In April 1941, with the Wehrmacht in Paris and the Ribbentrop–Molotov pact still in force, the political theorist James Burnham published “The Managerial Revolution,” which famously declared that capitalism was finished. His claim was not that it ought to be finished, but that it was, as a matter of observable fact, being replaced. The successor system would not, however, be socialism, as he had hoped during his earlier days as a Trotskyist. Socialism, he argued, was a utopia: it required abundance, and since human wants are unlimited, abundance is unreachable.
What was coming instead was a new economic system he termed “managerialism,” in which the instruments of production pass to the state and the state passes them on to the men who know how to run things — managers. If capitalists survived at all, it would be merely as a decorative residue: playing golf in Florida while the managers made every decision that mattered. The USSR was the first managerial society; Nazi Germany, fascist Italy and New Deal America were the next. Burnham noted with some relish that President Franklin D. Roosevelt’s 1940 re-election campaign had stopped using the language of “businessmen” and “bankers” and instead had turned to phrases like “technicians in industry” and “managers.”
But Burnham was wrong about nearly everything that followed. These managerial superstates didn’t divide up the world. The United States and the Soviet Union instead allied against Germany. And by the 1980s America had reverted, with a convert’s enthusiasm, to the sanctity of private property — the one ideological development Burnham had explicitly ruled out, since he believed both private property and the ideas justifying it were on their way to extinction. Once communism collapsed in Eastern Europe, and capitalism seemed set to become the only game in town, the whole managerial thesis looked like a period curiosity, the sort of thing one cites to show how confidently intelligent people can misread their own moment.
Burnham may have been wrong about the political outcome, but he was asking the right question: Who controls the instruments of production, and what class does that control create? This is the only question that has ever reliably predicted anything about the structure of a society and its rulers. The managers did rise. But they didn’t rise against capital, expropriating it through the state. They rose into capital. They became capitalists themselves and, in doing so, produced something that neither Burnham nor Marx anticipated: a ruling class simultaneously at the top of the wage distribution and ownership distribution curve.
In “The Great Global Transformation,” one of us (Branko Milanovic) coined the term homoploutia to describe a new class of people who are equally or “samely” (homo) rich (ploutia) in both factors of production — that is, who are highly compensated both from their labor and from capital income. The emergence of the homoploutic class is arguably the most important structural change in capitalism since World War II. It is now about to be tested by a technology that is on the verge of completely rearranging the relationship between capital and labor.
The Fusion & What It Created
It isn’t just the fact that today’s rich people work more than yesterday’s rich people did, as economist Thomas Piketty has observed. It’s that today’s richest people are both the highest-paid wage-earners and the richest capitalists. We define the homoploutic class as those in the top decile by labor income (e.g., salary), capital income (e.g. interest and dividends) and total income, and we find that roughly 30% of the top American income decile qualifies — that is, 3% of the total U.S. population. That share has risen steadily since the early 1980s, tracking almost exactly the rise in income inequality and the fall in intergenerational mobility.
Compare this to Mexico, where the homoploutia sits below 1% of the overall population. There, capitalism still runs on the classical pattern: the rich don’t work for a wage, and the well-paid doctors or lawyers don’t own enough property to reach the top decile of capitalists. The same holds in Brazil, Peru, Colombia. Richer countries fall in between — the homoploutic class in Spain, Italy, Germany, the Netherlands and Sweden all cluster around 2-2.5% of the population. The United States is the most extreme case, which makes it a case worth studying.
“Who controls the instruments of production, and what class does that control create? This is the only question that has ever reliably predicted anything about the structure of a society and its rulers.”
As bad as inequality of income from labor is, it’s far more extreme when it comes to income from capital. When one considers capital income alone, the picture resolves into an almost feudal geometry. Sixty percent of American households have zero or negligible cash income from capital ownership. (That compares to 79% in Spain, 93% in Colombia and 96% in Peru as of 2021, according to Milanovic.) Income from capital is extraordinarily concentrated, with its Gini coefficient (an income-inequality measurement) about twice that of disposable income. The top 1% of American capitalists received nearly $100,000 per person in capital income in 2022, which for a household of four implies $400,000 a year from financial assets alone. This included interest, dividends, rents and privately funded pensions. The homoploutic class proper — that is, people in the top decile in both labor and capital income — earns about $20,548 per person, or north of $80,000 per family, from capital income. That may not be plutocratic money, but it is a solid floor beneath a very good salary. And the fusion of these incomes brings invulnerability.
A pure wage-earner is exposed to the labor market; a pure rentier is exposed to the stock market. The homoploutic household is exposed to both and therefore, in practice, to neither. A bad year for equities is cushioned by the salary; a lost job is cushioned by the portfolio. This is why we argue that homoploutia is arguably the only development in modern capitalism that would have surprised Marx. It doesn’t resolve the conflict between capital and labor by abolishing one side. It resolves it by locating both sides inside the same person. There is no class struggle in a household that draws from both factors — the struggle has been internalized and, thereby, essentially eliminated.
