalism favours a tiny portion of the population at the expense of the rest but the premise that this is fantastic and that anything that could change the situation, like democracy, is a ‘threat’. Here’s some quotes:

The earth is being held up by muscular arms of its entrepreneur-plutocrats [Jesus, a straight-faced reference to Ayn Rand’s Atlas Shrugged]

In a plutonomy, there is no such animal as the ‘average consumer’. There are rich consumers, few in number, but disproportionate in the gigantic slice of income and consumption they take. There are the rest, the ‘non-rich’, the multitudinous many, but only accounting for surprisingly small bites of the national pie.

The top 1% of households account for 33% of net worth, greater than the bottom 90% put together.

[During an economic boom] in a plutonomy, the rich drop their savings rate, consume a larger fraction of their bloated, very large share of the economy. This behaviour overshadows the decisions of everybody else. The behaviour of the exceptionally rich drives the national numbers the ‘appalling low’ overall savings rate, the ‘overextended consumer’, and the ‘unsustainable’ current accounts.

While damning ‘non-plutonomies’ the memos show that it is possible to be a wealthy country with a basically capitalist system without an ever higher share of wealth going to the ultra-rich:

Under a section dealing with ‘threats’ to plutonomy:

Whilst the rich are getting a greater share of the wealth and the poor a lesser share, political enfranchisement remains as it was one person, one vote. At some point it is likely that labour will fight against the rising profit share of the rich.

Corporate tax rates could rise, choking off returns to the private sector, and personal taxation rates could rise dividend, capital-gains, and inheritance tax rises would hurt the plutonomy.

slow down the rate of wealth accumulation by the rich generally thought a reduction in the profit share of GDP. This could occur through a change in rules that affect the balance of power between labour and capital.

One reason that societies allow plutonomy is because enough of the electorate believe they have a chance of becoming a Pluto-participant. Could plutonomies die because the dream is dead, because enough of society does not believe they can participate? The answer is of course yes. But we suspect this is a threat more clearly felt during recession and periods of falling wealth if voters fells they cannot participate they are more likely to divide up the wealth pie.

The rich know they’re on conflict with us and they’re outnumbered. Their best hope is that most of us keep our eyes closed and continue to buy the lie that we could be plutocrats too.

45 comments on “Plutonomy”

  1. vto 1

    I think those memos refer to this idea being a ‘thesis’ not some previously unknown truth that the rich have suddenly and inadvertantly let out of the bag.

    • Daveo 1.1

      Read the document, it’s Citigroup’s analysis of how the economy works and their advice to the “mega-rich” on how to take advantage of it and prevent the masses from rising up and putting a stop to the whole crooked game.

      The document’s just stunning, they actually compare neoliberal economies to 16th century Spain.

      • vto 1.1.1

        It refers to plutonomy as a concept and as a thesis three times in the first two sentences.

        • Daveo

          Yeah, I don’t get what your point is though. It’s the way they believe the economy is working and they are advising their wealthy clients how to maintain this system. It’s a ‘thesis’ for these people in the same way that Marxism is a ‘thesis’ for the Communist Party.

        • snoozer

          so what vto? democracy is a concept, ‘efficient market hypothesis’ underlies neoliberal thought, evolution is a theory.

          All these words mean is that a model for conceiving of the real world is being explained, a model has validity inasmuch as it accurately describes what happens in the real world.

          I’m just not sure what you’re trying to get at vto. Are you saying that it’s not true that a small percentage of the population controls the bulk of wealth? Or are you denying the truth in front of your face that the rich are aware they are in conflict with the rest of us over wealth?

          • vto

            My point is that these memos are outlining just one, plutonomy, of many many ideas and theories that Citigrope research. That research is passed onto its clients.

            Plutonomy is not the sole, or even major, thesis that these rich pricks base their life practices on in order to maintain and expand their positions.

            Yet this post seems to take it as that. That plutonomy is “the way they believe the economy works” as daveo says.

            That is not what this memo is.

            I think this is what is called dog-whistling ya?

            • snoozer

              so, you’re saying that Citigroup doesn’t believe the stuff they release to clients?

