The Plutonomy And The iPad

Reihan thinks that Apple's days as the largest tech company are numbered. But that depends on Steve Jobs' keeling over. Meanwhile - wheeee:

The rise of Apple illustrates a number of social trends. Consider that Apple, a company that serves relatively affluent consumers and a handful of electronics-obsessed imbeciles (that's me), is now worth more than Walmart, a company that serves a far larger number of working- and middle-class Americans. Apple's success amidst the downturn, fueled by robust sales of the iPhone and more recently the iPad, is an almost perfect illustration of Plutonomics at work.

As Ajay Kapur first observed in 2005, in a report written for Citigroup, the United States has become a Plutonomy, in which the richest fifth of the population is responsible for as much as three-fifths of all spending. And if anything, the painful economic transition we're living through now will only reinforce this tendency. Middle-class households are carrying an extraordinarily heavy debt load.

One study, citing 2007 data from the Federal Reserve, found that while households in the top tenth had a manageable debt-to-disposable-income ratio of 116 percent, the next 40 percent of households had a debt-to-disposable-income ratio of 205 percent. Basically, it is that top tenth that is buying the bulk of Apple's products. As long as this slice of the population fares well, there's reason to believe that Apple really will live up to the outsized expectations of investors.