The Plutonomy Is Still Going Strong

[Passages]

For the last 20 years, analysts have known that this is an economy by and for the rich.

by David Dayen September 18, 2025

We are closing in on the 20th anniversary of one of the most revealing pieces of bank analyst research in recent American history. On October 16, 2005, Citigroup released an “industry note” for investors that started with a bracing statement: “The World is dividing into two blocs—the Plutonomy and the rest.”

Plutonomy is defined as an economy where, well, plutocrats provide the lion’s share of the economic activity and have a distortionary effect on economic statistics. One way to describe it is that if Bill Gates walked into a room with three laborers, the average wealth of all four in the room would be in the billions. But that wouldn’t tell you anything about the circumstances of the non–Bill Gates members of the sample, or how the economy feels to the “average” person in the room. “Consensus analyses that do not tease out the profound impact of the plutonomy on spending power, debt loads, savings rates (and hence current account deficits), oil price impacts … are flawed from the start,” the note explains.

This was an investor note, and it was primarily focused on finding a “plutonomy” basket of stocks to capitalize on this tendency. (Luxury goods, essentially.) But the researchers at Citigroup provided strong evidence for a continued pulling away of the rich from the rest, which has a lot of explanatory power for the moment we’re in economically today. How, otherwise, to explain the current combination of increased inflation, increased unemployment, and yet also increased consumer spending?

SNIP
This is not that novel an analysis—like I said, Citigroup, among many others, figured it out 20 years ago—but it has huge implications. First, on inflation, if the primary buyers of goods and services (the richest 20 percent) are not price-sensitive, there is no reason to moderate prices to ensure that customers have an ability to pay. If inflation is not going to meaningfully reduce volume of sales, you can keep marking up higher. This is consistent with the story of higher corporate earnings, with companies “raising prices when they can.”
https://prospect.org/economy/2025-09-18-plutonomy-still-going-strong/