              This is really head in the sand stuff champ

            • vto

              Sheesh snoozer I did not say that at all. I said it describes itself as a thesis. I imagine Citigroup would believe this thesis as much as say a university believes any thesis that sprouts from within its own confines.

              Do you believe every thesis snoozer?

              It really does nobody any good if something is held up as something it is not. Rather deceptive Mr Marty, stating this is “a frank admission” when it is nothing of the sort. Still, allows plenty of scope for the brainless lynch mobs to start braying, as per lprent’s lynch mob post a couple days ago.

            • felix

              So are you disputing anything at all about the thesis?

            • vto

              Well felix, from a quick glance mine own thoughts are that there appear to be some pretty damn good points in it.

              As I am sure there in other theories about capitalism and the position and manouevring of the ultra-rich within it.

            • snoozer

              vto. For godsake, Citigroup isn’t a university.

              At a university academics have academic freedom, which means they can come up with and print pretty much any thesis as long as it lives up to academic standards of research and argument. Their work is their’s not the university’s and they are not required to conform to an official univiersity position on issues.

              Citigroup is a business. Anything it produces is produced in the name of the organisation and employees do not have academic freedom or aynthing like it – they can’t just write whatever they want, it has to conform with the official company view. When Citigroup publishes a document, that is Citigroup’s official position. It puts out memos advising its clients on what shares to purchase and this is one of them wherein it advises its clients to purchase shares based on a frank analysis of the fact that the wealthy control the lion’s share of wealth – which citigroup refers to as (indeed praises as) plutonomy.

      • Bored 1.1.2

        Why not, its imperialism and exploitation still isnt it?

  2. Bored 2

    How can a blog be so accusing, so hard on the rich? Dont you know they have their just deserts through superior cleverness, harder work, any number of reasons that justify why they sit at the apex of the material mountain. How can you be so cruel to the wealthy? They deserve it, twisted versions of Darwin and the Bible confirm their right to be there. Not to mention St Ayns little missives.

    So leave the darlings alone, lets face it they never hurt anybody did they?

    • prism 2.1

      Yes Bored It pays to know that St Ayns ‘bibles; are well worth reading if one wants to understand the drive that these people on wealth steroids feel to magnify themselves. I particularly liked her Objective Ethics where she often fulminates of the ‘evil’ of altruism. Some objectivity.
      And she has also written the Virtue of Selfishness, she is just over the top and following her would turn our world into something like Bladerunner depicts.]
      I have got a lot of reading to do of her stuff before I can say I know it, I’ve got Atlas Shrugged which I need to set myself a few pages at least a day and seeing its a doorstop, it may take me six months. It is interesting to know about her as she stands out from the usual USA financial class.

      • Quoth the Raven 2.1.1

        Like rightwingers with Marx I think there is often a bit of hysteria around Rand, probably guilty of it myself.
        Here’s a couple of interesting bits:
        Ayn Rand’s Left-Libertarian Legacy.
        Ayn Rand and the Capitalist Class

        • prism

          Interesting site QTR – first thing I saw was – Andreas Katsulas, who played G’kar so unforgettably on Babylon 5, has died. Used to watch that religiously – great politics amongst other story lines.

        • Armchair Critic

          Thanks for the links QTR. I’m plugging through one of her novels now, and it has done a couple of things. One is that it has explained a lot about a couple of my friends. The other is it has consistently revolted me.
          The author of the links seems to have some sensible ideas on other topics, but when in comes to Rand he sounds like an apologist.

          • Quoth the Raven

            I don’t think he’s being an apologist, just showing another side of Rand – like young Marx and old Marx. If you want something negative about Rand this is a good read: The Sociology of the Ayn Rand Cult

            • Armchair Critic

              Thanks again QTR, I’ve done none of the things I planned to do this evening. LOL.
              I think Prof Rothbard is too kind, too, but that’s just me. The links from his page were good, too.

        • Daveo

          Rand is basically Nietzschian in outlook, she doesn’t even understand how capitalism works – that the dynamism is in the system, not in the god-like capitalists at the top.

