September 6, 2026
MISES
By Ryan McMaken
Key Takeaways:
The essay’s core claim: every state is run by elites who control coercion—“rule by the people” is a myth. Following Pareto, “elite” here means skill at organizing power, not virtue. Monarchs inherit violence that worked; democratic politicians excel at voters, coalitions, and using the state against rivals.
It splits economic elites by regime. In a mostly free market they rise by serving customers. Under heavy intervention they rise by partnering with the state—bailouts, monopolies, easy money. 2008 is the exhibit: Citicorp, AIG, JPMorgan, and Fed mortgage-bond buys, plus contractors such as Musk and Thiel, are cast as politically sheltered, not market-proven.
The conclusion: intervention fuses money and politics. Both sides tell stories (mandate of heaven, “will of the people,” “the market loves us”). Real elites, the author says, earn voluntary support in markets, families, and churches; those who rise by force and tax-and-spend are “counterfeit.”
Always and everywhere, political institutions are controlled by elites. It doesn’t matter if the regime type is democratic or monarchical. It doesn’t matter if there is a written constitution or not. All political institutions—and certainly every sovereign state—are run by a group of elites who control the means of coercion.The myth of “rule by the people” is precisely that: a myth.
But this leaves a big question open: who are the elites? Wilfredo Pareto, that pioneer of Italian elite theory, convincingly suggests that elites are simply those people who are most skilled in their respective fields. Being skilled does not suggest any sort of virtue or beauty, of course, and we cannot assume that any member of the elite will be more moral or refined than any, say, middle-class mechanic.
In the case of political elites, to be “elite” simply means to be the most effective at organizing and commanding political action. This can be done toward both virtuous ends or evil ends. The political elites excel at the gaining and wielding of political power. Nothing more. In hereditary monarchies, for example, the monarch is a monarch because his ancestors were more effective at using violence—and at stealing and killing—than were their competitors. Their descendants are able to remain in the elite through effective political scheming to maintain their positions. In democracies, those who gain and maintain power are effective at deceiving the voting public and at currying favor with the ruling coalitions of various interest groups. They’re not “the elite” because they are especially virtuous or well educated. They simply excel at cultivating the knowledge necessary to wield the power of the state against their enemies and against potential rivals.
Economic Elites vs. Political Elites
There is, however, often confusion as to the difference between economic elites and political elites. One could say that economic elites are those who are most skilled at the management of property. Yet, the nature of the economic elites depends largely on what type of regime exists within society. In a society that has a mostly market system, the economic elites are those who are most productive in the free marketplace. These are the people who are skilled at entrepreneurship, sales, logistics, investing, and all other aspects of a freely functioning market. In a mostly free society, the economic elites are free to spend most of their time on their activities in the marketplace, and they are thus rewarded for spending their efforts in improving their own productivity. Moreover, all of society benefits from these sorts of economic elites. This is because rewards in the marketplace stem from delivering more goods and services to more people at a price that a growing number of people can afford.
Things are different in a society where the economy is dominated by the state—and thus by the political elite. In such a society, the economic elites are those who are most skilled at using the power of the state to achieve success in the state-regulated marketplace. In this case, the economic elites are those who are able to partner with the regime to obtain policies that benefit the elites through the manipulation and regulation of the market. These policies include bailouts, state-backed monopolies, and an easy-money-fueled financial system. In this system, the economic elites are able to maintain and enhance their positions and their wealth through effective political action, and by serving the political elites instead of customers in the marketplace.
When this happens, we cannot assume that the economic elites are there because they add value to society. Rather, the economic elites in this latter system are parasitical. They rely on the exploitation of others to maintain their positions and to expand their market share. One of the most dramatic examples of this can be seen in the response to the financial crisis that began in 2008.
