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”