Plutonomy – Invasion of the Political Body Snatchers.

I want to pitch an idea for a contemporary science fiction film… the lead, called F, investigates the dark world of politics, wealth and manipulation of the economy in a small country called Brittania (B).

The first thing that intrigues F is a graph that shows that over a period of some 30 years, there had been a large upward redistribution of income from the bottom 90 per cent to the top 1 per cent… but most striking of all was the rapid increase in wealth of the top 0.1 per cent.

Whilst analysing international data, F realizes that this redistribution is not a generalised phenomenon of all advanced economies.  Instead it is particularly marked in Brittania and one other advanced economy, Americana.  It occurs to F that this puzzling pattern of income redistribution couldn’t have resulted from just any old factor.  It had to be due to government policies; and that meant that the redistribution had occurred regardless of which political party had been in power!

This is weird to F because there had been no significant change in the two countries’ formal systems of government … but F gradually begins to understand that there is more to government than its formal structures. The same institution, for example an elected parliament or even individual political parties, may perform radically, systematically and intentionally differently from one historical period to the next, including with regard to the welfare of the general population.

Perplexingly, even those political parties commonly identified with the interests of the wealthy, had won their seats by convincing the majority that their policies would best serve the electorate’s material interests.  The story was, that by generating a larger GDP, gains would ‘trickle down’ to be shared with the majority of the population.  Obviously, that hadn’t happened.  The graphs didn’t lie.

But in both Brittania and Americana, either of the two major political parties could win elections, and it was thus open to one or other of them to expose the policies which resulted in the declining standards of living for at least 90% of the population.

After all, F reasons:

 “It does not seem credible that the electorates would knowingly vote for their continuation. Together these points imply a change in the political structures of these countries.  Why?  Because if the major political parties have before them a straight-forward way of winning elections by appealing to the basic material interests of the overwhelming majority of the electorate and they repeatedly decline to do so even when it means defeat, then there must be a non-democratic reason that governs their decisions and their access to office.”

F concludes that it follows that the real agendas or platforms of the winning parties had been kept secret!  What are they?”  The plot thickens.

F reviews his findings.  It seemed that the populations of Brittania and Americana had been kept nearly totally ignorant of the fact that for over thirty years their countries have been subject to the engineering of huge and extremely skewed upward redistributions of income. Moreover, this central fact had virtually never been mentioned or discussed in their general media. Nor could F find much about it in economics journals.

The breakthrough comes when F finally gets hold of The Plutonomy Reports which, though incomplete, reveal that the redistribution phenomenon is documented, conceptually driven, and no mere historical accident. In fact, so-called Plutonomists exist… even though their history is clouded in secrecy.  Plutonomy is a real-world political force; and the primary players of this political ideology, political movement and concept of government, belong to the financial sector.  The Plutonomists are the 0.1%!

The three reports, written before the global banking crisis 4 years earlier, outline the key points of this political ideology.  Their strategic nature make it all too clear why it has been imperative for the plutonomists to keep the contents of these historical documents from entering into mainstream discourse.  Now F understands why the Plutonomists had gone to such lengths with threats of legal action to supress these important historical documents from the internet.  Fragments of the reports are given below:

.

‘Report no. 1

Little of this note should tally with conventional thinking. Indeed, traditional thinking is likely to have issues with most of it. The world is dividing into two blocs – the plutonomies, where economic growth is powered by and largely consumed by the wealthy few, and the rest. Plutonomies have occurred before in sixteenth century Spania, in seventeenth century Hollander, the Gilded Age and the Roaring Twenties in Americana.  

We project that the plutonomies (Americana, Brittania and Canadia) will likely see even more income inequality, disproportionately feeding off a further rise in the profit share in their economies, capitalist-friendly governments, more technology-driven productivity, and globalization.

In a plutonomy there is no such animal as “the Americana consumer” or “the Brittania consumer”, or indeed the “Russkian 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.

. . . we think the plutonomy is here, is going to get stronger, its membership swelling from globalized enclaves in the emerging world, . . .

Report no. 2

 The second report begins by identifying three things that have enabled the creation of plutonomies in Brittania, Americana, Canadia and Aussie:

Asset booms, a rising profit share and favourable treatment by market-friendly governments”…

What Could Go Wrong

. . . 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. . . . .  We don’t see this happening yet, though there are signs of rising political tensions. However we are keeping a close eye on developments.

