2019-08-05_Bloomberg_Businessweek-Europe_Edition

E C O N O M I C S

28

Edited by

Cristina Lindblad ILLUSTRATION

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● A political backlash is

brewing after the wealth gap

widened for decades

A few years before the financial crisis, Ajay Kapur

started advising investors to bet on the rich. He now

says it may be time to unwind that trade.

In the mid-2000s, Kapur and his then-colleagues

at Citigroup Inc. used the term “plutonomy” to

describeeconomieswhereincomeandwealthare

increasinglyconcentratedatthetop.TheU.S.was

ExhibitA. The investment thesis boiled down to

this: Buy the stuff rich people like.

The Citi stockpickers were latching onto a trend

that was already decades old. And it’s persisted ever

since, through the worst financial crash in gener-

ations and now the longest expansion on record—

making the U.S. the most unequal country in the

developed world.

There are signs a political backlash is building.

Democratic contenders for the 2020 presidential

nomination support measures, from public health

care to new taxes on wealth or securities trades,

that aim to narrow the gap. Even within President

Trump’s Republican Party, which passed a tax bill

widely reckoned to favor the wealthy, there’s been

support for curbs on share buybacks and the power

ofsuperstartechcompanies.

That’stheshapeofthingstocome,according

toKapur,nowheadofAsianandemerging-market

equity strategy at Bank of America Merrill Lynch in

Hong Kong. He ticks off features of the U.S. econ-

omy that have been around so long that investors

take them for granted: oligopoly power, lower taxes,

capitalist-friendly legislation. “All of these are sub-

ject to change,” he says. “No one is ready for this

new world.”

There are lots of ways to measure inequality, and

most of them show it’s getting worse. The problem

isn’t confined to the U.S. France has seen months

of protests by the yellow vest movement, triggered

by a fuel tax perceived to be unfair to the poor. Left-

behind regions of the U.K. helped swing the vote

for Brexit.

In the U.S., the Census Bureau’s gauge of income

disparity is the highest since record-keeping began

in the 1960s. The Federal Reserve says the share

of the nation’s total wealth has declined over the

past decade for every group except the richest

10%. “We’re supposedly a more egalitarian coun-

try, where if you work hard and play by the rules

and have access to capital, you can make it,” says

Heather Boushey, president of the Washington

The

Plutoparty

Is Almost

Over