Plutocracy
Imagine a society where wealth isn't just a status symbol, but the very foundation of political control. This is the essence of plutocracy — a system where the rich hold the reins of power, shaping laws and policies to their advantage. From ancient empires to modern debates, this intriguing concept forces us to consider the true cost of influence and who truly benefits when money speaks loudest. Plutocracy, rooted in ancient Greek, describes societies governed by the wealthy and is almost universally used as a pejorative term. Historically, numerous states from ancient city-states to powerful maritime republics have exhibited plutocratic characteristics. The ongoing debate about whether modern democracies, including the United States, are drifting towards or already function as plutocracies highlights persistent concerns about wealth's influence on governance.
AI Summary
Imagine a society where wealth isn't just a status symbol, but the very foundation of political control. This is the essence of plutocracy — a system where the rich hold the reins of power, shaping laws and policies to their advantage. From ancient empires to modern debates, this intriguing concept forces us to consider the true cost of influence and who truly benefits when money speaks loudest.
- Plutocracy, rooted in ancient Greek, describes societies governed by the wealthy and is almost universally used as a pejorative term.
- Historically, numerous states from ancient city-states to powerful maritime republics have exhibited plutocratic characteristics.
- The ongoing debate about whether modern democracies, including the United States, are drifting towards or already function as plutocracies highlights persistent concerns about wealth's influence on governance.
When Wealth Rules: Understanding Plutocracy
The term 'plutocracy' springs from Ancient Greek, combining 'ploûtos' for wealth and 'krátos' for power. Simply put, it describes a society — or a political system — where the control ultimately rests in the hands of the wealthy. It's not a political philosophy one would typically espouse, but rather an observation of how power can become concentrated.
Unlike systems like democracy or communism, plutocracy isn't an ideology with a grand vision; it's a descriptive term. And it's almost always used with a negative connotation. When people speak of a plutocracy, they're often warning against an undesirable state, implying that such a system undermines broader societal interests for the benefit of a few.
A History of Rule by Riches
Throughout history, many societies have shown traits of plutocracy. Think of the powerful merchant families of ancient Carthage, or the influential city-states of Ancient Greece like Athens, where wealth often dictated political standing. The grand Roman Empire, too, saw immense wealth concentrating power among its elite.
Later, during the Renaissance, the Italian maritime republics of Venice, Florence, and Genoa were essentially run by their powerful merchant and banking families. Even the Dutch Republic, a beacon of early capitalism, had significant periods where economic elites held sway. These examples remind us that the struggle between wealth and governance is an age-old one.
A Modern Example: The City of London
Perhaps one of the most formal, if often critiqued, modern examples of a system with plutocratic characteristics is the City of London — not the entire sprawling metropolis, but the ancient 'Square Mile' financial district. Its unique electoral system grants businesses, not just residents, a substantial voice. More than two-thirds of the votes come from business representatives, often proportional to their employee count within the City.
This arrangement means that the almost half a million non-residents who work in the City during the day vastly outweigh the influence of its mere 7,000 residents. The justification? That the services provided by the City of London Corporation primarily benefit the businesses within its unique jurisdiction. It's a striking illustration of economic power directly translating into political representation.
Plutocracy as Propaganda
During the tumultuous 20th century, the term 'plutocracy' became a potent weapon in ideological warfare. Fascist Italy and Nazi Germany, along with the Communist International, hurled it at Western democratic states. The implication was clear: these nations, despite their democratic facades, were supposedly controlled by a handful of super-wealthy individuals manipulating affairs from the shadows.
In Nazi Germany, particularly, 'plutocracy' was often used as a 'dog whistle' term, subtly referencing Jewish people in their antisemitic propaganda. Joseph Goebbels, Hitler's propaganda minister, favored the term, seeing it as a powerful concept to rally against, aiming the 'ideological struggle' directly at it.
The American Experience
In the United States, discussions about plutocracy often center on specific historical periods and ongoing contemporary debates. Many historians and economists argue that the U.S. exhibited strong plutocratic tendencies during the Gilded Age and Progressive Era, after the Civil War and before the Great Depression. This was a time when industrialists amassed vast fortunes and wielded immense influence.
President Theodore Roosevelt, known as the 'trust-buster,' famously confronted these concentrations of wealth. He used aggressive antitrust laws to break up massive monopolies like Standard Oil, believing that the 'tyranny of mere wealth' was the 'least attractive and most vulgar' form of oppression, threatening the very fabric of American democracy.
The turn of the 20th century saw large corporations grow to monopolistic scales, with their wealthy leaders increasingly influencing public opinion and politics. As progressive journalist Walter Weyl observed, money became the 'mortar' of this edifice, effectively transforming the state into 'one of their departments,' where political favors were openly traded for corporate gain.
