Plutocracy

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Blog Author :

Aswathi Jayachandran

Edited by :

Alfina L.

Reviewed by :

Dheeraj Vaidya, CFA, FRM

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Plutocracy Meaning

 A plutocracy is a form of government or rulership by the rich. It is a form of governance where policies and systems are geared to benefit the wealthy and powerful more than others. The plutocratic political system wields its power through money.

This political system is dominated by wealthy people who influence the country's political, economic, and social decisions. The rich coerces the lawmakers to submit to their will with the money they possess. As a result, they frame policies with their own best interests in mind, not the general public.

Table of contents
  • A plutocracy is a form of governance or political system dominated by the rich.
  • Their design is to benefit the wealthy and powerful disproportionately.
  • The system can either contain affluent individuals as leaders or ensure that they have influence or are in control over decisions that happen in the country.
  • An oligarchy is a government governed by a small group of people chosen for various reasons, including their education, service, social status, religion, or wealth. The meaning of plutocracy, however, differs from Oligarchy as only the wealthy rule here.

Explained

What-is-Plutocracy

Plutocracy in Greek comprises of two words- "Ploutos" meant wealth, and "Kratos" referred to power. The system, therefore, represents the rule by the wealthy for their self-invested interests. Plutocracy etymology thus is justified.

Plutocracy is a, therefore, the form of government or political system governed by wealthy people. The intention here is the benefit of the rich and powerful to a greater extent. The system can either contain leaders made up of wealthy individuals or ensure that they influence or control decisions made in that country. It is usually not a proper form of government but an indication of the inequality prevailing in governance. People mention the system to point out the unfair advantage the rich have over the poor and the influence of the wealthy.

Concentrating wealth in a few pockets is never a way to rule any country. Corruption and authoritarianism prevail in such a system and discourages the concept of welfare in society. The wealthy section of the nation would not want other sections of people to rise to their level. Hence, competition is more than often discouraged. This hides the true growth potential a country can achieve. There will be division in the society based on class (the rich and the poor), and conflicts will arise later in time.

Internal mechanisms in the plutocratic system are often too rigged to self-correct. However, the system can propel faster growth, especially in its early stages. When there is involvement of money, things are done at greater speed. Developmental projects can be sped up as there are monetary resources available. If utilized properly, it can feed the rest of the population or at least build opportunities for them to survive.

Countries with Plutocracy

Venice is one of the most famous examples of plutocracy. Florence, Genoa, and other merchant city-states were also under the plutocratic rule. The Dutch Republic and the empire of Japan before World War II, the Roman Empire, along with a few cities in ancient Greece, were also plutocratic. It is also said that the square mile city of London has a different electoral system for its local administration. Most of the services provided by the City of London Corporation are utilized by the businesses belonging to the city. More than two-thirds of the voters are non-residents. They are representatives of various businesses and other bodies that have a presence in the city. 

American Plutocracy

Inequality of income and wealth in the United States is far higher than in most developed countries, and it is increasing. The financial crisis (2008) and the long and unequal recovery that followed have impacted the country. The economic downturn brought by the COVID-19 pandemic has exacerbated these patterns.

One can analyze this through the Gini coefficient. It is a popular income distribution metric. The higher the rating, the larger the disparity between the richest and poorest citizens of a country Gini coefficient (in the United States is 41.1. Poverty is rising in the United States, with an estimated 12.3-17.8% of the population living in poverty. Many low-wage workers don't have sick days, pensions, or health insurance and live paycheck to paycheck.

In 2020, the Gini coefficient in the United States was 48.9%. This is the highest Gini index in the country in at least the last 50 years. In addition, the United States has the largestGini coefficient in the pool of G7 countries. The richest 1% of earnings in the United States earns nearly 39 times more than the bottom 90%, while roughly 33 million Americans make less than $10 per hour, pushing them to the verge of poverty.

Reports have been circulating that the rich funds the elections. This is concerning as the act of wealth influencing the election results will have a huge impact on the country's future. Their motive will be profit, and the rich may exploit the country for the same.

Oligarchy vs. Plutocracy

Oligarchy vs. plutocracy is a topic of popular debate. However, the two concepts are different in the following ways:

oligraphy-vs-plutocracy

Meaning

Oligarchy refers to a government system where the governance is under the control of a small group of privileged people. The meaning of plutocracy differs in that only wealthy people, irrespective of the type of influences they hold, rule the system.

The rulers

In an oligopoly system, religious people such as bishops or priests, elites, nobles, academicians, philosophers, high-ranking officials, wealthy people, etc., can influence the government. On the other hand, in a plutocratic government, the ruling party will constitute only rich individuals.

Examples

Ancient Sparta and the Vatican are examples of Oligarchy, while the Roman Empire and the merchant republics of Venice are examples of plutocracy.

Both plutocracies and oligarchies represent a self-interested minority group of the society. Therefore, both expressions are frequently used negatively to express concern that a ruling minority will prioritize its interests over the country's welfare. As a result, people may face oppression and discrimination under oligarchies and plutocracies.

Frequently Asked Questions (FAQs)

What are the features of plutocracy?

Rule by the rich is the basic feature of this type of system. However, another feature that distinguishes a plutocratic government from others is that a power shift can happen when one section becomes wealthy. 

What are the advantages of plutocracy?

Even though plutocracy is an unfair system to the larger sections of society, history has shown that it offers several advantages in its early phases. First, plutocratic systems are more productive and efficient as they have monetary resources at their disposal. Since money is a motive, there can be money motive driven economic growth.

How does a plutocracy work?

Plutocratic government works attuned to the heeds of the wealthy people. They influence the policies framed and decisions made in the country, preferably in a way that suits their interests. The system works mostly by coercion, corruption, and bending the laws and policies to suit their needs.