This article appears in the December 2025 issue of The American Prospect magazine. Subscribe here.
We are living in a new Gilded Age. The first, from roughly 1870 to 1890, was marked by dramatic inequality: Wealthy monopolists like bank tycoons and railroad barons saw their fortunes boom as the country industrialized, while the poor, particularly in the post-Reconstruction South, continued to suffer. A cast of corrupt men controlled the flow of capital and political power, shaping the country around their will. Thus it was not a golden age, but a gilded one—a veneer of prosperity hiding the real economic and social rot below.
Today, with a president obsessed with gold and material wealth, the Second Gilded Age metaphors write themselves; just look at the literally gilded add-ons to the Oval Office. Tens of millions of Americans rely on government food and medical assistance that Republicans have voted to cut; some Americans use “buy now, pay later” apps to pay for their rent and groceries; and wages can’t keep up with inflation. But the wealthy are doing just fine. The stock market is up 48 percent since 2022; luxury-brand purchases are holding strong; and Elon Musk is about to get a $1 trillion pay package. Our country is dramatically unequal, and it’s only getting worse.
The rich have a gravitational pull on the economy, dragging it in their direction. According to economic researchers at Moody’s Analytics, the top 10 percent of American earners are now doing almost half of the spending. Even those economists who dispute this specific number concede that the wealthiest Americans are doing an outsized amount of consumer spending. The wealth of the top 10 percent is up to $113 trillion, up $5 trillion just between April and July, according to Federal Reserve data. The top 1 percent holds $52 trillion in wealth, a new record.
That matters for several reasons. First, it produces an unclear picture of the economy. Even though the majority of Americans are feeling the squeeze of inflation and rising unemployment, the ultra-wealthy are doing well enough to keep spending, which makes it look like everyone has kept spending.
If you stop looking at averages and check the wealth of who’s actually spending, you can better understand the economic realities for the majority of Americans: There’s one line steadily going up, and another going down. That’s why some call ours a “K-shaped” economy—two lines headed in opposite directions. Others call it a plutonomy, a portmanteau of “plutocrat” and “economy,” signaling the disproportional power of the ultra-wealthy over our entire financial system.
There’s another reason that this wealth and spending inequality matters: It makes things more expensive for everyone.
CORPORATIONS KNOW THAT THE WEALTHY HAVE a distortionary impact on the economy, as they continue to spend while everyone else flounders. Citigroup executives coined the term “plutonomy” almost exactly 20 years ago in a memo sent to investors. The bankers didn’t coin the term as an intellectual exercise; the goal was to curate stocks accordingly. Identifying the country’s “plutonomy” was a way to marshal the movers of American capitalism, giving them a framework to continue making money. Corporations have taken note. If wealthy consumers are responsible for the lion’s share of spending, the logic goes, companies might as well raise their prices—the primary buyers can afford it.
“If you can come up with something that [rich people will] regard as special, you can really make a lot of money selling to them,” said Robert Frank, a professor of management and economics at Cornell. “So, a lot of the ingenuity in the economy gets directed to things that we would think of as less than essential.”
That’s the idea behind premiumization, a marketing trend that encourages companies to brand their products as high-end and sell them to wealthier consumers. A Forbes article describes premiumization as a “strategic move by consumer brands to elevate product offerings and charge higher prices.” The push for premiumization is largely driven by demand—wealthier consumers have more money to spend and are looking for “premium” ways to spend it—but it is also spurred on by inflation, which pushes companies to justify price hikes with a shiny exterior.
Social media has ratcheted up the status competition, making the clothes we wear and the weddings we throw visible to everyone we know.
“If I tell you that I raised your price … because I need to increase my profitability, you’re probably just going to go away,” said Z. John Zhang, a professor of marketing at the University of Pennsylvania. “But if I tell you that I raised my price because … I produced a better product for you, that sounds like a better message.”
