America: Not a Democracy, Not Socialism... It's a "Plutonomy"
I finally found the full text of one of Citigroup's reports about globalization, the rich and the poor:
Citigroup Oct 16, 2005 Plutonomy Report Part 1
It was mentioned for about a minute in Michael Moore's film Capitalism: A Love Story
This was prepared in 2005 but if you read it now, it really re-affirms a lot of things we already know as true today (and complain about a lot). It doesn't really go deep into American politics so much as class warfare and the friction that they were trying to foresee.
For instance, I don't think this paper predicted Frank-Dodd or the Tea Party, and the Tea Party itself has actually turned out to be the banker's best friend politically in all of this, but the paper itself is certainly worth a read since Citigroup decided to go into this musing.
After reading 50% through this... I wonder if Citigroup's own economists had already foreseen that they would be getting a bailout and it was worth continuing the sausage factory of bad mortgages in their Citimortgage unit.
And here's part 2 where Citigroup discusses what are the "risks". Risks is another way of saying "what bad sh*t can happen if wealth becomes too concentrated in too few individuals?"
I think we know the answer to that one: social and political instability.
RISKS -- WHAT COULD GO WRONG?
Our whole plutonomy thesis is based on the idea that the rich will keep getting richer. This thesis is not without its risks. For example, a policy error leading to asset deflation, would likely damage plutonomy. Furthermore, the rising wealth gap between the rich and poor will probably at some point lead to a political backlash. Whilst the rich are getting a greater share of the wealth, and the poor a lesser share, political enfrachisement remains as was -- one person, one vote (in the plutonomies). At some point it is likely that labor will fight back against the rising profit share of the rich and there will be a political backlash against the rising wealth of the rich. This could be felt through higher taxation on the rich (or indirectly though higher corporate taxes/regulation) or through trying to protect indigenous (home-grow)] laborers, in a push-back on globalization -- either anti-mmigration, or protectionism. We don’t see this happening yet, though there are signs of rising political tensions. However we are keeping a close eye on developments.
Seems like a decent companion to Kevin Drum's "Plutocracy" albeit from a different perspective.
I think it's sad that one of the backlashes they predict is anti-immigration sentiment.
Very interesting take-away:
A third threat comes from the potential social backlash. To use Rawlsian analysis, the
invisible hand stops working. Perhaps one reason that societies allow plutonomy, is
because enough of the electorate believe they have a chance of becoming a Pluto-
participant.Why kill it off, if you can join it? In a sense this is the embodiment of the “American dream”. But if voters feel they cannot participate, they are more likely to divide up the wealth pie, rather than aspire to being truly rich.
Originally Posted by gren
This paper predicts a backlash from the far-left people AND the far-right.
Far-left people will focus on American workers being displaced by free trade globalization which serves only the plutocrats.
Far-right people will focus on the other part, immigration, because it's considered "un-patriotic" for one, and they hint at the other reason but don't say it directly, which is far-right people are anti-immigration primarily because it causes demographic change for one, and the other reason is that it shifts the balance of voting power, as can be seen with the Hispanophobia that exists in Arizona and echoes around the country elsewhere.
The thing is, BOTH activities support a plutocracy. If the LEFT gets mad enough that trade barriers go up to protect US jobs, AND the far-right pass laws to block more immigration, the people who actually get hurt the most are plutocrats: the large individual shareholders of corporations and the managerial class who own shares.
Both policies on the far-left an far-right would drive up labor costs for multinational corporations.
That's why companies so easily switch their lobbying from far-left to far-right politicians and back again. They're trying to control the backlash on both sides.
Warren Buffett: The U.S. is moving toward plutocracy
He should know...he's benefitted handsomely from the bailout himself with his Goldman deal....his heir apparent is also a crook and just quit due to insider trading....
Buffet speaks from both sides of his mouth and talks his book..nonetheless the US is not moving toward plutocracy...it IS effectively a plutocracy run by kleptocrats of the financial oligarchy. Gov't is co-opted and Obama is just the oligarchy's spokesperson and marketing stooge...
I will now leave the discussion to the usual ideologues with their peasant partisan mentalities ....good luck America...where Americans hate their own people and are apologists for the kleptocrats...
"Socialism for the rich, Capitalism for everybody else"
That has always been a popular theory from day one. Many of the larger institutions, either through lobbying, elected official support or support of the Federal Reserve, figured they had a much larger risk cushion than a business operating under normal conditions.