Economist Paul Krugman points to several factors that cemented plutocracy in early America: the disenfranchisement of the poorest citizens, the pervasive funding of political campaigns by the wealthy, and widespread electoral fraud including vote buying and intimidation. These mechanisms allowed economic elites to directly shape political outcomes.
Modern American Plutocracy?
While progressive taxation was introduced in the U.S. in 1913, some scholars argue that since the 1970s, elites have used their growing political power to systematically lower their tax burdens. This phenomenon, sometimes called the 'income defense industry,' highlights how wealth can be mobilized to protect itself, potentially exacerbating inequality.
In 1998, The New York Times' Bob Herbert coined the term 'The Donor Class' to describe the modern American plutocrats. He defined them as a minuscule group — just a quarter of one percent of the population — whose financial contributions to political campaigns bought them unparalleled access and influence, effectively drowning out the voices of ordinary citizens.
The phrase 'Of the 1%, by the 1%, for the 1%,' coined by Nobel laureate Joseph Stiglitz in 2011, captured the essence of concerns that the U.S. is increasingly governed by and for its wealthiest citizens. Research by political scientists Martin Gilens and Benjamin Page suggests that the average American citizen has 'little influence over the policies our government adopts,' especially compared to economic elites.
Even billionaire investor Warren Buffett has candidly spoken about a 'class warfare' being waged. In 2006, he famously stated, 'There's class warfare all right, but it's my class, the rich class, that's making war, and we're winning.' His words underscore a widely felt sentiment that the scales of power are increasingly tilted.
How Plutocracies Emerge
The rise of a plutocracy is often a complex process. Rapid economic growth can sometimes lead to increasing income inequality, as the returns on innovation and capital disproportionately benefit those already wealthy. This concentration of wealth can then translate into political power.
Alternatively, a nation facing collapse, perhaps due to resource depletion or overwhelming debt, might also see a rise in plutocratic tendencies. In such scenarios, elites may hoard diminishing wealth or exploit the expansion of debt to maintain their stability, further enriching creditors and financiers. Even in seemingly healthy free markets, economists note a natural drift towards monopolies and oligopolies due to the efficiencies of larger businesses, further concentrating economic power.
Beyond economic forces, corruption plays a significant role. Practices like kleptocracy, where rulers steal a nation's wealth, or rent-seeking, where individuals or groups gain wealth through manipulating the economic environment rather than creating new value, can directly pave the way for a society where wealth dictates governance.
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Plutocracy
A plutocracy (from Ancient Greek πλοῦτος (ploûtos) 'wealth' and κράτος (krátos) 'power') or plutarchy is a society that is ruled or controlled by people of great wealth or income. It can be considered a form of oligarchy (rule by the few) where the ruling few are wealthy. The first known use of the term in English dates from 1631. It is not rooted in any established political philosophy.
Usage
Plutocracy
The term plutocracy is generally used as a pejorative to describe or warn against an undesirable condition. "Dollarocracy", an anglicised adaptation of the word "plutocracy", may refer to "a specifically American version of plutocracy".
Examples
Plutocracy
Historic examples of plutocracies include the Roman Empire; some city-states in Ancient Greece; the civilization of Carthage; the Italian merchant city-states of Venice, Florence and Genoa; the Dutch Republic; and the pre-World War II Empire of Japan (the zaibatsu). According to Noam Chomsky and Jimmy Carter, the modern United States resembles a plutocracy though with democratic forms. In 2018, Paul Volcker, a former chair of the Federal Reserve, stated he also believed the U.S. to be developing into a plutocracy.
One modern, formal example of a plutocracy, according to some critics, is the City of London. The City (also called the Square Mile of ancient London, corresponding to the modern financial district, an area of about 2.5 km2) has a unique electoral system for its local administration, separate from the rest of London. More than two-thirds of voters are not residents, but rather representatives of businesses and other bodies that occupy premises in the City, with votes distributed according to their numbers of employees. The principal justification for this arrangement is that most of the services provided by the City of London Corporation are used by the businesses in the City. Around 450,000 non-residents constitute the City's day-time population, far outnumbering the City's 7,000 residents.
In the political jargon and propaganda of Fascist Italy, Nazi Germany and the Communist International, Western democratic states were referred to as plutocracies, with the implication being that a small number of extremely wealthy individuals were controlling the countries and holding them to ransom. Plutocracy replaced democracy and capitalism as the principal fascist term for the U.S. and Great Britain during World War II. In Nazi Germany, it was often used as a dog whistle term for Jewish people in their antisemitic propaganda. Joseph Goebbels, the Reich Minister of Propaganda, found the term to be particularly favorable, describing it as "the main concept at which the ideological struggle will be aimed".
