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What is a Plutonomy?
A Plutonomy is an economy driven by spending by individuals in the highest economic class. It is characterized by a small middle class, with extreme disparity in wealth and income between the upper and lower classes.
Back to: ECONOMIC ANALYSIS & MONETARY POLICY
How Does a Plutonomy Work
In a Plutonomy, spending and economic product by the upper class exceeds (or far exceeds) the economic product generated by the spending of the lower class. This generally derives from:
- Innovative Technologies,
- Financial Innovations, and
- Capitalistic Governments
In such an economy, the upper class is better able to exploit economic conditions. As a result, there is increased spending on luxury items. The overall economy is more resilient to factors (such as interest rates, commodity prices, employment rates, etc.) affecting a more balanced economy. In theory, the windfall that the upper class experiences under these conditions may be subject to attack or upheaval by populist sentiment and opposition to the aggregation of wealth by the upper class.
Related Topics
- Real Economic Growth Rate
- Fox-Trot Economy
- Stagnation
- Neoclassical Growth Theory
- Exogenous Growth Theory
- Endogenous Growth Theory
- New Growth Theory - Explained
- Classical Growth Theory - Explained
- Real Economic Growth Rate - Explained
- Plutonomy