Home > income inequality, Plutonomy > Plutonomy update: “middle-class serfdom”

Plutonomy update: “middle-class serfdom”

from Edward Fullbrook

The middle classes, including nearly all economists, continue to prefer not to talk about plutonomy nor even admit its existence.  But among themselves the hyper rich are not so inhibited and so occasionally, as with the notorious Citigroup plutonomy reports, their analyses leak to us 99 percent.

Two such leaks are reported in a short article by Timothy Noah in the October 6th issue of The New Republic. He quotes Michael Cembalest, the chief investment officer of JPMorgan Chase, who

wrote in July of this year (in a clients-only newsletter obtained by Washington Post columnist Harold Meyerson) that “profit margins have reached levels not seen in decades,” and “reductions in wages and benefits explain the majority of the net improvement.” (Cembalest printed the latter quote in boldfaced lettering.) “US labor compensation,” he explained, “is now at a 50-year low relative to both company sales and US GDP.”

Noah also has quotes Dan Alpert, managing partner of theNew Yorkinvestment bank Westwood Capital.

Once upon a time, Alpert explains, American capitalists paid American laborers with something called a “salary.” Henry Ford famously boosted his workers’ pay to $5 a day so they could buy the Model Ts they were assembling. The better part of a century passed, and, by the early aughts, globalization had created a world oversupply of free-market labor—a hiring hall now housing about 2.6 billion recruits from emerging nations, together with roughly 550 million in the developed world. It no longer made financial sense to pay American workers high wages when you could pay Chinese workers low wages to do the same work. On the other hand, if American workers lost their spending power, who would keep the U.S.economy afloat?

The rise of cheap credit provided the answer. American labor effectively got paid in a different currency: debt. Instead of Model Ts, the latter-day working class bought overpriced houses and all sorts of other stuff it couldn’t afford. The beauty for the capitalists was that, when laborers got paid with debt, they had to pay it back with interest. Alpert calls it “middle-class serfdom.”

Noah’s article “Brooks Brothers Bolshevism: Wall Street discovers income inequality” is behind a paywall, but I accessed it for free at http://dispatches.us/post/10483612514/must-read-brooks-brothers-bolshevism


  1. September 27, 2011 at 11:00 pm

    Good work, Edward. I find the lack of comments ironic and almost laughable, except that even RWER is a nexus of flesh & blood humans, some of whom may unwittingly sustain some residual tendency to selective inattention, denial, and other symptoms of PTSD or TSS (traumatic shock syndrome, AKA Shell Shock). Also, as a sincere Buddhist who took The Cure (persistent realism), I can feel again and compassionately empathize with egos still too fragile for full awareness & heroic response. You probably know this, but it seems worth reminding everyone that Mr. Moore’s “Capitalism: A Love Story” features a copy of an early Citicorp plutonomy newsletter plus some pungent but valid commentary. The relatively new documentary “Moving Forward” while imperfect in its conclusions and short on viable options gives a view of The Problem much closer to wholeness. Naturally, HJ Chang’s RAS presentation & book on “23 Things TheyDon’t Tell You About Capitalism” is a must for all Realistics and economic holontologists. Thanks & Blissings

  2. September 28, 2011 at 1:38 am

    the link is not working………

  3. September 28, 2011 at 3:06 am

    Lori, If you mean for the “Brooks Bro Bolsheviks” link, it worked for me. If you meant the link to my Greenbook blog, try EcotectureNOW.wordpress.com and use the link on the “Greenbook” page.

  4. Alice
    September 28, 2011 at 9:50 am

    You know I think it is suspect when major banks are appealing to their wealthiest clients by saying “look how much we have hog tied labour”.

    There is an air of desperation about it ..which suggests to me that financial institutions are hunting the biggest fish who can still spemd freely…..

    I might be wrong but

  5. September 28, 2011 at 12:47 pm

    “Then there’s Dan Alpert. As managing partner of the New York investment bank Westwood Capital, Alpert hasn’t lost interest in making money. But, when he describes his view of how joblessness and stagnating middle-income wages relate to the debt bubble of the aughts—as he’s been doing more and more in the financial press and on the Washington policy-wonk circuit—he sounds like Robespierre. (He’s actually more of a Hubert Humphrey Democrat….”

    And people (including me) think I’m a cynic ….

  6. October 6, 2011 at 5:34 pm

    The dispatches.us link doesn’t work. Server appears to be down.

    Try here for Brooks Brothers Bolshevism:


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