What Is an Oligarch?

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DEFINITION

An oligarch is a businessperson who has undue influence on the political system in a country. They typically are a part of an oligarchy, which is a form of government ruled by a small group.

Definition and Examples of an Oligarch

An oligarch is usually part of a small ruling class, and has influence and control over government leaders. An oligarch typically owns a large number of businesses or a concentrated share of an industry. They tend to be very wealthy and politically connected. Oligarchs’ wealth and outsized business interests help influence national politics.

Individuals do not necessarily categorize themselves as oligarchs. Instead, the media and people from outside the oligarchy may label some businesspeople and other powerful members of society this. It is typically seen as a criticism of people who have a large influence on the government.

An oligarch is typically viewed negatively as one who influences leaders for their own benefit.

When people reference oligarchs, they often are referring to Russians who have large influences over their national government. They play active roles in advising the Russian government and parliament on legislative changes. Some have even drafted legislation.

An example of a Russian oligarch is Roman Abramovich. He is an advisor and friend to Russian President Vladmir Putin and made his money in oil. In 2022, the U.S. government and other nations around the world sanctioned oligarchs for their roles in helping Putin in his war against Ukraine.

While Russia has a large quantity of oligarchs, there are other countries with businesspeople who can strongly influence their politicians and government.

China has a concentration of individuals with business interests and wealth that have influence over the government. The Philippines also has often been cited as a country with a strong oligarchical class.  Oligarchies have also existed throughout history in many nations, including Italy, Sweden, and Korea, as many families have owned large conglomerates and had influence on their political operations.

How Does One Become an Oligarch?

One can become an oligarch by controlling business interests, which give them economic influence in a nation. If a businessperson controls enough economic interests, government leaders are more apt to work with them to continue to grow the economy or get a share of the business profit. Oligarchs gain power and influence with support from the state or government in the forms of direct subsidies, tax breaks, land grants, and subsidized credit.

Are Oligarchs Economically Beneficial to a Nation?

Oligarchs could be beneficial to an economy because their companies are very large and vertically integrated. This can mitigate hold-ups in the supply chain and keep the economy running normally.

Since oligarchs work hand-in-hand with the government, there is less likely to be friction between large businesses and government, which could help economic growth.

However, there are also a number of ways an oligarch can hurt economic growth. First, oligarchs own large conglomerates that are concentrated in important industries such as media, energy, and commodities. Connections to state-affiliated banks and government funding may make it difficult for small firms to enter the market and compete, which can hurt small businesses and consumers.

Second, oligarch-owned firms tend to be very large and may not operate efficiently. They keep their power through political favoritism and may not allocate capital and resources optimally in a way to maximize economic growth.

Third, oligarchs can weaken an economy by stripping assets away from the government through private ownership and the takeover of resources. This can weaken democratic institutions and laws that help ensure competitive fairness. It can also create an economic environment that is less conducive to economic growth.

Generally speaking, while oligarchs can increase wealth and assets for themselves and the oligarchy, this does not result in an equal amount of economic growth for all citizens of a nation. Moreover, because oligarchs control the news and other key industries, they have political influence on elections. Oligarchs will promote politicians that best serve them, rather than politicians that will best serve the economy as a whole. This can leave oligarchy economies vulnerable to crises.

Key Takeaways

  • Oligarchs are businesspeople who have influence over the government.
  • There are many examples of oligarchs throughout history, but Russian oligarchs have been of interest for their roles in the war on Ukraine.
  • While oligarchs can help or hurt an economy, they tend to advocate for policies that help their own business interests, not the interests of the overall economy.

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Article Sources

  1. Sergei Guriev and Andrei Rachinsky. “The Role of Oligarchs in Russian Capitalism,” Journal of Economic Perspectives, 19 (1).

  2. The White House. “President Biden’s Comprehensive Proposal To Hold Russian Oligarchs and Elites Accountable.”

  3. Demid Chernenko. “Capital Structure and Oligarch Ownership.”