(posted to nettime-l with the permission of Steve Cisler) I was thinking about the rejection of shocklog when I read this in the current Economist. It uses a term new to me 'plutonomy' and I looked it up on Google: lots of stuff since the two economists coined it in 2005, but not in wikipedia.
It is an interesting concept, especially to see it in the Economist. Steve -- Buttonwood Mutiny in the ranks Feb 8th 2007 From The Economist print edition Reasons not to savour that fat bonus cheque IT'S the rich wot gets the pleasure, it's the poor wot gets the blame. The soldiers who sang that ditty in the first world war may have been reflecting on the contrast between their lice-ridden, shell-shocked existence and the creature comforts available to aristocrats back home. There was an enormous disparity between the income and wealth of the top and bottom classes of society in the early days of the 20th century, as there is today, another era of boisterous global trade. The issue of inequality prompted Ben Bernanke, the Federal Reserve chairman, to make a speech on February 6th calling for improvements in education and training to help displaced workers. Ajay Kapur and Niall Macleod, two Citigroup strategists, have invented the term plutonomy to describe an economy where the spending power of the elite holds sway. They argue that American savings data are distorted by the top 20% of the population. Whereas many Americans are reasonably thrifty, the wealthiest group spends more than it earns. The rich need not save because financial markets are doing their savings for them. Rising equity and house prices drove up the net-worth-to-income ratio of the wealthiest tenth of Americans from 5.8 in 1989 to 8.4 in 2004. That gives them a licence to spend and makes them immune to petty worries like higher petrol prices. Furthermore, Messrs Kapur and Macleod say the rise of wealthy elites in Russia and Asia may help explain why America finds it so easy to fund its current-account deficit. Emerging-market plutocrats are nervous about keeping their fortunes at home, lest the political winds change. So they seek to move as much of it as possible to richer countries. This, together with reserve management by the central banks in Asia and oil-exporting countries, provides a steady source of demand for American assets. But what has caused this great dispersion of wealth? It is not happening in all countries. The gap has been widening in America, Britain and Canada but has barely budged in France, Japan or the Netherlands. The two strategists cite numerous factors, including rising executive pay and technological innovation, which have rewarded high-skilled individuals. Globalisation, which seems to have lowered the relative cost of unskilled labour and boosted the return to capital, has also played its part. Actually, if one looks at a broad sweep of history, it is the relatively egalitarian 20th century that seems the exception. Mass democracy is only 100 years old and it ushered in both the welfare state and redistributive taxation. The rise of democracy, in turn, was driven by the economic power of workers, especially those gathered in large groups to work in mining, manufacturing and transport. As those industries have ebbed, so have the forces of economic equality. But although the workers have lost some of their economic power, they have not lost their votes and may yet use them to redress the balance. Messrs Kapur and Macleod suggest there may even be a link between the growth of profits as a proportion of national income and the rising popularity of far-right European parties such as the National Front in France. If there were such a backlash, it could be a threat not just to globalisation, but to democracy itself. Opinion polls and low voter turnout at elections may indicate widespread public disillusionment with politicians. There is also scepticism about the fairness of the political process, given the role companies play in financing political parties. And this is during strong economic growth: imagine what a recession could do. The prospects for a tax grab on company earnings are limited, given the ability of corporations to move quickly across national boundaries. But even in countries (like America) without extremist parties on the left or the right, politicians will be tempted to deflect the voters' wrath away from their corporate paymasters and towards an easier targetforeigners of all types. Hence the potential appeal of protectionist and anti-immigrant policies. In time, this could undermine globalisation and reverse the relative advantages of the rich (and the higher trend in profits). Although many might welcome a more egalitarian world, the risk is that protectionism would usher in a deep global recession, as it did in the 1930s. It is easy to assume, with globalisation, that a rising tide lifts all boats. And most people do gain, even if the improvement in their way of life can sometimes be hard to discern. But workers whose factories are shut are unlikely to see it that way. For them, it must seem these days that a rising tide lifts only all yachts. # distributed via <nettime>: no commercial use without permission # <nettime> is a moderated mailing list for net criticism, # collaborative text filtering and cultural politics of the nets # more info: [EMAIL PROTECTED] and "info nettime-l" in the msg body # archive: http://www.nettime.org contact: email@example.com