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Meaning of the Term 'Plutocracy' with Examples

Akshay Chavan
A plutocracy does not have an official political philosophy like other forms of a government, such as a democracy or communism. This story explains the meaning of plutocracy, with the help of examples of the countries it is found in.

Did You Know?

The Nazis used the term 'plutocracy' as a code word for the 'Jews', trying to create a propaganda that Western democracies were controlled by a few wealthy Jewish industrialists.
Since the onset of human civilization, it has been seen that economic wealth and political power go hand in hand. In both cases, man is never satisfied, and wishes for more.
While a relation between wealth and power has always been surreptitiously indicated, there have been times in the past when the rich made no secrets of their ambition to rule, giving the justification of their wealth. Obviously, such a government is based on selfish interests, rather than a motivation to improve people's lives.
This is exactly what a plutocracy is about, and though it was more common in the past, not a day goes by without some country being labeled as 'plutocratic' by its critics.

What is a Plutocracy?

A plutocracy is a form of government in which power is controlled by the wealthy. This term is derived from two Greek words - 'ploutos', meaning wealth, and 'kratos', which means ruler. Though there are no actual plutocracies in the modern world, in ancient times, several empires in Europe and Asia had this form of government.
Plutocracies are usually established in countries which are emerging democracies, or those recovering from disorderly conditions. This is because, the select few entities controlling most of the resources want the new government to hear their say.
The wealthy may not actually be the ruling class in a plutocracy, but rather, they may exert influence on the leadership.
This influence may be positive, where corporations or individuals finance election campaigns of a politician, or negative, when they may withdraw support to a government they dislike, by threatening to relocate their industries elsewhere to create unfavorable economic conditions.
All plutocracies have certain characteristics that they share in common with each other. To start with, these regions show an economic disparity, since the wealthy elite influence the government to take actions which benefit them the most. In simple words, this leads to a widening economic divide, with the rich getting richer and the poor getting poorer.
Wealthy organizations or individuals may try to appease the masses by claiming that such a form of government will help them become rich as well, claiming that economic benefits given to upper income levels will ultimately benefit the entire economy.
However, on the contrary, the masses often have little say in such a government, and the poorest of them comprising immigrants and people of different races do not even have the right to vote. The elite intermarry among themselves to prevent wealth from reaching the weaker sections of society, so that their influence remains intact.
Thus, the poor have no chance of rising higher in society, leading to great social immobility.

Plutocracy Examples

Ancient Venice

Venice is a good example of how plutocracy can bring about the downfall of a thriving city.
In the early 14th century, this place was a city state, where power rested only in the hands of about 500 billionaires, who were noblemen called 'patricians'. The city owed its success to the 'colleganza', a primitive stock-trade company. This company financed the voyages of merchant ships, and the participating businessmen shared the profits earned.
While in the beginning, this was a free-for-all enterprise, which allowed any new investor to test his fortune, the 'patricians' felt insecure about their status if businessmen from the weaker sections of society were allowed to rise up.
Under a new policy called 'La Serrata', these noblemen banned newer investors from investing in the colleganza, thus officially setting up a plutocracy. Soon, the fortunes of the city took a turn for the worse.
By 1500, the city's population was lesser than it was in 1330. Even the industrial revolution, which spurred European growth in the 17th and 18th centuries, couldn't save Venice, which continued to decline.

Pre-World War 2 Japan

In the years preceding the Second World War, large business houses called 'zaibatsu', controlled most of the Japanese economy.
These organizations were mainly involved in mining, shipping, finance, and manufacturing industries, though in reality, there was not a single trade where their influence did not exist. The zaibatsu had always sought advantageous relations with the political leadership, as this gave them ownership over state properties at low prices, and desirable contracts.
By the year 1929, they had succeeded in edging out their market competition, and had gained such political influence, that they could even control government policies. This nexus between organizations and politicians ultimately led to the weakening of the country's parliament by 1930.
However, it also led to a widening economic divide between large enterprises and small firms in terms of wages and productivity. This weakened the country's domestic market, prompting it to invade other countries to create new markets for its industries.

USA

The US government, established after the Great War of Independence, allowed only adult, white males, who owned land, to vote. To own land, one obviously requires a certain amount of wealth.
Also, many landowners, at the time, owned African-American slaves. So, the poor, colored people, and women who weren't allowed to vote till 1920, were marginalized. From the end of the Civil War till the Great Depression in the 1930s, many large corporations had begun to monopolize the market and exert political influence.
The rich were even able to elude taxes by influencing the leadership, right till the 1970s, whereas, they were eligible for taxation under the progressive taxation laws of 1913. Today, corporations are allowed to fund election campaigns of legislators, which cynics call bribing, though it is allowed by law.
Critics have warned that this trend symbolizes the growth of plutocracy in the United States. The country also faces great economic disparity - 80% of the national wealth generated since 1973 lies with the upper 2% of the population, with 65% belonging to the top 1% alone.

