Homoploutia

Description

Branko Milanovic:

"it is based on the empirical observation that in modern capitalist societies an increasing share of the rich are rich in two dimensions: they are among the best paid workers, and among the richest capitalists. I operationalize this idea by looking at the top after-tax income decile, top labor (wage) decile, and top capital (rents, dividends and interests) decile in some two-dozen countries. It turns out that almost one-third among the richest income-decile Americans are “homoploutic”, i.e. they are best-paid workers and richest capitalists. This makes for an elite of about 3% of Americans. That elite, as I discuss in the post, in Capitalism, Alone and in the forthcoming The Great Global Transformation is not similar at all to the vaunted professional middle class, or professional managerial class (PMC). It is ideologically strongly pro-capitalist and pro-private property because within their own persons they accomplish the fusion of capital and labor. Hence the elite strongly defends the rights of capital, low taxes on capital incomes and wealth, and everything else that goes with it. This neo-liberal ideological aspect of the new capitalist elite should not be neglected."

https://branko2f7.substack.com/p/new-capitalism-ii-compositional-vs

Discussion

The 'Managerial Revolution' was overblown, instead <this> happened:

Branko Milanovic:

"That capitalism changed in the twentieth century with the advent of what many called a new “managerial” class. The rise of managers –-people who neither own the means of production not are simple laborers, but manage the means of production for capitalists lazily playing golf in Florida—was announced by James Burnham classic in 1941, and then further developed by Joseph Schumpeter, Raymond Aron, John Kenneth Galbraith and Daniel Bell, among others, in the 1960s and 1970s; continuing in the same vein, there is also a recent book Managerial Capitalism: Ownership, Management and the Coming New Mode of Production, by Gérard Duménil and Dominique Lévy. For its critical discussion see, Nicole Aschoff in Jacobin.

The perception of capitalism as a three-class society, with managers rising to be the new ruling class, drew on the contrast that Marx saw, but never fully resolved, between two functions played by the capitalist: the provider of the means of production and the organizer of their use (or put differently in Walrasian language, capitalist and entrepreneur). Logically, the two functions could be separated, and in fact they did become separate. That separation—it was argued by the authors I mentioned—created a new, third, class: that of managers. A very nice recent paper by Alexandre Chirat discusses the phenomenon from the Marxist point of view.

But the managerial revolution was overblown. It never happened and it is not happening. Managers as such never succeeded in creating a third class. What happened instead, as I argued in my 2019 book and several new papers confirm, is the rise of a homoploutic elite in the United States, in particular, and also in other rich capitalist economies. What is homoploutia? As often when faced with a new phenomenon, we resort to coining a new term by using Greek words: “same wealth”, or wealthy both in terms of the so-called “human capital” and thus labor income, and in terms of productive and financial capital and thus income from ownership. Homoploutic elite is composed of people who are simultaneously among the richest capitalists and richest (best paid) workers. They may be financial sector CEOs, engineers, doctors, software developers (and hence receiving high salaries) and at the same time having large financial wealth that generates sufficiently high capital income to place them at the top of capital income distribution. They might have inherited that money, or they might have saved over their lifetime out of their high salaries enough to transform themselves into the richest capitalists. We do not know the relative importance of the two channels, because the area of research is new, and nobody has yet used longitudinal data that should, in principle, allow us to answer that question."

(https://branko2f7.substack.com/p/new-capitalism-in-america)

Homoploutia, the new aristocracy combining income from both capital and labor

Branko Milanovic:

"The new capitalism has even in the rich countries failed to produce what Margaret Thatcher, and Friedrich Hayek before her, called “property-owning society”. (For good measure, Thatcher added “democracy” too.) Even when we include income from forced savings that becomes pension wealth, between one-half and almost 90 percent of the population in rich countries are capital destitute. That percentage becomes more than 90, or even more than 95, in less developed countries.

The two biggest countries in the world are interesting. Nominally, capitalist India leaves 97 percent of its population with zero capital income; nominally Communist China has become remarkably “capitalized” in the past forty years and about one-half of its population receives some income from capital; relatively more than in the United States and the UK.

To conclude: when it comes to capital ownership, new capitalism has not broken, in any significant way, the barrier erected by the classical capitalism: receiving income from capital is a privilege of the few and that privilege is, even amongst those who have non-zero income from capital, extraordinarily skewed.

The new capitalism is not people’s capitalism, but homoploutic capitalism. What has happened was not that capital income tricked down, but that labor income “trickled up” and combined with the pre-existing or newly-created large fortunes to create, at the very top, a new class whose wealth comes from both labor and capital. Homoploutia, or new aristocracy, my friend!"

(https://branko2f7.substack.com/p/the-new-capitalism-iii-capital)