US A Plutocracy - No Longer A Democracy?

In October 16, 2005 Citigroup wrote a report for their wealthy clients, which eventually was leaked, I suppose, and can now be found on the internet, where I found it, and others that followed some time later.  When we read their summaries, I think we get the picture, what they think about the average citizen in this country, and others who also operate their economies as a plutonomy.

First let's look at two definitions:

What is Plutocracy?

• Government by the wealthy.

• A country or society governed by the wealthy.

• An elite or ruling class of people whose power derives from their wealth.

 What is "plutonomy"

"Plutonomy (from Greek πλοῦτος, ploutos, meaning 'wealth', and νόμος, nomos, meaning 'law', a portmanteau of "plutocracy" and "economy") is a term that Citigroup analysts have used for economies "where economic growth is powered by and largely consumed by the wealthy few."

 In the summary of this report they wrote;

"SUMMARY
➤ The World is dividing into two blocs - the Plutonomy and the rest. The U.S.,
UK, and Canada are the key Plutonomies - economies powered by the wealthy.
Continental Europe (ex-Italy) and Japan are in the egalitarian bloc.
➤ Equity risk premium embedded in “global imbalances” are unwarranted. In
plutonomies the rich absorb a disproportionate chunk of the economy and have
a massive impact on reported aggregate numbers like savings rates, current
account deficits, consumption levels, etc. This imbalance in inequality
expresses itself in the standard scary “ global imbalances”. We worry less.
➤ There is no “average consumer” in a Plutonomy. Consensus analyses focusing
on the “average” consumer are flawed from the start. The Plutonomy Stock
Basket outperformed MSCI AC World by 6.8% per year since 1985. Does
even better if equities beat housing. Select names: Julius Baer, Bulgari,
Richemont, Kuoni, and Toll Brothers."

In this report we can also read,
"4) In a plutonomy there is no such animal as “the U.S. consumer” or “the UK
consumer”, or indeed the “Russian 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."

"At the heart of plutonomy, is income inequality. Societies that are willing to
tolerate/endorse income inequality, are willing to tolerate/endorse plutonomy."

"Protectionism or regulation. Here, we believe lies a cornerstone of the current wave of plutonomy, and with it, the potential for capitalists around the world to profit. The wave of globalization that the world is currently surfing, is clearly to the benefit of global capitalists, as we have highlighted. But it is also to the disadvantage of developed market labor, especially at the lower end of the food-chain."

"Our conclusion? The three levers governments and societies could pull on to end plutonomy are benign. Property rights are generally still intact, taxation policies neutral to favorable, and globalization is keeping the supply of labor in surplus, acting as a brake on wage inflation."

"The U.S., UK, and Canada are the key Plutonomies - economies powered by the wealthy.
Continental Europe (ex-Italy) and Japan are in the egalitarian bloc."

Ref. https://pissedoffwoman.files.wordpress.com/2012/04/citigroup-plutonomy-report-part-1.pdf

In March 5, 2006, their summary reflects the following.

"SUMMARY
➤ The latest Survey of Consumer Finances, for 2004, has been released by the
Federal Reserve. It shows the rich continue to account for a disproportionately
large share of income and wealth in the US economy: the richest 10% of
Americans account for 43% of income, and 57% of net worth. The net worth to
income ratio for the richest 10% of Americans increased from 7.4x in 2001, to
8.4x in the 2004 survey. The rich are in great shape, financially.
➤ We think this income and wealth inequality (plutonomy) helps explain many of the conundrums that vex equity investors, such as why high oil prices haven't
seriously dented growth, or why "global imbalances" are growing along with
the equity bull market. Implication 1:Worry less about these conundrums.
➤ We think the rich are likely to get even wealthier in the coming years.
Implication 2: we like companies that sell to or service the rich - luxury goods,
private banks etc. Favored names include LVMH and Richemont."

 Ref. https://pissedoffwoman.files.wordpress.com/2012/04/citigroup-plutonomy-report-part-2.pdf

In September 29, 2006, the wrote the following:

"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."  Emphasis added.

Ref. https://pissedoffwoman.files.wordpress.com/2012/04/citigroup-plutonomy-report-part-3.pdf

I admit, the referenced reports herein represent heavy reading; the charts do not reflect the current state of affairs, however, we get the message, don't we?

I recall reading in one of these reports, that in their opinion, the US is no longer a democracy, because the super rich are now calling the shots.  I find myself in complete agreement.  We see that also in other major countries, and until the majority has enough of this abuse, it will go on.  The fact that we have elections, does not alter the fact that the working men and women, are getting the short end of the stick.

This Plutonomy can only exist, because the majority, which is poor compared to the super rich, have an innate dream to one day join them, by perhaps winning the big lottery one day, or by some other fantasy coming true, etc.  Once the majority realizes and accepts the truth, it will spell the end of this plutonomy, we are now subjected to.  History is full of examples where the masses finally saw the light, and reacted, and often it was not a pretty picture.

 We are told over and over the tale of the American Dream, and if we work just hard enough, we can achieve anything.  Most of the current wealthy were born with  silver spoons in their mouths; I venture to say that almost all of the self-made Billionaires did not get there, within the rules of the law.  Somebody got the shaft, and contributed to their lucky (?) fortunes.  Just look at companies like Herbalife, and others less blatant.  Companies who pray on the poor, less knowledgeable, and the greedy, who risk their retirement, aspiring the American Dream.

The American Dream is mostly reserved, and enjoyed by the ruling class, in this country.  A number of other countries have similar outcomes.  For the working stiffs, the American Dream is nothing but a mirage, and failing to see what it really is, keeps the Plutonomy going.

As an aside, the front people of the super rich, also known as our members of congress, for the most part are multi-millionaires.  When one follows the link below, one can see how rich the majority of them really are.  There are a few, probably newcomers, who have not collected their share yet; just give them time.
https://media.cq.com/50Richest/