The homoploutic class has a sociological face and an ideological one as well. In “The Meritocracy Trap(2019),” the law professorDaniel Markovits described the class’s machinery: The elite is hard-working and credentialed and is therefore convinced that its position is earned — even as the value of parental investment separating an elite child as compared to a middle-class child by the end of graduate school is equivalent to a traditional inheritance in the neighborhood of $10 million per child. He calls merit “an ideological conceit, constructed to launder a fundamentally unjust allocation of advantage.” One can put it as a modification of Marx’s M–C–M’ (money-commodity-money) circuit: here the circuit becomes M–E–M’, where E is the education of one’s children. But if E gets out of reach for all but the children of homoplouts, it means that class mobility has effectively closed.
This isn’t a technocratic class in the sense that scholars like Jan Tinbergen, John Kenneth Galbraith, Raymond Aron or Clark Kerr meant in the 1960s, when they imagined East and West converging on the same efficient methods of administration, with managers indifferent to ownership structure. The homoploutic class is different precisely because its material interest and its ideological commitment to private property are the same thing. It defends capital because it is capital, and it defends educational credentials and labor because it is that too.
That double grounding in educational credentials and workplace performance has been the source of the class’s political legitimacy for decades. The message to everyone below was coherent, if irritating: We are rich because we are useful, because we have studied hard and worked hard, and you may join us if you are useful, too. Such a path was narrow and expensive, but it existed, and its existence did most of the ideological work.
Entrenchment Or Dissolution
Now what happens when we insert artificial intelligence into this structure?
Much is still unknown. We don’t know whether AI will raise our total labor output or merely shift production from human labor to machines without expanding the total. For example, dictating essays rather than typing them may allow people to write faster, but not necessarily more. (Generating good ideas turns out to be a rate-limiting factor.) The technology changed the composition of effort without changing the output; something similar may hold for AI. We also don’t know whether AI’s capabilities will continue to progress as rapidly and inexorably as its promoters promise, especially given the circular financing methods used for data centers and other computational capacity, and the political backlash against building them. Finally, we do not know how fast the technology will be adopted and integrated in productivity-enhancing ways.
“We don’t know whether AI will raise our total labor output or merely shift production from human labor to machines without expanding the total.”
But if we accept the premise that the technology will work roughly as its promoters claim, two very different futures open for the homoploutic class and thus for us as a society. The difference between these two scenarios turns on a specific and currently unresolved empirical question: whether AI will be a substitute for or a complement to high-premium cognitive labor. We cannot be certain which will prevail.
The first possible future is elite entrenchment. The homoploutic household earns a large salary and holds a diversified portfolio. As capital’s share of national income rises — because the quantity of capital rises with AI deployment while the average profit rate is held up by Schumpeterian destruction of the old capital stock — the portfolio leg of their income simply gets heavier. If they can hold onto their high-paying jobs, they can purchase shareholdings in exactly the sectors growing in the new economy. In this scenario, the homoploutic class thickens, from a third of the top labor-income decile to half or two-thirds. These elites can then continue to transmit their advantages to their offspring through education and inheritance, with even greater reliability, because now they have more of both to transmit. In this scenario, today’s top 3% of Americans becomes the stable, self-reproducing aristocracy of an AI economy. In the limit case, the top 10% of labor-income earners will also be the top 10% of capital-income earners, and they will lock in these same positions for their children, effectively creating a form of hardworking aristocracy. Homoploutia will have simply been a transitional state along the way to a renewed form of hereditary hierarchy.
The second alternate future is class dissolution. Homoplouts typically work jobs that command a wage premium in today’s labor market — as lawyers, financiers, consultants, software engineers, doctors and so on — because they require cognitive work often enabled by fancy educations, diplomas and credentials. Unfortunately for these individuals, this is also precisely the sort of work that large language models perform most convincingly. As the roboticist Hans Moravec famously observed, high-level reasoning turns out to be easier to automate than sensorimotor skills developed over a billion years of evolution.
If AI ends up substituting for rather than complementing knowledge work, then the wage premium commanded by highly educated workers will shrink. For such workers, the salary that complemented the income from their investment portfolio will diminish or disappear; what will remain is their portfolio alone. The homoploutic household in this case reverts to a purely capitalist household that lives entirely off the earnings from its investment portfolio; in other words, it reverts to Mexico’s classical pattern where the rich don’t work.
Modernization Theory Turned On Its Head?
