In 2005, Citigroup analysts coined the term Plutonomy as an ideological provocation disguised as analysis. They argued that global growth rested disproportionately on the spending of the wealthy, especially the “top 1%.” According to this claim, the world economy follows the whims of the global elites’ demand, while the majority slips into irrelevance.

The Plutonomy thesis reveals either ignorance of capitalism or ideological hostility toward it. Left-collectivist critics embrace it because it dresses capitalism as feudalism in modern clothes. But in essence, capitalism and feudalism are opposites. Feudalism chains wealth and power to the bloodline, preserving a static order. Capitalism breaks that order. It multiplies, redistributes and even annihilates wealth through innovation, entrepreneurship and competition. 

Plutonomy advocates point to inequality data to support their case. Yes, wealth concentration exists, but the inference those advocates draw from it is false. Capitalism’s logic is not one of privilege but freedom. Studies from Williams Group wealth consultancy show that two-thirds of wealthy families lose their fortune by the second generation, and 90% by the third. Concentration of wealth is not permanent but a phase in a cycle. The system does not malfunction when wealth clusters — it functions. Success receives reward, but failure swiftly destroys fortunes.

The capitalist system rests on voluntary exchange, individual initiative and open competition. The moral principle is not “the few rule the many” but “each individual acts by right.” Critics mistake correlation for causation. Rising wealth at the top does not mean exclusion of the bottom. 

In fact, global data since 1980 demonstrates that while the top 1% grew richer, more than a billion people worldwide rose out of extreme poverty. China, India and much of Southeast Asia did not escape starvation because elites consumed more; they escaped because capitalism’s logic of production and trade reached their masses.

The logic of capitalism undermines Plutonomy at its root. Elites may shape markets, but capitalism’s engine lies in mass participation. The wealthy do not dictate growth; they compete within a framework shaped by consumer sovereignty and entrepreneurial risk. No aristocracy ever built an industrial revolution; no plutocracy ever lifted billions from poverty. Only capitalism, driven by free exchange and broad demand, accomplished that.

Capitalism rewards action, not birth

Capitalism treats wealth as a process, not a possession. Entrepreneurs must continually recreate wealth through production, innovation and risk-taking. Inherited fortunes erode when heirs fail to compete. Thomas Piketty claimed that capital tends to accumulate, but capitalist markets demonstrate the opposite: Unused capital dissipates. This competitive order forces every firm and every individual to justify their position anew. Aristocracy freezes history in bloodlines while capitalism accelerates history through challenge, destruction and renewal.

Joseph Schumpeter identified this dynamic as creative destruction. He argued that capitalism thrives by overturning the old and replacing it with the new. Innosight data confirms this: In the 1950s, Fortune 500 companies survived on average for 60 years. Today, they survive for less than 20 years. 

Kodak dominated photography with 90% of the film market, yet it collapsed in 2012 because it ignored digital innovation. Canon, Sony and other firms seized Kodak’s market by betting on digital technologies. Nokia controlled 40% of the cellphone market in 1999, but its share fell below 5% by 2013 because it missed the smartphone revolution. Apple and Samsung seized Nokia’s throne. 

In 1980, oil and auto companies such as Exxon, GM and Ford dominated the global rankings. By 2022, Apple, Microsoft, Amazon, Alphabet and Tesla occupied those top positions. The World Economic Forum estimates that industries younger than 40 years generate over half of global GDP. Shifts in dominance reveal capitalism’s law: Innovators survive, complacent firms vanish.

Entrepreneurial stories embody the same laws. American businessman Jeff Bezos launched Amazon in a garage in 1994 and expanded it into a trillion-dollar firm by leveraging capitalism’s infrastructure of financial markets and contract law. South African businessman Elon Musk reinvested profits from PayPal into Tesla and SpaceX, enterprises that toppled century-old automakers and state-run aerospace monopolies. American businessman Mark Zuckerberg built Facebook in a dormitory and redefined global communication. 

These entrepreneurs did not inherit aristocratic dynasties. They acted. Forbes reports that more than 70% of billionaires worldwide are self-made, and in China, over 80% built their fortunes as first-generation entrepreneurs. Capitalism rewards action, not birth.

This dynamic reality delivers capitalism’s strongest refutation of aristocracy and Plutonomy. Aristocracy assumes permanence; capitalism enforces transience. Aristocracy passes property by bloodline; capitalism demands innovation by merit. Plutonomy imagines static classes; capitalism generates continual upheaval. 

