Piketty, plutonomists, and the legal framework
from Edward Fullbrook
Plutonomists, like real-world economists, know that the main determinant of income and wealth distribution is the legal framework in which an economy functions. The Plutonomy Movement, by far the most powerful political force of our age, is founded on the underground application of this basic principle. Occasionally this becomes manifest when one of plutonomy’s strategic documents is leaked. Such an event happened last week when the Bank of American Merrill Lynch report “Piketty and Plutonomy: The revenge of inequality” found its way into non-plutonomist hands. In addition to posts on this blog, there was coverage in the Chinese and the Australian press and Brad Delong posted an excerpt from the report including three graphs. Here is another excerpt, very brief, and number 42 of the report’s 45 figures. Red indicates “regulatory legislation” and green “deregulatory legislation”.
Financial re-regulation will likely put a damper on the incomes of some finance professionals, reducing income inequality at the level of the top 0.1% of households (>US$1.5mn income) but not for the top 0.01% households (>US$7.2mn income). However, the vast growth in global financial wealth projected by Piketty, both in EMs and DMs, will likely boost income inequality at the top 0.01% level, driven by astute capital/wealth managers like hedge funds and private equity exploiting scale economies.
Drawing on our earlier work, and the research of Thomas Philippon and Ariell Reshef we highlight the importance of financial de-regulation in engendering plutonomy. Figure 42 delineates the history of financial regulation in the USA. (emphasis added)
A history of financial regulation and deregulation
The report’s lead author, Ajay Kapur, is one of Plutonomy’s key strategists. Recently Brad Delong posted on his website three of Kapur’s Citigroup reports from about ten years ago. Here are the links:
And here is the ”The Plutonomism Manifesto”
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Real-World Economics Review Blog 
Great post, Edward. Follow the links, guys!
Extract from Plutonomy 1 p.9: “Clearly, a speculative instinct is key to generating and sustaining these complex and risky transformations [underlying plutonomy]. Here, a new rather out-of-the box hypothesis suggests that dopamine differentials can explain differences in risk-taking between societies. … Populations generally have about 2% of their members with high enough dopamine levels [to have] the curiosity to emigrate”.
Curiously(!) the personality analyst conducting my (Jungian) Myers-Briggs Personality Indicator said that Introvert iNtuitive personality types are as rare as 1%, so that Introvert iNtuitive Thinking types (the practically and the intellectually curious types together) account for just 2%, and that my INTJ type was characteristic of entrepreneurs (though in fact I sat right on the dividing line between these practical “Judging” and exploring “Perceptive” types).
So perhaps there is something in this genetic “dopamine” thesis, with the practical type narrowly focussed by personal ambition less likely to perceive the survival and moral significance of Ashby’s “requisite variety” and St Paul’s (1 Cor 12) cooperative symbiotic relationships?
In certain sectors of the economy, the the business model is essentially to deplete stocks of natural capital (that, absent legislation, have no inherent “owners”) and to externalize (or resist internalization) of the costs associated with that depletion (primarily ecological costs with an incidence on other species, or if borne by human beings at all, typically by distant future generations of them).
I have suspected for some time now, that the main “economies of scale” enjoyed by major firms in such sectors are more than anything else, political. One needs critical mass to lobby effectively for access to ore bodies and hydrocarbon pools, and to ensure that one is adequately sheltered by legislation and administrative policy from any liability for all the damage caused bringing these resources to market.
Michael Barkusky
Pacific Institute for Ecological Economics
Vancouver BC
Canada
Hi Edward,
where did you get this excerpt from? Is there some way that I can get hold of the whole document?