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Plutonomies and the Rise of Inequality

August 4, 2013 Stuff

I’ve been reading Strange Rebels by Christian Caryl, an interesting account of how a number of key characters and events made 1979 a remarkable year, a turning point in the history of the world.

The further I read, the more it looks like the late 70s and early 80s laid the foundations of the world as we know it:

  • The first non-Italian Pope in centuries set out to dismantle the Soviet bloc and put an end to the Cold War;
  • The first ever female Prime Minister of Britain led the way to an unprecedented array of liberalizations and privatizations that would forever change the role of the State in the West;
  • China opened up to the world and started pulling millions of its citizens out of poverty…

All good then? Well, I would dare to say that the 1979 Islamic Revolution of Iran hasn’t really kept its promise of wealth redistribution. People in Afghanistan don’t seem close to prosperity either.

But what if the seeds of that period also caused a series of issues and excesses that are now threatening the so-called rich world?

The book is primarily focused on the countries mentioned above and it doesn’t analyze America much. However it’s in that same year – on July 15th 1979 – that US President Jimmy Carter delivered the remarkable “Crisis of Confidence” speech, of which one passage sounds to me especially meaningful: <<In a nation that was proud of hard work, strong families, close-knit communities, and our faith in God, too many of us now tend to worship self-indulgence and consumption. Human identity is no longer defined by what one does, but by what one owns. But we’ve discovered that owning things and consuming things does not satisfy our longing for meaning. We’ve learned that piling up material goods cannot fill the emptiness of lives which have no confidence or purpose.>>

Did they listen to him? Hmm… The fact that he was not re-elected should give us a clue. And this brief clip from “Capitalism” by Michael Moore argues that the following US President – Ronald Reagan – actually steered the leading country of the rich world in the exact opposite direction.

Later on, the same movie mentions three leaked Citigroup reports that show how successful the effort to change Western societies actually was. The authors coined the definition of Plutonomies for those countries – primarily the USA, U.K. and Canada – where the better-off enjoy a disproportionate slice of national wealth and income.

citi-plutonomy

The top 1% of American households account for about 40% of financial net worth, more than the bottom 95%. But it’s not only a matter of accumulated wealth, because the top 5% enjoy about 30% of national income: it was little more than 20% when Jimmy Carter gave the mentioned speech.

Japan and continental Europe are placed in the “egalitarian” bloc instead, with one sad exception: Italy… which is the same country, however, where the sales of bicycles – in the wake of the Euro crisis – have reportedly surpassed those of cars for the first time this year. Could it be that people are starting to realize that piling up expensive material goods is not the way forward?

One Comment on “Plutonomies and the Rise of Inequality

Ash
September 20, 2013 at 6:23 AM

Here’s an interesting article about the bad effects of inequality on the economy: http://www.usnews.com/opinion/blogs/economic-intelligence/2013/09/12/record-high-income-inequality-threatens-us-growth

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