The triumph of merit

In 19th-century American business life, the rise of the “inventor-businessman” type most clearly revealed capitalism’s difference from aristocracy. Andrew Carnegie, a poor immigrant from Scotland, rose to become one of the giants of the steel industry. John D. Rockefeller, starting from humble origins, founded Standard Oil and became the world’s first dollar billionaire.

Rockefeller was born in 1839 in New York to a poor family. His father, William Avery Rockefeller, worked as a charlatan traveling salesman, always chasing ventures and failing to provide a steady income. His mother lived frugally and devotedly. Rockefeller grew up amidst poverty and uncertainty but absorbed discipline and thrift early on. 

At 16, he began working in an accounting firm. In his first years of work, he carefully tracked every dollar, saving some and donating some to charity. By his early twenties, he entered the oil business in Cleveland with his partners. At the time, oil was new and difficult to refine, yet Rockefeller turned these difficulties into advantages.

Rockefeller founded Standard Oil in 1863 and quickly built it into the largest US oil company in refining, distribution and sales. He also tried to monopolize transportation by striking deals with railroad companies to gain cost advantages. This advantage lasted only until the state enacted antitrust laws. 

In 1911, the US Supreme Court declared Standard Oil a monopoly and ordered its breakup. Far from shrinking Rockefeller’s fortune, this ruling multiplied it, as the separated companies — Exxon, Chevron and Mobil — grew independently. The episode revealed a truth of the capitalist market: Even a monopoly, once broken, can generate more growth in a dynamic marketplace.

Rockefeller also pioneered what we now call philanthropic capitalism. He donated hundreds of millions to institutions such as Harvard and the University of Chicago. The foundations he created in medicine and education still shape society today. He did not owe his wealth to the state, as state regulations tried to restrict him. He did not inherit aristocratic privilege, nor did he cling to feudal instincts of passing wealth intact to heirs. Instead, he taught his children thrift, philanthropy and entrepreneurship.

Through his story, capitalism reveals its revolutionary and egalitarian nature: The son of a poor preacher left a permanent mark on world history through ability and hard work in the marketplace.

The Rothschild family illustrates how intellect, numerical skill and entrepreneurship built a global banking network despite European antisemitism. Mayer Amschel Rothschild was born in 1744 in the Frankfurt ghetto, where Jews lived under restriction with scarce educational opportunities. Mayer displayed an extraordinary passion for books and numbers. As a youth, he apprenticed with a banker in Frankfurt, learning financial calculations. He then traded antiques and rare coins, building his first capital. This step gave him access to Frankfurt’s nobility.

In the 1760s, Mayer achieved his breakthrough when he became financial advisor to Wilhelm IX, the Prince of Hesse-Kassel (a state within the Holy Roman Empire). He managed the prince’s wealth but showed greater genius by sending four of his five sons — Nathan Mayer, Saloman Mayer, Karl Mayer and James Mayer — to Europe’s capitals to establish a family banking network. Nathan went to London, Salomon to Vienna, Karl to Naples and James to Paris. 

The Rothschilds became the most influential financial family of 19th-century Europe. Their success came from superior knowledge, communication and risk management. Before the telegraph, they created networks that gave them faster access to market information. During the Napoleonic Wars, they controlled key information flows, lent money to Britain and helped finance the British army against France.

The Rothschilds did not descend from a dynasty. They exemplified how a marginalized Jewish family could, despite prohibitions, become leaders in finance by investing in knowledge and commerce. The capitalist market valued their achievement, not their lineage. And although their descendants remain financially active, modern giants like BlackRock and Vanguard far surpass the influence the Rothschilds held a century ago. Their eclipse proves again that capitalism does not freeze into aristocracy but renews itself endlessly.

Capitalism’s inbuilt renewal

Capitalism’s competitive nature creates a powerful resistance mechanism against the absolutization of economic power. Competition functions not as an external safeguard but as the system’s internal law, its self-regulating force. Those who claim that capitalists inevitably form cartels to seize markets misunderstand the essence of capitalism. 

Oligopolies may rise, and firms may dominate for a time, but such power cannot last. Knowledge flows, entrepreneurship pushes forward and innovation breaks every chain. The marketplace acts as a battlefield in which permanence is an illusion. What matters is the ability to adapt, not the possession of a temporary advantage.

In the late 1980s, Microsoft commanded almost absolute dominance in global software with its Windows operating system and Office suite, which ran on over 80% of personal computers. Yet, this supremacy did not endure. Google rose by capturing the internet, Apple transformed communication through the iPhone and Linux opened doors for free software alternatives. Today, Microsoft remains powerful, yet it no longer controls the future of computing.

