Plutosaturation

The modern economy keeps getting better at turning raw materials and energy into goods and services- known as productivity gains. That is, real cost of making stuff gets cheaper.

A common political argument is that the proceeds should be distributed more widely. That sounds fair enough. If the economy can produce more, more people should get more.

However, if productivity gains are widely distributed, more people consume more goods and services. They buy more things, travel more, eat more varied food, live in bigger houses, use more devices, replace things more often and expect more services around them.

That means more material extraction. More energy. More transport. More waste. More emissions. That is, acceleration in climate change and depletion of resources.

The unexpected counterweight is wealth inequality. If the gains from productivity are captured by a small number of people (as they are), the consumption effect is throttled. A billionaire does not eat a billion breakfasts. They do not wear a billion shirts. They do not personally occupy a billion houses. There is only so much one body can consume in one day. After a point, extra wealth stops turning into extra consumption. It turns into assets, shares, property, influence, tax structures, private foundations, vanity projects and dynastic storage.

So inequality becomes a kind of accidental ecological brake. The ugly little paradox is this: broad prosperity increases consumption, while concentrated wealth limits consumption by trapping purchasing power above the level at which one person can use it. I am going to call this “Plutosaturation”.

Plutosaturation is the point where extra wealth held by the rich no longer converts efficiently into personal consumption, because human appetite, time and physical use all have limits.

The theoretical maximum consumption of one person could be pushed into the billions of dollars per year if “consumption” includes deliberately wasteful commanded consumption: private resorts, chartered aircraft, celebrity performances, extreme luxury travel, personal staff, security, medical services, food, drink, fuel, hotel stays and events with no retained asset value. A rough upper-bound estimate of about USD 3 billion per year is possible on paper, but it is not a realistic sustained consumption level because one person has limited time, appetite, attention and physical use capacity, and because much of the apparent spending by the ultra-wealthy is actually asset conversion rather than consumption. So USD 3 billion per year is best treated as an absurd theoretical ceiling, while realistic sustained personal consumption is likely far lower, say USD 10 million per person per year in actual non-asset consumption.

The global top 0.01 percent appear to hold about USD 100 trillion in wealth. Even if each member personally consumed USD 10 million per year, they would only convert about USD 5.6 trillion of that wealth into annual consumption. The remaining USD 94 trillion is not inactive, but it is trapped above the level at which it can be converted into ordinary personal consumption. Sure it gets reinvested in schemes that create productivty gains. But these in turn get trapped.