United States
US federal minimum wage if it had kept pace with productivity. Also, the real minimum wage.
Some modern historians, politicians, and economists argue that the U.S. was effectively plutocratic for at least part of the Gilded Age and Progressive Era periods between the end of the Civil War until the beginning of the Great Depression. President Theodore Roosevelt became known as the "trust-buster" for his aggressive use of antitrust law, through which he managed to break up such major combinations as the largest railroad and Standard Oil, the largest oil company. According to historian David Burton, "When it came to domestic political concerns, TR's bête noire was the plutocracy." In his autobiographical account of taking on monopolistic corporations as president, Roosevelt recounted:
...we had come to the stage where for our people what was needed was a real democracy; and of all forms of tyranny the least attractive and the most vulgar is the tyranny of mere wealth, the tyranny of a plutocracy.
The Sherman Antitrust Act had been enacted in 1890, when large industries reaching monopolistic or near-monopolistic levels of market concentration and financial capital increasingly integrating corporations and a handful of very wealthy heads of large corporations began to exert increasing influence over industry, public opinion and politics after the Civil War. Money, according to contemporary progressive and journalist Walter Weyl, was "the mortar of this edifice", with ideological differences among politicians fading and the political realm becoming "a mere branch in a still larger, integrated business. The state, which through the party formally sold favors to the large corporations, became one of their departments."
In "The Politics of Plutocracy" section of his book, The Conscience of a Liberal, economist Paul Krugman says plutocracy took hold because of three factors: at that time, the poorest quarter of American residents (African-Americans and non-naturalized immigrants) were ineligible to vote, the wealthy funded the campaigns of politicians they preferred, and vote buying was "feasible, easy and widespread", as were other forms of electoral fraud such as ballot-box stuffing and intimidation of the other party's voters.
The U.S. instituted progressive taxation in 1913, but according to Shamus Khan, in the 1970s, elites used their increasing political power to lower their taxes, and today successfully employ what political scientist Jeffrey Winters calls "the income defense industry" to greatly reduce their taxes.
Post-World War II
In modern times, the term is sometimes used pejoratively to refer to societies rooted in state-corporate capitalism or which prioritize the accumulation of wealth over other interests. According to Kevin Phillips, author and political strategist to Richard Nixon, the United States is a plutocracy in which there is a "fusion of money and government."
Chrystia Freeland, author of Plutocrats, says that the present trend towards plutocracy occurs because the rich feel that their interests are shared by society:
You don't do this in a kind of chortling, smoking your cigar, conspiratorial thinking way. You do it by persuading yourself that what is in your own personal self-interest is in the interests of everybody else. So you persuade yourself that, actually, government services, things like spending on education, which is what created that social mobility in the first place, need to be cut so that the deficit will shrink, so that your tax bill doesn't go up. And what I really worry about is, there is so much money and so much power at the very top, and the gap between those people at the very top and everybody else is so great, that we are going to see social mobility choked off and society transformed.
In 1998, Bob Herbert of The New York Times referred to modern American plutocrats as "The Donor Class" (list of top (political party) donors) and defined the class, for the first time, as "a tiny group – just one-quarter of 1 percent of the population – and it is not representative of the rest of the nation. But its money buys plenty of access."
When the Nobel Prize–winning economist Joseph Stiglitz wrote the 2011 Vanity Fair magazine article entitled "Of the 1%, by the 1%, for the 1%", the title and content supported Stiglitz's claim that the U.S. is increasingly ruled by the wealthiest 1%. Some researchers have said the U.S. may be drifting towards a form of oligarchy, as individual citizens have less impact than economic elites and organized interest groups upon public policy. In the U.S. Congress itself, more than half of all members are millionaires.
A study conducted by political scientists Martin Gilens of Princeton University and Benjamin Page of Northwestern University, which was released in April 2014, stated that their "analyses suggest that majorities of the American public actually have little influence over the policies our government adopts". Gilens and Page do not characterize the U.S. as an "oligarchy" or "plutocracy" per se; however, they do apply the concept of "civil oligarchy" as used by Jeffrey A. Winters with respect to the U.S.
The investor, billionaire, and philanthropist Warren Buffett, one of the wealthiest people in the world, voiced in 2005 and once more in 2006 his view that his class, the "rich class", is waging class warfare on the rest of society. In 2005 Buffet said to CNN: "It's class warfare, my class is winning, but they shouldn't be." In a November 2006 interview in The New York Times, Buffett stated that "[t]here's class warfare all right, but it's my class, the rich class, that's making war, and we're winning."
Causation
Plutocracy
According to Piketty, a nation that is experiencing rapid economic growth, income inequality will tend to increase as the rate of return on innovation increases.