Michael Rapino, the CEO of Live Nation, the owner of the loathed, fee-grabbing event ticketing operator Ticketmaster, was blunt about this in an interview with The New York Times’ Andrew Ross Sorkin. “I think music has been underappreciated,” he said. “It’s like a badge of honor to spend 70 grand for a Knicks courtside [seat], they beat me up if we charge $800 for Beyoncé … we have a lot of runway left.”
Once you learn the term, it’s hard not to see premiumization everywhere. Demand for new luxury goods is outstripped only by demand for used luxury goods from websites like The RealReal. Apple and Dyson (maker of $1,000 vacuums as well as $400 hair dryers) have long embraced premium aesthetics to sell their products, but so have more surprising companies: WD-40, the company that makes the eponymous lubricant, found that they could charge more by selling cans with “smart straws” that spray the oil in both a stream and a mist.
Airplanes are becoming premiumization delivery systems, with seats that were once considered basic economy now sold as premium because they are in the front of the plane. The half-decent seat pitch (referring to the distance between your seat and the seat in front of you) that was once standard has now become a luxury that passengers will pay for to avoid the even more cramped seats in the back. Some first-class “suites” now have doors, caviar service, and even free pajamas.
Changes to Disney resorts reveal premiumization in perhaps its most concentrated form. Whereas traveling to Disneyland or Disney World was once a rite of passage for the middle class, visitors now shell out for access to the front of the line for rides; those booking a guide or staying at a Disney property get priority. (Until 2021, that FastPass service was free, as long as patrons returned to the ride in a specific time window.) There’s a lounge in Disney’s EPCOT that has a $179-per-person prix fixe snack and champagne; Disney’s Grand Floridian hotel on the resort grounds has a Michelin-starred restaurant; there’s a secret Club 33 in the theme parks that is invitation-only. Instead of providing a common experience, Disney caters to the rich, putting a velvet rope around the most American vacation there is.
AN INCREASE IN COSTS AND LUXURIES DOESN’T just affect wealthy spenders. Middle-class Americans see the same advertisements, watch the same influencer vlogs, and thus feel pressure to make the same purchases. And sometimes it’s not just psychological pressure, but simple logistics: If the only hair dryer at your beauty supply store is a Dyson, and you need a hair dryer, you will end up paying more.
J.W. Mason, an associate professor of economics at John Jay College at the City University of New York, compares this to a kind of premiumization that some companies turned to during World War II, when the country put caps on the price of goods to manage runaway inflation. The price controls were quite effective at slowing massive inflation, but some companies found a clever way around the caps by only stocking high-end items, so they could say they didn’t raise their prices, but still charge a premium. While today’s businesses aren’t responding to the same artificial price caps, consumers are feeling something similar when their only options are premium-ized and marked up.
We can see some evidence that consumers are responding to premiumization by buying more expensive versions of the same products. Using data from the U.S. Bureau of Labor Statistics, I looked at the Consumer Price Index for new vehicles, yielding a measure of the average change over time in prices Americans pay for a new car with roughly similar features. That data tells us that, between 1980 and 2025, the price of a new car doubled. But when you look at what consumers are actually spending on new cars, it’s now somewhere around six times as much as it was in 1980. Are today’s cars three times better than they were in 1980? Maybe. But if consumers don’t actually need cars that are three times as good, and are buying them anyway, it points to two possible reasons: They’re paying for the status of the car, or premium options are the majority of what’s for sale.
Another good example is weddings. Within just a few years, event planners have noticed a steep rise in couples wanting to tie the knot away from home. Market research confirms it: The destination wedding industry grew by $7 billion between 2022 and 2023. By 2027, the industry will be worth more than $78 billion. “If what people are buying isn’t just the material thing, but the kind of status and display that goes with it, then people may feel that they have to buy more expensive versions,” said Mason.
This jostling for status has a real economic impact. A study of U.K. consumers found that around 40 percent of Brits had been invited to a destination wedding in the past year, and the average cost of attendance lands around $2,500. Of those who attended, over 30 percent put the travel expenses on their credit cards. Others used buy now, pay later services or even took out loans.
