Plutonomics: It's Why You Want to Work for the Wealthy

The Wealth Report blog posted this on Plutonomics:

Ajay Kapur, global strategist at Citigroup, and his research team came up with the term “Plutonomy” in 2005 to describe a country that is defined by massive income and wealth inequality. According to their definition, the U.S. is a Plutonomy, along with the U.K., Canada and Australia.

In a series of research notes over the past year, Kapur and his team explained that Plutonomies have three basic characteristics.

1. They are all created by “disruptive technology-driven productivity gains, creative financial innovation, capitalist friendly cooperative governments, immigrants…the rule of law and patenting inventions. Often these wealth waves involve great complexity exploited best by the rich and educated of the time.”

2. There is no “average” consumer in Plutonomies. There is only the rich “and everyone else.” The rich account for a disproportionate chunk of the economy, while the non-rich account for “surprisingly small bites of the national pie.” Kapur estimates that in 2005, the richest 20% may have been responsible for 60% of total spending.

3. Plutonomies are likely to grow in the future, fed by capitalist-friendly governments, more technology-driven productivity and globalization.

For an earlier, and free, column on Kapur's concept, go here.

Kapur believes the virtually invisible U.S. savings rate may be a symptom of Plutonomics. The rich, who have no worries about repaying loans, borrow so much that the total overwhelms the modest amounts being put aside by the little guy.

The rich may also deserve thanks for easing the economic impact of high oil prices. They're humungous consumers of fuel oil and gasoline, and they don't have to worry about the price.

Businesses that serve the rich, says Kapur, should continue to enjoy immense opportunities for profit.

Aren't you glad you're in wealth management?