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> (email exchange)
> On Sun, Oct 18, 2009 at 12:01 PM, Russell wrote:
> I don’t know if the very wealthy support consumption.
As a point of logic yes, it can be done, and we’ve been moving in that direction.
> I was always under the impression it was the mass of the people
> not the mass of wealth. Gillian Tett supports your thinking on this.
The essential thesis is that plutonomies arise when there are factors such as â€œdisruptive productivity gains, financial innovation, capitalist-friendly governments, overseas conquests and dopamine-heavy immigrants, the rule of law, patent protection and great complexity exploited by the wealthy of the timeâ€.
This description has applied to countries such as the US, UK, Canada and Australia recently: in the US, for example, the top 1 per cent control almost a quarter of the wealth. And that has big implications for consumer spending or global financial flows.
For while economists tend to watch factors such as unemployment to predict consumption, Mr Kapur thinks this can be misleading because it is the elite rich â€“ not the middle class â€“ who tend to drive consumption.
Last year, for example, this elite cut spending and raised saving because their assets plunged in value. However, in the next year, Mr Kapur is expecting plutonomists to make a comeback. As a result, he expects spending to reappear.