Is the world moving towards a new era of private economic feudalism

One of the defining features of the twentieth century economy was that governments did not merely govern nations; they were also among their largest creators of wealth. Governments built steel plants, public sector enterprises, banks, telecommunications networks, power projects, scientific institutions and national infrastructure. They created employment, invested in research and technology, built strategic capabilities and, importantly, redistributed the wealth generated by the economy. But the economic philosophy of the twenty-first century is changing quietly and fundamentally.

The biggest economic shift of our time is the changing balance of power between the state and private capital. Governments are increasingly moving from being creators of wealth to being distributors of it, while capital formation, technological innovation, employment generation and the industries that will shape the future are increasingly being led by private enterprise.

Look at the United States. Despite being the world’s largest economic and technological power, the commanding positions in artificial intelligence, cloud computing, advanced semiconductors, digital platforms and the global data economy are overwhelmingly held by private companies rather than the government. The global AI race increasingly appears to be a contest not merely between nations, but between a handful of powerful technology companies.

The same transformation can be seen in earlier technological revolutions. Over the past four decades, the development of personal computing, software, search, digital platforms and the internet economy has been driven overwhelmingly by private companies. One may therefore ask whether the American economic model has, over time, normalised the concentration of technological and economic power in private hands and whether that model has subsequently influenced the rest of the world.

India is no exception. From 2G to 5G, the expansion of India’s telecommunications revolution has been driven largely by private investment. The digital networks used by hundreds of millions of Indians today have expanded primarily through private capital. The same is increasingly true of renewable energy, where some of the largest investments are being made by private companies. Airports, ports, logistics, data centres, industrial corridors and several other major infrastructure sectors are also seeing a decisive role for private capital. This is not accidental. The sectors expected to generate enormous economic value in the coming decades are precisely those attracting substantial private investment.

The structure of India’s stock market tells a similar story. Of the 30 companies in the BSE Sensex, only two are public-sector companies, SBI and NTPC. Public-sector representation in the Nifty 50 is also limited. This is not merely a stock-market statistic. It reflects a broader economic reality: a substantial share of the market value of India’s listed economy, and therefore much of its future capital formation, lies in private hands.

For an ordinary Indian investor putting money into the country’s leading companies, most of that investment is likely to flow into private enterprises. In other words, an increasing share of India’s future wealth is being created by private capital.

This transformation, however, is not confined to the stock market.

China presents a different model. It allowed companies such as Alibaba, Tencent and other private enterprises to grow into global economic forces. But when the Chinese state perceived that private corporate power was becoming too influential, it intervened forcefully through regulation. The action against Alibaba and the prolonged withdrawal of its founder Jack Ma from public visibility became a powerful reminder that, in China’s system, the ultimate centre of economic power remains the state. This brings us to a deeper question about modern democracy.

Governments across the world are increasingly focused on redistribution. Direct benefit transfers, subsidised food, financial assistance to women, scholarships, health insurance, pensions and other welfare programmes have become important instruments of democratic politics. There is no argument against protecting vulnerable sections of society. That is a legitimate responsibility of a democratic state.

But there is a larger concern. Welfare can gradually become more than a social safety net it can become an instrument for sustaining political popularity. When redistribution expands while the state’s role in long-term wealth creation and productive capacity becomes relatively weaker, the economic balance begins to change.

The question, therefore, is not whether welfare is necessary. It is whether welfare is beginning to overshadow wealth creation.

This distinction matters enormously. Consider public capital expenditure. In India’s 2026–27 financial year, the combined capital expenditure allocation of the states was around Rupees 10.45 lakh crore, yet only about 10 per cent had been utilised during the initial period. At the same time, redistribution oriented programmes continue to expand.

This is not an argument against any particular welfare scheme. It is a question of priorities.

If public capital formation remains slow while a growing proportion of economic investment comes from private enterprise, the state can gradually move from being a builder of economic capacity to being a redistributor of the wealth created elsewhere.

That shift has consequences for employment as well.

There was a time when the public sector was one of the principal sources of organised employment. Today, the future of employment is increasingly tied to private investment. This means that job creation will be influenced more strongly by market conditions, corporate investment decisions and private sector expansion.

Maintaining a balance between economic growth and employment will therefore become increasingly difficult.

There is another area where the imbalance deserves attention: research and innovation.

India currently spends around 0.84 percent of its GDP on research and development, while China’s investment is around 3 percent. In the next global race in AI, semiconductors, quantum computing, biotechnology and advanced manufacturing—such investments will determine not merely economic competitiveness but strategic power.

If governments underinvest in long-term scientific capabilities and rely excessively on private capital to fund the future, the country may find itself economically strong in some areas but technologically dependent in others.There is also a less discussed dimension of this debate: inflation and market power.

The energy sector provides an important example. For a considerable period before the West Asian crisis, international crude oil prices remained relatively moderate. Yet consumers did not always receive the full benefit of lower global prices. Taxation, regulation, global market conditions and several other factors influence the final price paid by consumers. But another question remains relevant: when a few large private players dominate critical sectors, how do we ensure that competition, pricing power and consumer interests remain balanced? This is why strong regulatory institutions are as important to a modern economy as a strong private sector.

The issue is not that private enterprise has become powerful. It should. The private sector is among the most important sources of investment, innovation, risk-taking and economic growth. Governments should not attempt to become competitors to private industry.

The real question is whether governments are gradually surrendering their developmental role. There are areas where the market will naturally invest because the returns are attractive. There are other areas where the market will either invest too little or too late because the social returns are far greater than the commercial returns. That is precisely where the state must remain indispensable.

India must recognise that a very large part of its population is still deprived of basic, high-quality services. Quality education particularly in small towns and rural areas must become a national priority. Accessible and high-quality healthcare should not be viewed merely as social expenditure; it is an investment in economic productivity.

A country cannot measure its progress only by the size of its GDP. The real test is whether economic growth expands human capability, opportunity and dignity.

The next generation may not simply ask how large the economy became. It may ask a more uncomfortable question:

Who created the wealth, who benefited from it, and who decided the direction in which the future would move? Perhaps this question has not been asked forcefully enough because the economic formula of the twentieth century was relatively straightforward: the government created wealth and the government distributed it.

The emerging formula of the twenty-first century is different:

Private capital creates an increasing share of the wealth, while governments increasingly focus on redistributing it sometimes with an eye on political popularity.

That may be efficient in some areas. It may also be inevitable in a market-driven economy.

But if this transformation continues without sufficient public investment in infrastructure, education, health, science, research and strategic capabilities, the consequences could go far beyond economics.

The issue is ultimately about power. Who creates wealth? Who owns the productive capacity? Who controls technology? Who creates employment? And who decides how the benefits are distributed? If these questions are not confronted now, the coming decades may force us to redefine not only the role of government, but also the meaning of democracy, economic power and the modern nation-state.

The real danger is not a strong private sector. The real danger is a weak state becoming strong only at redistribution, while becoming weaker at creating the foundations of tomorrow’s wealth.