Plutonomy is an economy where a small percentage of the population controls most of the wealth, often caused by explosive economic growth fueled by advances in technology. The US is an example of a plutonomy, with the top 10% controlling more wealth than the remaining 90%. The rich control the economy through wealth generation, spending, and influencing the national debt.
The term plutonomy refers to an economy in which the balance of wealth is extremely uneven. In a plutonomy, a small percentage of the population controls most of the wealth. This affluent group has the highest incomes and controls much of the spending and economic growth. This phenomenon is usually created by explosive economic growth fueled by advances in technology, where huge amounts of money are made by a select few. Some people think that this contributes to the loss of the middle class, be it the rich and all.
The word plutonomy was coined by Ajay Kapur, a financial analyst for Citigroup, to describe countries that have unequal wealth distributions and huge national incomes. The United States has been identified as one such country. The term actually combines the words economy and plutocracy, with plutocracy meaning government for the rich, to create a word that refers to the control of the economy by the rich.
In the United States, the top 10 percent of American households are estimated to control more wealth including money and other assets than the remaining 90 percent. This is one of the things that makes the United States an example of a plutonomy. The massively uneven distribution of wealth means that this small percentage of extremely wealthy people have a far greater effect on the economy than the rest of the population combined.
According to some theories, a plutonomy occurs when a relatively small number of people earn huge sums of money, often during an economic boom. One known cause of these huge incomes would be advances in technology. When a new technology becomes a part of mainstream culture, it generates wealth for the relative few people who control the new technology. An example of this would be the increased use of the Internet which generates large sums for Internet service providers and the owners of major websites, especially now that most households have Internet connections.
Another aspect of plutonomy states that this uneven distribution of wealth creates only two economic classes, the rich and everyone else, or the non-rich. This is because there is such a large gap between the rich and the not rich that there is very little in between. The rich control the economy not only through wealth generation but by spending far more than the non-rich, close to 70% of all spending, according to some estimates. They also further affect the economy by influencing the national debt; they spend a much larger percentage of their income, borrowing more and saving less than the non-rich.
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