It’s a natural thing to feel the pressure of “keeping up with the Joneses,” but that becomes a lot harder in a plutonomy, when the Joneses are really, really rich. It’s also harder to tune out the lifestyles of our neighbors now that they’re all over our phones. Social media has ratcheted up the status competition, making the clothes we wear and the weddings we throw visible to everyone we know, and often to thousands of strangers too. It’s a digital form of the upsell: Instead of the fast-food clerk asking if you want fries with that, thousands of people streaming through your feed are telling you to take that vacation, go to that five-star hotel, and live your best life. We’re living in the FOMO economy.
In the early days of Facebook and Instagram, users could keep up with how their friends were living; now, with TikTok’s boom and algorithms designed to push content from strangers, users are exposed to more wealth and consumption in an hour of scrolling than some of their grandparents ever saw in a lifetime. Just take the social media hubbub around ultra-wealthy Anant Ambani’s Mumbai wedding in 2024 or the TikTok-fueled tween obsession with Drunk Elephant, a skin care brand that will run you $72 for a moisturizer. The $250 billion influencer industry is selling their lifestyles to us, whether or not we can afford them.
Frank, who wrote the 2013 book Falling Behind: How Rising Inequality Harms the Middle Class, was careful to note that the blame for our plutonomy shouldn’t fall on consumers, whether it be the wealthy who are indulging in luxuries or the middle- and working-class people who feel pressure to spend more than they have. The wealthy “do what everybody does who has more money: They spend more, they build bigger, they buy faster, they travel farther,” he said. “That’s not a moral indictment of them. I mean, that’s what poor people do when they get more money. That’s what middle-class people do when they get more. Rich people do that too,” he said.
If anyone should be blamed for our rapidly increasing consumer inequality, Frank argues, it’s policymakers who refuse to tax the wealthy. “When [the wealthy] just bid up the prices of penthouse apartments, there’s only so many of them with views of Central Park to go around,” he said. If the government taxed the exorbitantly wealthy, “all that money that went into that could have been used to buy things that are actually useful for everybody.”
To Mike Pierce, the executive director of debtor advocacy group Protect Borrowers, corporate America deserves much of the blame, too. When speaking about plutonomy and premiumization, “it’s really easy to tell a story about how people are living beyond their means,” Pierce said. “But the real story here is about big financial companies seeing that precarity, that vulnerability, and trying to get rich off of it.”
The middle class is taught, through carefully designed marketing and social media, to identify more with the rich than the poor. This class misalignment keeps them striving for the upward mobility our economic mythology promises them, even though so many are just one medical emergency or car crash away from poverty.
“The people in the middle aren’t resentful of the lifestyles of the rich,” Frank said. “They want to see pictures and footage of mansions and yachts. They think, usually incorrectly, they’ll be rich someday. What’s it going to be like?”
ON OCTOBER 29, CHIPOTLE, PURVEYORS OF BURRITOS and slop bowls, had a difficult earnings call. CEO Scott Boatwright described the “consumer headwinds” the company has been experiencing as consumers who make below $100,000 per year have stopped eating out. The executives offered a succinct explanation: Everyone who isn’t wealthy is feeling the weight of unemployment, student loan repayments, and slow wage growth. These low- to middle-class consumers account for 40 percent of Chipotle’s sales, so losing them threatens their whole business model. Chipotle is not alone. Other fast-casual chains are seeing depressed sales. Walmart, Kohl’s, and discount store Dollar General have noticed their lowest-earning customers spending less and less. Growing numbers of back-to-school shopping families have struggled to outfit their kids this year. Americans making over $100,000 a year have seen their consumer sentiment climb in 2025, while those under $100,000 are gloomy.
If Chipotle is missing a major chunk of its customer base, it’s likely they’ll be forced to raise the prices for everyone else to make up for it. Maybe they’ll use premiumization to justify those price hikes (special guacamole or healthful tortillas, perhaps). Regardless of their strategy, low- and middle-class consumers lose. If prices go up, eating out at Chipotle becomes less of a casual weekday lunch and more of a once-in-a-while treat. And, generalizing this conclusion to other goods and services not of the burrito bowl variety, it’s clear that the goalposts of a comfortable middle-class lifestyle have just moved further back.