The automobile industry reveals the same dynamic. For decades, General Motors, Ford and Chrysler ruled the US market. But Japanese firms —Toyota, Honda, Nissan — challenged them with efficient production and durable models. By the 1980s, Japanese automakers controlled nearly 30% of the US market, forcing Detroit into reform or collapse. 

In this century, Tesla has shattered the industry again, proving that even the giants of capitalism cannot insulate themselves from new rivals armed with better ideas. This fragility does not weaken capitalism; it strengthens it. Dynamism, not stagnation, defines its law.

The rise of the East Asian Tigers — South Korea, Taiwan, Singapore and Hong Kong — illustrates capitalism’s transformative power. In 1960, South Korea’s GDP per capita barely reached $150; by 2020, it had risen to over $30,000. Taiwan, once an agrarian economy, became a global technology leader and now produces more than 54% of the world’s semiconductors through Taiwan Semiconductor Manufacturing Company (TSMC). Singapore, a city-state without natural resources, climbed to rank among the wealthiest nations, with a GDP per capita surpassing $70,000. These countries escaped poverty not by state planning but by unleashing markets, encouraging exports, fostering education and creating an open environment for enterprise.

Centrally planned economies show the opposite trajectory. The Soviet Union, despite immense resources, collapsed under inefficiency. Former supreme leader Mao Zedong’s China starved tens of millions. Only when Mao’s successor Deng Xiaoping’s reforms embraced markets in 1978 did China’s GDP begin to grow at an average of nearly 10% per year for three decades, lifting 800 million people out of extreme poverty. 

The state as the enemy of competition

The real enemy of competition is not capitalism but the state. History shows that whenever governments step in to control markets, competition collapses. In the 17th century, the British Crown granted the East India Company exclusive rights to trade in Asia. Instead of innovation, this monopoly produced corruption, inefficiency and exploitation, until its collapse in the 19th century. 

In the 20th century, state-backed corporations in Latin America — such as Pemex in Mexico or Petrobras in Brazil — became centers of inefficiency and political patronage, draining resources without innovation. The United States itself has suffered similar distortions: The government’s antitrust case against AT&T in the 1980s reveals how state-protected dominance stalled telecommunications innovation. Once AT&T was broken up, competition flourished, giving rise to mobile telephony, the internet and the digital revolution.

In the second half of the 20th century, South Korea and Taiwan embraced export-led capitalism, transforming from impoverished to high-income economies. Between 1960 and 1990, South Korea’s GDP per capita grew nearly tenfold. By contrast, North Korea, under state control, stagnated in famine and isolation. The same divide appeared in Germany: West Germany’s market economy surged after 1948, while East Germany’s socialist experiment collapsed under inefficiency and repression.

Latin America shows the same truth. Venezuela — with the world’s largest proven oil reserves — nationalized industries and imposed state control. By 2020, its GDP had contracted by over 70% from the previous decade, inflation exceeded one million percent and millions fled the country in response to the economic crisis. Meanwhile, Chile liberalized markets in the 1970s and 80s. From 1990 to 2015, its poverty rate fell from 40% to under 10%, and it became Latin America’s richest nation per capita. 

In China, state-owned enterprises (SOEs) consume over 30% of the country’s bank credit yet generate less than 10% of GDP growth. World Bank data shows SOEs earn returns on assets less than half those of private firms. They survive on subsidies, cheap credit and political protection. 

By contrast, private firms — Huawei, Tencent, Alibaba and BYD — compete globally and drive breakthroughs in telecom, digital finance and electric vehicles. The difference lies in rules: SOEs live by privilege, private firms by competition. SOEs employ barely 10% of China’s workforce yet capture most corporate credit, starving small firms of capital. Productivity lags because connected giants hoard resources. Meanwhile, the private sector — responsible for 80% of urban jobs and 70% of innovation — faces crackdowns whenever it threatens state power. 

The West tells the story in another form. The 2008 financial crisis showed how intervention entrenches failure. US and European governments bailed out American International Group (AIG), Citigroup, Royal Bank of Scotland and others, freezing competition and rewarding recklessness. The US Troubled Asset Relief Program (TARP) spent $700 billion rescuing failing banks, while the Eurozone added trillions in guarantees. 

Instead of disciplining error, states preserved it. These bailouts created a sense of moral hazard. Banks knew governments would shield them, so accountability vanished. A decade of ultra-low rates followed, keeping “zombie companies” alive. This was not a result of capitalism failing, but capitalism blocked. The corrective force of failure capitalism provides, was replaced by political privilege.

Russian-American writer and philosopher Ayn Rand foresaw it: “The difference between a welfare state and a totalitarian state is only a matter of time.” When governments protect the incompetent, they turn markets from arenas of merit into shelters of privilege. The market demands discipline. Remove that truth, and freedom vanishes.