The third is the longest of the three reports.  Significantly, it notes that  ‘The rise of this inequality is not universal. In a number of other countries – the non-plutonomies – income inequality has remained around the levels of the mid 1970s. It singles out Japan, France, Switzerland and the Netherlands as examples and dubs them “The Egalitarian Bunch”.  Further on, after reminding the readership that “plutonomy countries” are those with “economies powered by a relatively small number of rich people” and geared to “financial wealth creation”…. “the risks to plutonomy” are, as in previous reports, considered.

 Report no. 3

‘Perhaps the most immediate challenge to Plutonomy comes from the political process. Ultimately, the rise in income and wealth inequality … is an economic disenfranchisement of the masses to the benefit of the few. However in democracies this is rarely tolerated forever. One of the key forces helping plutonomists over the last 20 years has been the rise in the profit share – the flip side of the fall in the wage share in GDP. As plutonomists or capitalists tend to be long {on} the profit share, they have benefited from trends like globalization and the productivity revolution, disproportionately. However, labor has, relatively speaking, lost out. We see the biggest threat to plutonomy as coming from a rise in political demands to reduce income inequality, spread the wealth more evenly, and challenge forces such as globalization which have benefited profit and wealth growth.’

[emphasis added]

Nonetheless:

Our own view is that the rich are likely to keep getting even richer, and enjoy an even greater share of the wealth pie over the coming years.’

F is left reeling. These three plutonomy tracts, being windows both into the plutonomist’s mind and to their strategies, contain many interesting points, but for F, the most overwhelmingly significant one is that plutonomists see the subversion of the democratic process as the ultimate key to their success.

Indeed, if the “political enfranchisement remains” and is allowed to remain, then the “economic disenfranchisement of the masses” is only possible if the electorate can be bamboozled into voting against their interests.

The rest of the film is devoted to F uncovering the means by which the Plutonomists have undermined the democratic process and engineered the redistribution of wealth upward and off-shore.  F identifies the various strategies employed to effect and preserve the desired changes in law and government policy… the lobbyists, the think-tanks, the Public Relations, the political campaign funding, the long-term contracts enshrined by international treaties, the repeal of inconvenient legislation (particularly with regard to financial markets), off-the-books accounting for banks, deregulation (or non-regulation), tax havens, globalization, tax cuts for the 1%, shrinking state policies  and so on.

F finally realises, that underpinning all of this redistribution is the revolving doors movements of personnel between roles in government, corporations and finance.  For example, F’s attention is repeatedly drawn to the revolving doors movement of a mysterious organization referred to as the giant squid company, which seemed to wield inordinate influence in governments across the globe.

It also seemed that wherever the financial sector’s profit-seeking activities became focused primarily on the buying, selling, packaging and repackaging of either existing financial assets or new ones attached to existing real assets, the squid people were likely to be involved.  Furthermore, this profit-seeking activity, the redistribution of wealth upward, and the creation of asset bubbles were interlinked. By using their financial power to create rising prices which attracted investors, especially pension funds, from outside the plutonomy’s inner core, the prices became more and more inflated until eventually the bubble burst. Needless to say, the bubbles burst because the 1% sold off at the top, leaving themselves with proportionately huge profits to the disadvantage of the pension funds. The whole process was then re-started by the squid people, to create another bubble.

I will not spoil the climax of the film, which is essentially the struggle to regain power back from the 1%; and the difficulties for the 99% in identifying between the ‘good’ and the ‘infected’ politicians/activists … but suffice it to say that giant squids are definitely involved!

Reference:

Edward Fullbrook, “The Political Economy of Bubbles”, real-world economics review,

issue no. 59, 12 March 2012, pp. 138-154, http://www.paecon.net/PAEReview/issue59/Fullbrook59.pdf

9 thoughts on “Plutonomy – Invasion of the Political Body Snatchers.

  1. Pingback: Plutonomy – Invasion of the Political Body Snatchers. « syzygysue

  2. Amazing, I simply love the way this site keeps coming up with the perfect economics for dummies classes – without being patronising.

    This was educational but also bloody good fun to read – Sue you’ve done it again xx

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