Pierce took a second lesson from the Chipotle earnings call. “It’s downstream from that moment when the C-suite is finally waking up to the fact that people can’t afford the stuff they’re selling,” he said. “They haven’t been able to afford the stuff they’re selling for a while now, and easy access to debt is masking that sickness in the economy.”
Wide-open access to lines of credit is one tool that has emerged to keep Americans spending like influencers.
Indeed, wide-open access to lines of credit is one tool that has emerged to keep Americans spending like influencers—or even just staying afloat—despite economic trouble. With the proliferation of “buy now, pay later” companies like Klarna and Affirm, which allow consumers to put purchases on credit and pay off their debt over a number of weeks, Americans can keep buying what they always have, even if they don’t actually have the money in hard cash.
While the majority of buy now, pay later purchases are for general “stuff,” like furniture and clothing, an alarming number of Americans are using these debt services for absolute essentials. A quarter of buy now, pay later users have used the services to pay their rent, according to a poll commissioned by Protect Borrowers and Groundwork Collaborative. One in three have used it to pay for medical or dental care. Perhaps most harrowingly, nearly 40 percent have used buy now, pay later to make a payment on another debt, such as a credit card payment.
Those numbers are a stark reminder that middle- and working-class Americans aren’t greedy or overindulgent; instead, they are just trying to live in accordance with the model set by generations past, where a meal out or a new sweater didn’t require taking on debt. In our new Gilded Age, that’s a much harder prospect.
These Americans “go to work every day, they bring home the paycheck that they command in our economy, and it just doesn’t go far enough,” said Pierce. “And so, they’re figuring out how to live the same kind of life that their parents lived, and to do that often involves a tremendous amount of consumer debt.”
Jared Bernstein, former chair of the White House Council of Economic Advisers under President Biden, emphasized to me that for increasing numbers of Americans, the issue isn’t whether they can afford a destination wedding or a new car. Instead, it’s whether they can put food on the table while also paying off student loans and the electricity bill.
“We know that inequality is psychologically discomforting to people,” said Bernstein. “If you’re a billionaire, and the person you think you’re competing with is a trillionaire, you feel like you’re falling behind … I think for most middle-class people, falling behind means falling behind on the rent.”
Whether they’re taking on debt to buy the products and experiences social media markets as the trappings of a good middle-class life, or taking on debt just to make rent, those in the middle are feeling the squeeze of an economy by and for the wealthy. Our ideas of how to live and what to buy are often warped, as if in a funhouse mirror, by the ultra-rich and the companies that design products toward them.
Soon, Pierce told me, he thinks people will start to miss their buy now, pay later payments en masse. Those companies are directly linked to consumer bank accounts, so people will start getting charged overdraft fees if they don’t have enough when “pay later” becomes “pay now.” Pierce sees the buy now, pay later economy as a house of cards threatening collapse as debt catches up with consumers.
I asked him if he worries about the shifting goalposts of middle-class life—the idea that we need luxury cars and new clothes and destination weddings to keep up with the wealthy. He agreed that our plutonomy is psychologically destructive, but fears something far worse.
“I certainly do worry about what it means for the American dream and the way people think about their role in the economy if this keeps up,” he said. “But I worry more about what it means if people don’t actually have any agency in that position, and at some point Wall Street pulls the rug right out from under them.”
Those of us who are “too poor to afford life, but too high-income to get help,” as Elizabeth Pancotti, managing director of policy and advocacy at Groundwork Collaborative, put it, are caught between a plutonomy that pushes prices higher and a lower class that, under the Trump administration, is rapidly having the social safety net pulled out from under them.
“You really get squeezed by both sides by this phenomenon of prices going up as things get luxurious, and you don’t get any help from the bottom,” she said. “And I think that window is expanding as our social safety net shrinks as the wealthy get even richer.”
This article appears in Dec 2025 Issue.