Oligarchies, Their Pros and Cons, With Causes and Examples

Is the United States an Oligarchy?

Oligarchy
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An oligarchy is a power structure that allows a few businesses, families, or individuals to rule. They have enough power to turn the country to benefit them to the exclusion of other members.

They maintain their power through their relationships with each other. Oligarchy is from the Greek word oligarkhes, and it means "few governing." 

Well-Known Oligarchies

Three of the most well-known countries with oligarchies are Russia, China, and Iran. Other examples are Saudi Arabia, Turkey, and apartheid-era South Africa. 

A plutocracy is a subset of an oligarchy. In a plutocracy, the leaders are rich. The leaders in an oligarchy don't have to be rich, even though they usually are. For example, a high school ruled by a popular clique is an oligarchy. A plutocracy is always an oligarchy, but there could be some oligarchies that aren't plutocracies. 

An oligarchy can occur in any political system. In a democracy, oligarchs use their relationships and money to influence the elected officials. In a monarchy or tyranny, they have enough power and money to influence the king or tyrant. 

The iron law of oligarchy states that any organization or society will eventually become an oligarchy. That's because the people who learn how to succeed in the organization gain a competitive advantage. The larger and more complicated the organization becomes, the more advantages the elite gain.

Oligarchs only associate with others who share those same traits. They become an organized minority as opposed to the unorganized majority. They groom protégés who share their values and goals. It becomes more difficult for the average person to break into the group of elites. The following pros and cons summarize some of the benefits and issues:

Pros

  • Power is centralized within a leadership team, rather than involving everyone in every decision.

  • People can participate in activities, relationships, and work while the group in power handles the larger issues of the society.

  • An oligarchy strives to keep the status quo, which breeds conservatism instead of taking on risky ventures.

Cons

  • The ruling class controls policies and legislation, and ends up with much more wealth than the rest of society.

  • As the ruling class gains more expertise, it tends to exclude outsiders, making it tough for people to break in.

  • Prevents new perspectives and diversity.

  • Can limit available supplies to certain classes, fix prices, provide selective benefits, and restrict the economy by hindering basic supply and demand functions.

  • Causes rebellion when people feel they can't join the ruling class, and disruption and war when people no longer follow the rules.

Pros of an Oligarchy

Oligarchies exist in any organization that delegates power to a group of expert insiders so that the organization can function. It's not efficient for everyone to make all the decisions all the time. 

An oligarchy allows most people to focus on their day-to-day lives. They can ignore the issues that concern society as a whole. They can spend their time doing other things, such as working on their chosen career, cultivating relationships with their families, or engaging in sports.

The oligarchy allows creative people to spend the time needed to innovate in new technologies. That's because the oligarchy manages the society. They can be successful as long as their inventions and success benefit the oligarchy's interests as well. 

The decisions made by an oligarchy are conservative since the goal is to preserve the status quo. It’s therefore unlikely that any single strong leader can steer the society into ventures that are too risky.

Cons of an Oligarchy

Oligarchies increase income inequality. That's because the oligarchs siphon a nation's wealth into their pockets. That leaves less for everyone else.

As the insider group gains power, it seeks to keep it. As their knowledge and expertise grow, it becomes more difficult for anyone else to break in. 

Oligarchies can become stale. They pick people who share the same values and worldview. This can sow the seeds of decline since they can miss the profitable synergies of a diverse team.

If an oligarchy takes too much power, it can restrict a free market and agree informally to fix prices, which violates the laws of supply and demand. 

If people lose hope that they can one day join the oligarchy, they may become frustrated and violent. Consequently, they may overthrow the ruling class. This can disrupt the economy and cause pain and suffering for everyone.

Causes of Oligarchies

An oligarchy forms when leaders agree to increase their power regardless of whether it benefits society.

The people in charge are very good at what they do; otherwise, they wouldn't have risen to that level. That's how they can continue to take more wealth and power from those that don't have those skills or interests. 

A monarchy or tyrant system can create an oligarchy if the leader is weak. The oligarchy increases its power around this person. When the leader leaves, the oligarchs remain in power. They select a puppet or one of their own to replace the leader. 

Oligarchies can also arise in a democracy if the people don't stay informed. This happens more often when a society becomes extremely complex and difficult to understand. People are willing to make the trade-off of allowing those with the passion and knowledge to rule to take over.

U.S. Oligarchies

Is the United States an oligarchy? Many economists, such as France's Thomas Piketty and Simon Johnson, a senior fellow of the Peterson Institute for International Economics, say if it isn't already, it's headed that way. One sign is that income inequality is worsening. The incomes of the top 1% of earners rose 157% between 1979 and 2017 and the top 0.1% of the population has more than tripled its share of earnings in that period.

The top 0.1% represents the corporate executives, hedge fund, and other financial managers, lawyers, and real estate investors. They go to the same schools, travel in the same social circles, and sit on each others' boards.

American oligarchs are not within the same families. They don't all support the same causes. Instead, they are very wealthy people who donate to campaigns and causes that help their businesses.

The Washington Post found that just 10 mega-donor individuals and couples contributed nearly 20% of the $1.1 billion raised by super PACs in 2016. Super PACs are political action committees that can shield the identity of their donors. The top givers were split roughly equally along party lines.

For example, Charles Koch and his late brother David made their wealth by investing in oil derivatives and support conservative politics through the Koch foundations. Another is Harold Hamm, owner of Continental Resources, who opened up the Bakken shale oil fields. He supported Republicans who approved the Keystone XL pipeline. 

Comcast lobbyist David Cohen is a millionaire who donates to Democrats. He also successfully lobbied the government for the merger of Comcast and NBC. S. Donald Sussman is a hedge fund manager who supports liberal candidates.

Research conducted by Northwestern and Princeton universities supports the oligarchy claim. It found that the nation's economic elite dominate federal policies.

It reviewed 1,800 federal policies enacted between 1981 and 2002. The researchers compared them to the preferences of four groups. It found that the policies most frequently aligned with the wishes of the elite and special interest groups rarely aligned with those of average citizens or mass interest groups. 

Americans Feel Disenfranchised

As a result, most Americans feel disenfranchised. If not, they feel helpless in influencing their society. A 2018 Gallup poll found that 63% feel dissatisfied with the way things are going right now. Also, 68% are dissatisfied with income distribution. As a result, 37% feel that there is not much opportunity to get ahead. That's up from 17% in 1997. 

These attitudes have led to populist protest groups such as the Tea Party and the Occupy Wall Street movement. However, the Tea Party directed people's anger toward the federal government, not the oligarchy. The Occupy Wall Street movement didn't carry out any real change.

This dissatisfaction became a critical force in the 2016 presidential campaign. It created momentum for candidates on both ends of the political spectrum. Bernie Sanders railed against those policies that perpetuated income inequality. Donald Trump lumped the Tea Party, traditional Republicans, and Democrats into the same "swamp." Trump used the anger at the status quo to win the election.

President Trump then filled his Cabinet positions with many of the same elite he had campaigned against. He also granted waivers to former lobbyists to direct policy in areas they had once lobbied for. 

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