          There’s a lot of talk about ‘freedom’ and ‘liberty’ but if you read Atlas Shrugged with some basic understanding of politics and philosophy she’s essentially a proto-fascist who believes in rule by a property-owning elite. Her contempt for democracy is explicit, and she repeatedly refers to ordinary people as “moochers” etc. That scene where she celebrates the death of people who believe in the tenets of collectivism is bordering on genocidal. And that rape scene in The Fountainhead? Jesus.

          It’s worth reading, just to get an understanding of how a lot of the more rabid right-wingers think, but there’s nothing there for the left.

      • Bored 2.1.2

        From what you have told me of your reading of Ayn you share my sympathies. I would have to suggest that I found Ayn a bit like eating something that repulsed every sense in your taste buds at a dinner party, then being asked for the sake of politeness to take a second helping. May I suggest you read something else for dessert, you have done your duty.

  3. tc 3

    With some religions it’s ‘God is great, god is good…..” in the world of high finance/corpoate finance it’s ‘Greed is great, Greed is good….” and with similar fanatacism heaven forbid anyone who disagrees with the might of the rich and powerful ruling class.
    On that subject isn’t it nice to see Mark and Eric’s hangover escape any meaningful scrutiny by the powers that be…..Gaynor had a go but felt the weight of their mates whilst a compliant finance media sat idly by simply too weak/inexperienced to ask some serious questions……a sham arrangement designed to keep them from following Bridgecorp/Bluechip into the courts.
    I note their chairman Yes Man (Greg Muir) who fronted the ‘arrangements’ is no longer around…..rats and ships eh.

    • Bored 3.1

      Theres a wonderful Biblical line (dont know where from) that goes “to those that have will be given”…..

  4. Quoth the Raven 4

    Lo and behold what came to rescue citigroup from the market? The state with billions of dollars worth of bailouts.

  5. Clarke 5

    I’ve posted both these quotes before, but they probably bear repeating in this context:

    “Today, the signature of modern American capitalism is neither benign competition, nor class struggle, nor an inclusive middle-class utopia. Instead, predation has become the dominant feature — a system wherein the rich have come to feast on decaying systems built for the middle class. The predatory class is not the whole of the wealthy; it may be opposed by many others of similar wealth. But it is the defining feature, the leading force. And its agents are in full control of the government under which we live.”

    – James K. Galbraith

    And this:

    “Western democratic capitalism … never foresaw that in a society governed passively by free markets and free elections, organised greed always defeats disorganised democracy.”

    – Matt Taibbi

  6. Bored 6

    Jeez, I just read the article and part 2, it really is the sickest little f**k you text to those who are not plutocrats. Veblen would have had a field day with this, the Jacobins would have said “QED, convicted, guillotine, next”.

  7. fizzleplug 7

    Just as a suggestion, when linking pictures instead of inserting, could the linked image be larger please? (probably not technically linked, but clicking on it led to a new page, so the terminology is close enough for me).

    I don’t like straining my eyes if I don’t have to.

  8. Rich 8

    What the Citigroup memo proposes is exactly the Marxist idea of false consciousness. The writers believe, as did Marx, that the “proletariat” (nowadays, the non-plutocrats) are misled as to their chances of material progress.

    It’s interesting that they feel able to advance this thesis, when use of the term “false consciousness” amongst any group to the right of the SWP nowadays gets you called patronising, a Stalinist, or worse.

    • marco 8.1

      All hail Lotto…placating the masses since who knows when.

      • prism 8.1.1

        marco – Lotto isn’t too bad. Many of us like a flutter, take a little risk, unlike those betting on financial houses being viable.

        Did you hear on Nat radio recently about the woman who lost everything to bingo? Went into a trance and drew money from her account and couldn’t remember doing it – finished up losing her house etc. Even had a miscarriage while at the pokies but just cleaned up and went back, completely besotted with it.

        We didn’t use to have pokies in NZ till those 1984 righties introduced them, may have been under Labour’s watch. Why, a business opportunity was being lost! Sophisticated gambling casinos, friendly neighbourhood gambling parlours – just what we need they decided. It is a nice package for businessmen to seduce the vulnerable and addict them, then you have their money, their allegiance, and you can feel superior and kick them when they are down.

  9. So,….the “American Dream” is a euphemism for the carrot the plutocrats dangle in front of the rabbits to keep them hopping along.