State-backed oligopolies, rent-seeking firms and politically privileged corporations represent the intrusion of non-capitalist elements into the system. Rand captured this with brutal clarity in her novel Atlas Shrugged:

When you see that trading is done, not by consent, but by compulsion — when you see that in order to produce, you need permission from men who produce nothing — when you see that money is flowing to those who deal, not in goods, but in favors … you may know that your society is doomed.

Her warning underscores the point: government favoritism replaces merit with power and enterprise with privilege. A genuine free market grants no actor permanent advantage. Every success must be tested, every fortune re-earned, every firm challenged. 

Collectivist regimes historically reveal the true nature of plutonomy. The Soviet Union gave Politburo elites privileges comparable to those of Western billionaires, while ordinary people could not access basic goods. In China, Mao’s Cultural Revolution impoverished millions, while Party cadres enjoyed privileged lives. During Deng’s reforms, the state integrated market elements but ensured that real capital accumulation still depended on Party ties. 

In contemporary China, the case of business magnate and investor Jack Ma illustrates this reality: after criticizing government policies, he lost public visibility, and the state restructured Alibaba (a multinational technology company), demonstrating how easily political authority can dismantle market success.

The case of Venezuela illustrates the modern socialist version of plutonomy. Former Venezuelan President Hugo Chavez built his 21st-century socialism not by distributing oil revenues to the people but by concentrating them within the state apparatus and a loyal elite. Managers of Petroleos de Venezuela (PDVSA) enriched themselves rapidly in foreign currency, while the general population lacked access to basic food and medicine. These cases prove that plutonomy emerges not in capitalism but in collectivism. 

Capitalism as democracy in motion

Capitalism’s stability and sustainability depend on a broad consumer base that responds to production. Economic growth and prosperity come not from the excessive wealth of the minority but from the consumption capacity of the majority.

The capitalist market functions as a democratic decision-making arena. Consumers, through their daily purchasing choices, effectively cast votes in the marketplace. These votes reflect not only economic value but also preference. The market thus becomes a ballot box where products and services, not rulers, compete. 

Consumer behavior directly shapes economic existence. The consumer acts as capitalism’s “silent voter” — silent because the vote is cast by buying, not speaking. Yet this silence masks immense power: the collective choices of consumers decide whether a product stays on shelves, spreads or vanishes. Unlike centrally planned systems, capitalism rests on pluralism and bottom-up consent.

Liberal democratic philosophy aligns with this capitalist structure. Just as political leaders rise through popular votes, entrepreneurs and producers survive only through consumer choice. No matter their capital, ventures without customers collapse. This reality highlights capitalism’s populist and majoritarian nature, not an aristocratic one. 

Capitalism is no elitist club but a competitive arena built on mass consent. For a product to remain in the market, it must resonate with the public. This constant need for validation keeps capitalism open to pressures from below. Broad participation is the indispensable condition of capitalist democracy. If middle- and lower-income groups cannot participate, the voting mechanism breaks down. Capitalism requires individuals not just to exist as consumers but to function effectively as consumers.

The democratic nature of the market creates fairness and dynamism. Consumer choice directs supply, drives innovation, raises efficiency and prevents waste. Each purchase acts as a “yes” vote; each rejection, a “no” vote. This continuous micro-level voting process builds a coordination mechanism more precise and dynamic than any central planner could achieve. The market generates a natural order through supply and demand. Austrian-British economist and philosopher Friedrich Hayek described this as spontaneous order, where knowledge spreads through millions of free decisions, not through central authority. No ministry or planning agency can collect and process such knowledge. 

French diplomat, political philosopher and historian Alexis de Tocqueville highlights a fundamental tension in Democracy in America: In democratic societies, when freedom is sacrificed to equality, people become passive and consent to their own chains. The plutonomy discourse offers exactly such chains: it promises not freedom but passivity under the guise of equality. Capitalism rests on the moral principle of consent. Neither producer nor consumer, neither employer nor employee, enters the system by force. 

This order, built on mutual benefit, secures not only economic efficiency but also individual autonomy. Capitalist economics allow the individual to secure their place through labor, capital or ideas. In contrast, plutonomy undermines freedom by persuading individuals to believe in systemic determinism rather than their own potential. This mentality denies individual worth and responsibility, portraying success not as the product of productivity but as a matter of birth privilege. As a result, young individuals turn away from entrepreneurship, and potential inventors give way to “pseudo-opponents” who hate the system yet make no contribution.

[Natalie Sorlie edited this piece.] 

The views expressed in this article are the author’s own and do not necessarily reflect Fair Observer’s editorial policy.