Your friend is using a lot of terms that he himself probably has not defined clearly.
I would NOT go further in the discussion until DEFINITIONS are agreed upon.
He uses "plutocracy," which is rule by the wealthy. Get him to define what he means.
Then, ask him what the Occupy Wall Street people have been protesting. Don't give your opinion, just ask him what he thinks they were protesting.
Of course, they were protesting the very thing that he says would happend in a libertarian society (or in a free market). Then ask him, if the wealthy are ruling things NOW, then why isn't he opposed to the CURRENT system, rather than his hypothetical liberarian one.
That is where he will try to claim we have a free market now. So, then get him -- AGAIN -- back to definitions.
Get him to define "libertarian." Make sure he understands there is more than one variety of libertarian, but that in general libertarians are in favor of small government because of the non-initiation principle.
Get him to define "free market," and make sure he understands that a free market can only exist when the government is NOT involved in picking sides, whereas a plutocracy occurs where government DOES choose sides, favoring the wealthy.
But try to do it like a trial lawyer does it. Only ask questions, as much as possible, getting him to first define his terms, then asking him how his vision of all the bad things that could happen are not already happening right now -- with BIG government.
At some point, he may claim it would be even worse with small government. That's where you have to get him to admit that the United States government today is the biggest it has ever been and things are getting WORSE. Ask him to justify HIS position in light of that.
That's how I would go about it -- get HIM to define his terms and the defend HIS position, while showing him that he's full of s**t because he is opposed to the very things that are happening right now, while supporting the very system that allows it to happen.