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The Plutocrats Still Lead With Control

Two months ago, a report by Princeton University Professor Martin Gilens and Northwestern University Professor Benjamin Page uncovered a major issue in the American political system. Specifically, it uncovered how much power the elites in society hold in the U.S. compared to the average citizen.

Koch Brothers dressed as clowns.

Plutocrats like the Kochs control our country, but is there hope?

It is very interesting and provides useful insight into the structure of the U.S. system and how it creates political inequality. Despite the authors acknowledging the lack of specifics the term “elite,” they still recognize there is a lack of representation that threatens the U.S. democracy.

Yet, back in 2007, two reports were leaked out of Citigroup, one of the largest U.S. financial institutions searching for solutions that are “simple, creative and responsible,” that were dubbed “The Plutonomy Report.”

Led by former Chartered Financial Analyst Ajay Kapur, the team told Citigroup investors in 2005 and 2006 that the U.S., the U.K., Canada and Australia were all plutonomy economies. By definition, a plutocracy is when an economy “is powered and consumed by the wealthiest upper class of society.”

What leads to a plutonomy and why is it relevant to the research conducted by Gilens and Page?

To answer the former, as Kapur and his team note, there are a number of factors that led to the rise of this parallel to other periods in history.

“Disruptive technology-driven productivity gains, creative financial innovation, capitalist-friendly cooperative governments, an international dimension of immigrants and overseas conquests invigorating wealth creation, the rule of law and patenting inventions. Often these wealth waves involve great complexity, exploited best by the rich and educated of the time,” they write.

To answer the latter, Gilens and Page uncovered major ways the structure of the U.S. leads to inequality in politics. They do argue “the impediments to majority rule that were deliberately built into the U.S. political system” are contributors to control among the few. However, the two reports from Citigroup provide an insight into the thoughts of the rich in society.

The rich consume so much, therefore, as Kapur and his team argue, this is where governments and markets will draw most of their focus. The rich will dominate in such a way that the rest of America will be considered excess. This produces major consequences for major decisions as Gilens and Page argue in their paper.

“Not only do ordinary citizens not have uniquely substantial power over policy decisions; they have little or no independent influence on policy at all,” they write. (Emphasis not mine)

Furthermore, the points mentioned by the Citigroup team correlate with the arguments raised by Gilens and Page. For one, income inequality is spoken in the 2005 report as an issue mainly contributing to the power of the plutocrats. Indeed, this is what allows for such threats to the American democracy.

“At the heart of plutonomy, is income inequality. Societies that are willing to tolerate/endorse income inequality, are willing to tolerate/endorse plutonomy,” Kapur and his team said.

The question remains whether the Citigroup report is still relevant in contemporary society, especially considering the 2007-08 meltdown that increased attention on the distribution of the wealth. This holds consequences pertaining to the report produced by Gilens and Page and affects our voice in our society.

A recent report by Unity Marketing suggests the answer was yes. In fact, their headline for the press release of their new study for businesses to use was titled “Affluents in the Driver’s Seat of U.S. Economy.”

“I think the most important shift in the economy at large is the growing importance of the affluent (top 20% of U.S. households by income which represent about 24.2 million households) in driving the recovery. The middle-class and lower-income folks have greatly reduced spending power, due to tax changes, unemployment, etc. so the affluent heavy-lifters are behind all the news about retail and consumer spending growing. If you dig a little deeper into the numbers you find it is the affluent behind all the good economic news,” Pam Danziger, president of Unity Marketing, said.

The consumer market for the affluent has its own terms enterprises that prove the authors of the “Plutonomy Report” on how there is no such thing as an “average consumer” in the West. There are just rich consumers and the rest of us.

While it may appear to be ridiculous, the names given to these consumers show the determination to market to the right audience. For instance, there are the “Butterflies,” who are “the most highly evolved luxury consumers who have emerged from their luxury cocoons with a passion to reconnect with the outside world.” Moreover, there the “Luxury Cocooners,  who are focused on hearth and home.” With these terms, it is diffcult to tell whether Unity Marketing is a marketing firm or a lepidopterist firm who do marketing on the side.

Moreover, it seems the rich are living in their own America with their own income to spend compared to the rest of America where it was found last summer 76 percent of Americans are living paycheck-to-paycheck.

Journalist Darwin Bond-Graham recently wrote a piece using data from Redfin, a real estate organization, showing sales of homes for the affluent are increasing, while it is declining for “the other 99 percent of the market.”

San Francisco tops the list with the most expensive sales for the rich in our society. As the authors of the report state, “a luxury homebuyer would need a million-dollar down payment and an annual salary of $916,000 to qualify for a 30-year fixed-rate loan, and to afford what would be a $21,369 monthly mortgage payment.”

To understand this, the real median income in 2012, based on Census data, for San Francisco is $74,932. In California and the U.S., it is $58,328 and $51,371 respectively.

Yet the consequences cannot be felt solely in the U.S. system as there are other externalities as well. Journalist Fred Pearce mentioned this in when writing  on the dangers of overconsumption by the elite.

“By almost any measure, a small proportion of the world’s people take the majority of the world’s resources and produce the majority of its pollution. Take carbon dioxide emissions — a measure of our impact on climate but also a surrogate for fossil fuel consumption. Stephen Pacala, director of the Princeton Environment Institute, calculates that the world’s richest half-billion people — that’s about 7 percent of the global population — are responsible for 50 percent of the world’s carbon dioxide emissions. Meanwhile the poorest 50 percent are responsible for just 7 percent of emissions,” Pearce said.

Not only do the rich have a system built for them, but they have their own market geared just for them. The rest of the population, on the other hand, must contend with the growing income inequality and hope our interests correlate with the interest of the rich.

This uncovers a system built on the premise of inequality not only in the economic sense, but also in the political sense. It has been raised incessantly how there are issues that require attention, but it is a legitimate point. What is the point of a country that states it is for democracy when it the market and governmental elites focus on an exclusive group of people?

The corporate media structure may be focusing on the upcoming elections as an indicator of where the country is heading, but a report by Bank of American Merrill Lynch on Thomas Piketty’s new book and central theme may already show what direction the country will be heading.

“When wealth and income are as concentrated as they are, and expected (a la Piketty) to get even more so, examining the ‘average’ consumer or ‘average’ investor makes little sense. Examining the fat tail – the behavior of the plutonomists, rather than that of the multitudinous many – is more advantageous to investors. Plutonomists determine and dominate spending and investment decisions and their magnitudes. Any analysis that does not tease out the skewed global income and wealth distribution, but focuses on the average is flawed from the start and is incomplete, as we step into its deeper extremes,” the authors of the report wrote.

The author who led the report? Ajay Kapur.

Indeed this power held by the plutocrats does not seem to be declining. Boston Consulting Group recently released a report showing global private wealth growing by 14.6 percent to be $152 trillion. In addition, there was an increase in the amount of millionaires households worldwide. Wealth is growing everywhere and it seems our current system refuses to address this as half of the members in Congress are millionaires (no doubt representing the Plutocrats).

Is it all hopeless? If our system is devised to stop any meaningful efforts, then why should any of us vote?

If Seattle’s recent efforts shows us anything, it is that there is still a hope not to rely on documents that are in serious need of revolutionary change. Rather it is a hope to challenge the status quo and place the power from the plutocrats to the working class.

Image by DonkeyHotey released under a Creative Commons license.

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Brandon Jordan

Brandon Jordan

Brandon Jordan is a freelance journalist in Queens, NY and written for publications such as The Nation, In These Times, Truthout and more.