Tuesday, April 6, 2010
Last weekend we went to an outlet shop where branded products are sold at a discount. I did not buy anything myself but my wife and kids did. I just paid for the stuff. It was also the last day of the financial seminar at the library. It was a good session. Although I knew already about the topics perhaps about 90% from the books I read, it was the exchange of viewpoints that I liked. The discussion was interesting and it showed the real everyday situation faced by the participants. I realized that most people have limited financial literacy and I guess I can consider myself a bit advanced.
Most of my knowledge is from books but I have had training in college plus actual experience. This classifies me perhaps above the usual everyday person. Yesterday I watched Michael Moore’s documentary ‘Capitalism – A Love Story.’ It’s a great film that allows you to understand the today’s problems. An interesting part was about a report from Citigroup about the ‘plutonomy’. It was a new term for me. It applies to the income inequality where the top 1-5% controls the majority of wealth. I found the report and downloaded it. It’s an interesting concept but cold and frightful as expressed in Moore’s film.
According to the report, the average person places his wealth in real estate. The wealthy elite prefer equities. It also identifies the location of the ‘plutonomy’ residing to USA, UK and Canada. The situation exists where there are common factors: financial innovation, technological breakthrough, foreign migration and cooperative government. The people who can capitalize on this situation are the very wealthy and the managerial aristocracy. Being financially literate allows you to enter into the rare filled atmosphere. I guess this is what Alvin Toffler wrote about in his book ‘Revolutionary Wealth.’ It is just so unequal to the majority.
In the good side are egalitarian countries like Japan, France, Switzerland and other European cultures except Italy. The report was written in 2005 – before the financial crisis of 2008-2009 and the election of Barack Obama. I wonder if there is any change in the report’s findings especially with the increasing role of government due to the bailout. Moore’s film seems to indicate that radical change is coming. There is no choice considering the financial mess. Tax the rich and give to the poor seem to be the rallying cry. The recent passage of the health care bill is a possible indication. There is too much more to do if one hopes to achieve Franklin Roosevelt’s dream of having a 2nd bill of rights.
I always thought that the US is the best place to grow and achieve one’s dream. But is this possible with the ‘plutonomy’? Most people would prefer to live in egalitarian countries like France or Japan but unfortunately these are more ‘closed’ countries that do not have the progressive immigration policies like US and Singapore. But I think Singapore strives to be more egalitarian than the US. It’s an interesting concept and Moore’s films have again educated a lot of people. One needs to be exposed to films, books and seminars to understand all the present day financial complexity. Further changes lie ahead with coming legislation to monitor the financial industry.