    • burt 9.1

      And the Aussie dream and the Kiwi dream. Borrow big and live the lifestyle today… grease the wheels of the money machine. Now some crazy bare foot fellow use to talk about not being a lender or a borrower. Wonder what he thought of capitalism.

  10. RedLogix 10

    The best cure for greed is to make it an embarrassing social disorder. (I’m being serious.)

    • Galeandra 10.1

      Right on, RL
      Too often we’re polite about wealth, when in fact it is a symptom of greed. Especially today when we can know there’s a huge environmental backstory behind the successes like “Joe, my ex-neighbour from down the road, real hard worker, nice bloke, he’s got four farms down South,now.” (overheard on a plane recently)

      Should people feel a bit ashamed of the implications behind us all ‘growing NZ’ s share of the pie’, and of their growing their share of the NZ pie?

    • Draco T Bastard 10.2

      It is a social disorder but mental illness shouldn’t be seen as embarrassing. These people need help and if they’re embarrassed they probably won’t seek that help.

    • RL

      I so agree with you on this one. LOL. (I’m bloody serious about it too.)


      I reckon greed is one of the many forms their disease can take and as such one of the diagnostic tools but you’ll find more often than not that the underlying disorder is that of Malicious Narcissism or Sociopathy. These people are notoriously difficult to treat and they will never ever think of themselves as someone who needs help.

  11. Quoth the Raven 11

    Here’s an interesting video:Crashing Michael Moore

    • Daveo 11.1

      It’s a complete misunderstanding of political economy to think that capitalist power relationships could exist without the force of an interventionist state. What those chumps are describing isn’t capitalism, it’s a schoolboy fantasy.

      • Quoth the Raven 11.1.1

        Captialism involves the interventionist state if we talk about actually existing capitalism. That’s why I think it’s wrong to talk about the free market as capitalist. I agree with you that captialist power relations couldn’t exist without the state. It’s like pro-capitalist anti-free market economist Martin Whitman said:

        “I am one with Professor Friedman that, other things being equal, it is far preferable to conduct economic activities through voluntary exchange relying on free markets rather than through coercion. But Corporate America would not work at all unless many activities continued to be coercive.”

        • Daveo

          This would be the Friedman who met with and later had his ideas implemented by Chilean dictator Augusto Pinochet?

          Friedman also met with the military dictator, President Augusto Pinochet during his visit. He did not serve officially as an advisor to the Chilean government, but did write a letter providing Pinochet with a “shock” program to end hyperinflation and promote a market economy[39]. Later, Friedman said he believed that market reforms would undermine Pinochet.[40] Chilean graduates of the Chicago School of Economics and its new local chapters had been appointed to important positions in the new government soon after the Coup, which allowed them to advise Pinochet on economic policies in accord with the School’s economic doctrine.

          According to his critics, Friedman did not criticize Pinochet’s dictatorship at the time, nor the assassinations, illegal imprisonments, torture, or other atrocities that were well-known by then…

          • Quoth the Raven

            Either that Freidman or David Friedman. But through Pinochet once again we see the evils of state capitalism. From the wiki page on Milton Friedman:

            Chile is not a politically free system and I do not condone the political system … the conditions of the people in the past few years has been getting better and not worse. They would be still better to get rid of the junta and to be able to have a free democratic system.” Friedman defended his activity in Chile on the grounds that, in his opinion, the adoption of free market policies not only improved the economic situation of Chile but also contributed to the amelioration of Pinochet’s rule and to the eventual transition to a democratic government during 1990. That idea is included in from Capitalism and Freedom, in which he declared that economic freedom is not only desirable in itself but is also a necessary condition for political freedom. He stressed that the lectures he gave in Chile were the same lectures he later gave in China and other socialist states.[43] During the 2000 PBS documentary The Commanding Heights, Friedman continued to argue that criticism over his role in Chile missed his main contention that freer markets resulted in freer people, and that Chile’s unfree economy had caused the military government. Friedman suggested that the economic liberalization he advocated caused the end of military rule and a free Chile.

          • Quoth the Raven

            Nice ad hom by the way.

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