London

The city of London has been labeled as an example of a modern plutocracy by some critics. It has a rather unique election system, in which, both, the businesses based in the city as well as its residents are allowed to vote.
The excuse given for this by the Corporation is that, most of their decisions affect local businesses, since the resident population of the ancient wards of the city is only about 7,000. In contrast, the daytime population is composed of 330,000 non-residents, who mostly work in banks and financial companies.
The voting system is such that, organizations with more employees get more voting rights than others. The influence of such wealthy organizations has resulted in lower tax rates, which in turn draws a large number of wealthy people from around the world each year.
Central London displays the highest range of income inequality in the whole of Britain. 30% of its population is among the poorest in the UK, while 27% falls in the richest bracket. Only about 12% of the population has moderate income levels.

Philippines

Plutocracy in the Philippines can be traced back to the period when it became a Spanish colony in the 16th century.
The Spaniards chose the most cultured lot of the Filipinos as 'Ilustrados', who were given charge of collecting taxes from the indigenous population and giving it to the Spaniards. Towards the end of the 19th century, when the colonizing Spaniards were replaced by the Americans, this system continued.
The Americans also appointed officials from the Ilustrado clan to political positions.

With time, political influence largely remained restrained to these elite Filipinos, who ensured that the lower classes did not get empowered. This widened the economic and social divides in a society already battling caste discrimination.
So successful were the Ilustrados in controlling power, that even today, out of 265 members of the country's Congress, 160 belong to this clan alone. Since 1985, the country's income inequality is very high; the top 1/5 of the population commands more than 50% of the national income, while the lowest 1/5 gets only 5%.

India

Despite achieving independence from Britain in 1947, India has always seen a serious economic divide between its rich and poor, which continues to widen.
According to statistics up to 2009, 20% of the country's GDP, and up to 80% of its stock market capitalization was controlled by a small group of 50 billionaires. There is also a close nexus between politics and wealth, as investors tend to associate themselves with politicians to prevent fluctuations in their investment.
Moreover, such connections help organizations bag important infrastructural and construction projects, apart from getting easy clearances.

The marginalization of the country's weaker sections has resulted in armed insurgencies in different parts of the country.
Another statistic helps better understand the economic divide. The top 5% of the population is in control of 2/3 of the country's wealth, while the top 10% collectively controls about three-fourths. The lower classes only have 4.5% of the total wealth.

Canada

When Canada was a part of the British Empire, the British Parliament passed a law, called the Constitutional Act of 1791.
This divided the Canadian province of Quebec into two colonies to accommodate all British loyalists fleeing from USA following the Great War of Independence. By this act, the southwestern part of Quebec was called the colony of Upper Canada, and its northeastern part was called Lower Canada.
This arrangement helped foster a plutocratic system of government. Almost immediately, power in both the colonies was vested in the hands of wealthy merchants and landowners. In Upper Canada, this group came to be known as the 'Family Compact', who ruled from the 1810s to the late 1840s, when the dynasty collapsed in the aftermath of a rebellion in 1837.
In Lower Canada, powerful families, called the 'Chateau Clique', controlled the government. All the advisers to the British-appointed Governor were drawn from these families. The Chateau Clique was even supported by the Catholic Church for almost 200 years, when the Quiet Revolution of the 1960s weakened much of its influence.
Critics also accuse the modern Canadian government of falling prey to the wealthy, citing examples of how wealthy industrialists have been able to evade taxes and bypass the environmental laws of the country.

Russia

When the Soviet Union disintegrated in 1991, most of the natural resources, like oil and natural gas in Russia were allegedly misappropriated by political entities.
Since then, the influence of these entities has only grown. Despite a financial slowdown in the late 1990s, Russian tycoons benefited from the subsequent rise in oil prices, which earned them more revenue.
These individuals and corporations have also been accused of grabbing public funds in the past, by exerting their influence on the political leadership. Even in the 2014 Winter Olympics, the government was accused of giving in to corporate pressure, by ignoring human rights violations.
The country also has one of the highest levels of wealth inequality in the world, with 35% of its wealth being controlled by a meager number of 110 billionaires.
Most accusations of plutocracy against a country can be traced to its rivals. The truth is, there is some level of plutocracy in most nations, since politicians can't ignore the power that wealth brings with it. However, each government needs to be armed with tough laws to ensure that this influence is restricted to a minimum.