Originally Posted by MayfairMeat
OMG, finally a thread that showing that both parties really act in the interests of the few at the detriment of the many.
Originally Posted by raider.adam
I think the theory has legs if we're talking JPMorgan or Citi.
I am not sure tho the feeling was shared among all the banks. The old I-banks didn't have discount window protection (JPMorgan did, but only because it's chartered as a bank holding company). For example if Lehman Brothers calculated that they would have protection from the Feds to backstop their assets, they were terribly misguided.
Back to the plutonomy theory... if America was an intense plutonomy in its past (the Guilded Age) and plutonomies collapsed due to spectacular financial debacles, I'm wondering why this didn't happen b/c of the Great Recession?
This recession was born on the backs of mainly working class middle America and the lightweight retail investment class. The working poor, middle and upper-middle class America suffered the most pain in this recession. Not the ultra-wealthy and not so much the safety-netted abject poor. The plutocracy has only gotten stronger, not weaker. Even frauds as giant as Bernie Madoff didn't knock much of a dent in it.
I wonder if this is because we're so bent on supporting globalization that we really are not taking a step back and looking at who is really benefiting the most from it.
At what point does public opinion of globalization stops being painted with candy-coated images of multicultural children in 3rd world countries getting a laptop, and the working class in developed countries who are marching towards the status of poor... begin to reject it?
We're already up in arms over immigration, which also serves the plutocracy and benefits them. When does it affect the other pillar of the plutocracy; robbing the wealth of the working classes to add to the assets of the rich?
Perhaps it ends with a currency crisis at the end, where all assets get massively devalued?
Here's more evidence that the Tea Party has been skewered and fooled by the plutocracy:
The Tea Party does not have a presence in Indonesia, where the term evokes cups of orange pekoe and sweet cakes rather than angry citizens in “Don’t Tread on Me” T-shirts.
But a Tea Party group in the United States, the Institute for Liberty, has vigorously defended the freedom of a giant Indonesian paper company
to sell its wares to Americans without paying tariffs. The institute set up Web sites, published reports and organized a petition drive attacking American businesses, unions and environmentalists critical of the company, Asia Pulp & Paper.
The Tea Party may have started out its first few minutes of life as a grouping of general populists, but it's gone now. It's now calcifying into a group of people that are aligning pro-globalist. Now I wonder who is going to muzzle the the anti-immigration sentiment within the Tea Party?
Here's another one... net neutrality. I kinda wondered why some tea activists were so anti neutrality:
One of his most visible stands was opposing net neutrality, a tenet of Internet policy criticized by broadband suppliers who want the right to charge for different levels of service. With the rise of the Tea Party movement in 2009, the institute, by then under Mr. Langer, helped inject the issue into the national dialogue, and soon signs equating net neutrality with government oppression became a staple at Tea Party rallies.
So it seems on some level, tea supporters are being "paid" what to think based on injections of money. The populism voice is going to be muffled I think... because you can shut just about anybody up if you stuff enough cash in their mouths.
I am not a Tea Partier, but I think the Net Neutrality stuff being pushed are bad ideas.
Originally Posted by MayfairMeat
Ehh, I think it's a tad overplaying it to say that the tea party is anti- X, Y, or Z because they have money stuffed in their mouth. I mean, that's not to say corporate money doesn't help create a climate, or that individual interests and identities don't align with corporate ones but it's far from direct. I think a good read is It Didn't Happen Here about the failure of socialism in the United States. It's main contribution is one of the later chapters talking about ethnic divisions in American labor and how those were utilized. I think a lot of what you see with the tea party is a cultural expression of a culture that feels it's under threat. It has a lot to do with legitimacy of Americanness. There are innumerable books that try to explain how mostly grassroots organizations (and I think that's definitely how the vast majority of tea party organizations started) come to take certain positions that may seem against their economic interest--What's The Matter With Kansas comes to mind. It struck me as rather simple. If your identity is more important to you than your economic fortunes then you'll take actions to project a certain identity. I doubt that most of those guys--and I met quite a few at a health care rally--are "paid" although corporate money definitely helps with logistics and allowing events to take place. But isn't that the whole point about plutonomy and the risks? They aren't a clear "if the rich amass wealth there will be a backlash against them". There will be all different types of actions from different interest groups. Be it anti-rich, anti-globalization, or anti-immigrant.
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