E C O N O M I C S
28
Edited by
Cristina Lindblad ILLUSTRATION 731● A political backlash is
brewing after the wealth gap
widened for decadesA 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
describe economies where income and wealth are
increasingly concentrated at the top. The U.S. was
Exhibit A. 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
of superstar tech companies.
That’s the shape of things to come, according
to Kapur, now head of Asian and emerging-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 WashingtonThe
Plutoparty
Is Almost
Over