Under either scenario, the ideological position of the homoploutic class as a legitimate meritocracy will collapse. Under entrenchment, the homoploutic claim to merit becomes untenable because there is no path to entry: Once inheritance is the only way into the top decile of capitalists, such a class can’t credibly describe itself as meritocratic, no matter how hard-working. Under dissolution, if education no longer commands a wage premium, there is no longer any meritorious activity to point at — one is simply an owner of capital, as one’s great-grandfather was. In the first case the asset value of the class survives, but the flow into it stops. In the second, both go.
Around this reduced elite the rest of society’s structure becomes legible. At the summit we find the few thousand people who own the models. Next is the homoploutic remnant — thinned or thickened but closed to the lower ranks. Below them is a service class doing what AI cannot yet do, at low to moderate wages: think gardeners, home nursing aides, bartenders, tradesmen, mechanics and so on. These people will be employed, but not in any meaningful sense middle class. And finally, at the bottom sits a redundant population — the term “unemployed” is misleading, because it suggests a temporary state and a return path. The redundant or surplus population are people whose skills have been rendered obsolete, whose retraining would take years and that no one will fund. In theory, a universal basic income or a permanent unemployment benefit would solve their material problem, and perhaps such people can be kept pacified with religion, sex and TV. “Bread and circuses” is, after all, a venerable political solution; more than a few in Silicon Valley dream of UBI and TikTok memes as its modern update.
“At the summit we find the few thousand people who own the models.”
What is striking about this pyramid is its pre-industrial (that is, feudal) shape: sharply graded at the top, flat and wide at the bottom, with no substantial middle. Every society before the Industrial Revolution looked like this, and the 20th-century assumption that development produces a large middle class, which in turn produces political stability and democratic peace, was an inference from a period that may prove to have been exceptional. If AI creates such a rigid class pyramid, then the richest and most technologically advanced societies on Earth may well become politically more turbulent than poorer ones — a tragicomic inversion of modernization theory’s teleological belief in the coming universalization of stably democratic middle-class societies. A large lumpen population with little stable work or social status (and unlimited free time) represents a reserve army of politically combustible malcontents — ready kindling for political operators with a grievance and a budget.
A hierarchy that can be scaled, even improbably, is a hierarchy that at least potentially can be tolerated, even within a democracy. For much of the last century, inequality was justified with the claim that some people were more talented and hardworking than others, a process that educational institutions vouched for through an elaborately formalized ranking and credentialing system. This is the meritocracy, and homoplouts are the No. 1 beneficiaries of this ideology. A closed-off hierarchy, however, is intolerable to a democracy. This helps to explain why so many in Silicon Valley are moving in a markedly and explicitly anti-democratic direction — the subject of Gil Duran’s recently published “The Nerd Reich.”
The Roman analogy is relevant here for reasons that go beyond our tech elites’ decadence. The late Republic didn’t fall because the masses rose spontaneously in revolt against the elites. It fell because the oligarchic clans couldn’t settle their disputes among themselves and each faction found it expedient to mobilize the idle urban population against its rivals. A socioeconomic structure with a handful of enormously wealthy factions at the top and a large supported-but-purposeless population at the bottom doesn’t require a revolutionary movement to become unstable. It requires only that one plutocrat decide his interests are better served by mobilizing the malcontents rather than parleying with his peers.
Burnham’s Question, Again
Burnham was wrong in predicting that managers would displace capitalists: the “shareholder value” revolution of the 1970s-1980s dethroned the postwar managerial class and ensured that corporations would place the interests of capital ahead of all other stakeholders. But he was right to insist that the instruments of production are the seat of social domination, that whoever controls them controls society, and that ideology follows from this rather than determining it. He grounded both capitalist and managerial society in the relations of production, which is why the recent enthusiasm for enlisting him in arguments about a “woke” professional-managerial class is either a misunderstanding or a misappropriation. Burnham wasn’t writing about the opinions of the credentialed. He was writing about the people who control the machines.
Applied to our moment, his question — Who controls the instruments of production, and what class does that control create? — is discomfiting. If artificial intelligence becomes the decisive instrument of modern production, then those who control it become the new ruling class. Educational credentials as such will no longer work to legitimate society’s socioeconomic hierarchy. The homoplouts may end up being the last generation of a ruling class that was required to be good at something other than clipping coupons. Or some small fraction of them may end up as the owners of the machines that replaced them, which is a different fate but not, in the long run, a more legitimate one.
All we are reasonably sure of is that the roughly 40-year settlement in which the same people held the best jobs and the most property — and pointed to the first as justification for the second — is coming to an end in one way or another. Advocates of abundance who imagine machines doing the work while we enjoy our leisure have described the economics correctly and the politics not at all. We may well get abundance. But what we won’t get on present trajectories is a society organized in a way that anyone outside of the ultra-elite would want.