Had the marketplace been allowed to function, many large banks and other firms would have been bankrupted, and their property repurposed by other, more efficient owners and managers. Those new owners could have become a new economic elite. But thanks to the intervention of the incumbent political elites, failing firms were saved through the redistribution of wealth from the productive classes to hand-picked, politically connected incumbent firms and owners. Thus, firms like Citicorp and AIG were bailed out, new regulations imposed, and firms like JP Morgan greatly expanded their market share. The Federal Reserve’s mass purchasing of mortgage-backed securities rescued a large portion of the financial sector from insolvency. As a result, most of the economic “elite” we find in the financial sector owe their positions to political action rather than any actual skill in the marketplace. Sure, these people are fond of telling themselves that they are rich because “the market” values them so highly. In reality, they are successful because lobbyists have succeeded in propping up their firms and ensuring, through constant monetary inflation, growth in their portfolios.
But this is just one example. In any society where the political elites are prolific spenders, or engage in widespread regulation of the economy, the economy is continually distorted in a way as to favor the politically well connected at the expense of everyone else. For example, the economic “elites” who rely heavily on government contracts—e.g., Elon Musk, Peter Thiel, the founder of Flock Safety, et al—are not in the elite because they are especially productive in a free market. They are in the elite because they are adept at seizing the property of taxpayers through the tax-and-spend mechanism.
Note that in this interventionist system, the real economic elites—the people who would have risen to the top of an actually free economy—are crowded out and kept down by government action that favors certain firms. Who are these would-be elites? We’ll never know, and instead we are left with our counterfeit billionaire class which is “elite” only in their skill at exploiting people who do real work in the private sector.
Conclusion
Thus we have a merging of the economic and the political elite. Both types of elites generally rely on some sort of deception to buttress their claims.
The political elite, for example, claim their positions by virtue of some sort of mandate from heaven, or moral virtue, or because they allegedly reflect the “will of the people.” These are all lies, of course, but have nonetheless worked to fool and pacify the public for many centuries.
Under a regime of economic interventionism, the economic elites rely on lies as well. They claim they are elites because they are efficient or hard-working, or “serve the customer.” These are lies as well since, in the absence of a free—or even mostly free—market, the elites are, in fact, in their positions due to political maneuvering. They are, in effect, merely an extension of the political elite. The more interventionist the regime is, the more this is true.
The real elites have always been those who receive the voluntary and free support of others through the private sector, or through other non-violent means of interaction: through families, religious institutions, and other institutions of the private sector. On the other hand, those who become “elites” through the initiation of violence, and through the looting of others, have always been frauds and imposters.
Thus we have a merging of the economic and the political elite. Both types of elites generally rely on some sort of deception to buttress their claims.
The political elite, for example, claim their positions by virtue of some sort of mandate from heaven, or moral virtue, or because they allegedly reflect the “will of the people.” These are all lies, of course, but have nonetheless worked to fool and pacify the public for many centuries.
Under a regime of economic interventionism, the economic elites rely on lies as well. They claim they are elites because they are efficient or hard-working, or “serve the customer.” These are lies as well since, in the absence of a free—or even mostly free—market, the elites are, in fact, in their positions due to political maneuvering. They are, in effect, merely an extension of the political elite. The more interventionist the regime is, the more this is true.
The real elites have always been those who receive the voluntary and free support of others through the private sector, or through other non-violent means of interaction: through families, religious institutions, and other institutions of the private sector. On the other hand, those who become “elites” through the initiation of violence, and through the looting of others, have always been frauds and imposters.
About the author: Ryan McMaken (@ryanmcmaken) is editor in chief at the Mises Institute, a former economist for the State of Colorado, and the author of two books: Breaking Away: The Case of Secession, Radical Decentralization, and Smaller Polities and Commie Cowboys: The Bourgeoisie and the Nation-State in the Western Genre. He is also the editor of The Struggle for Liberty: A Libertarian History of Political Thought. Ryan has a bachelor’s degree in economics and a master’s degree in public policy, finance, and international relations from the University of Colorado.
Source: This article was published by the Mises Institute
About MISES
The Mises Institute, founded in 1982, teaches the scholarship of Austrian economics, freedom, and peace. The liberal intellectual tradition of Ludwig von Mises (1881-1973) and Murray N. Rothbard (1926-1995) guides us. Accordingly, the Mises Institute seeks a profound and radical shift in the intellectual climate: away from statism and toward a private property order. The Mises Institute encourages critical historical research, and stands against political correctness.
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