Economists suggest the United States has become a plutonomy

Thevenin's La Prise de la Bastille

Income disparity like plutonomies lead to things like the storming of the Bastille. Image from Wikimedia Commons.

The question has been raised many times over whether the United States is becoming or already is a “plutonomy.” The word plutonomy is a portmanteau of “plutocracy” and “economy,” meaning an economy based on a plutocracy,  which means the wealthiest few control the economy. Some people insist the U.S. economy was that way to begin with. Recently released figures indicate that recent booms in the economy had almost everything to do with the wealthiest few.

Plutonomy does not involve a cartoon dog

What the term plutonomy implies is the economy is driven by and depends on a small number of the wealthiest people. There is reason to think any “improvements” during the recession have everything to do with the spending habits of the richest few. According to the Wall Street Journal, Moody’s has kept track of consumer spending habits, including the richest 20 percent of the population.  Over the past 20 years, the richest 5 percent alone contributed 37 percent of consumer spending. The bottom 80 percent (i.e. the rest of us) contributed less than 40 percent.  The richest 10 percent make about half the income of the U.S.

The math works

According to a study released in 2006 by the Federal Reserve, economist Arthur Kennickell found that the wealthiest 10 percent of the nation held almost 70 percent of the wealth. That means for every dollar of value in the sum total of all non-public assets of the United States, 90 percent of the population owns only 30 cents worth. It seems Reagan’s trickle went upward, and it was no mere trickle; it was a tidal wave.

Of, by, and for the rich

A few scholars, such as Howard Zinn, observed that the Founding Fathers of this country were the wealthiest of the wealthy. Their profits were affected more by British taxes than the commoners were. Thus, they revolted and established a nation in which they would enjoy an oligarchy of advantage. James Madison estimated only a third of Americans were actually for the American Revolution, the rest being either opposed or indifferent. Republics, by their nature, foster aristocracies. If there is one universal harbinger of doom for a society, it is a growing and vast disparity between the wealthiest few and the many poor.

Further Reading

Wall Street Journal

Federal Reserve study of Wealth Distribution (PDF; requires Adobe Reader)

Wikipedia on Wealth Inequality in the United States

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