What is an Oligarchy?

By Benjamin Elisha Sawe on September 25 2018 in World Facts

In an oligarchy, very few select people control the wealth.

Oligarchy represents the leadership system where power is held and controlled by a few individuals. Oligarchy represents a leadership system where power is held and controlled by a few individuals. The term comes from the Greek word "oligarkhia" which translates to "ruled by a few". Aristotle was responsible for the using the term to refer to the ruling elite. Oligarchs are known for using their influence to solidify their positions of power and to advance and protect their interests. Examples of modern day oligarchies are Ukraine and Russia.

Oligarchy In Russia

A country that has been synonymous with the oligarchy is Russia. Oligarchs in Russia rose to financial prominence during the collapse of the Soviet Union in the late 20th Century. During this period, state assets worth billions of dollars were up for the taking through a system known as voucher-privatization. Oligarchs used their political networks to obtain wealth running to billions of dollars as the economy shifted to amarket-based exchanges. Russia’s oligarchs were hard hit during the 2008 global financial crisis. Figures from Bloomberg show the top 25 richest individuals in the country have lost an estimated $230 billion since 2008. The plummet in the collective wealth of the country’s oligarchs is also attributed to the Russo-Georgian War of 2008 which had detrimental effects on the country's economy. An example is Oleg Deripaska who was at one time the country’s wealthiest person. Oleg’s fortunes were hit by the 2008 crisis that left him struggling to finance his ballooning loans.

Oligarchs And The Kremlin

The oligarchs in Russia are known for their close relationships with the Kremlin. President Vladimir Putin is thought to have aided the growth of oligarchic networks in the country. Some individuals who have been bosom friends with President Putin have in recent years become billionaires including his childhood friend, Arkady Rotenberg. Some people, however, argue that the president has been fighting oligarchy in the country, indicating that some oligarchs have been charged with economic crimes during Mr. Putin’s tenure. The country’s top wealthiest individuals are also known for their preference for buying real estate property in lucrative and affluent cities around the globe. London is the first choice for many of the Russian oligarchs, something that has earned the city the nickname “Londongrad.” Some of the oligarchs have even become expatriates in the city. Others have made huge investments in the UK such as Roman Abramovich.

Oligarchy In Ukraine

Wealth distribution is a big problem in Ukraine because very few people hold most of the wealth and therefore the power in the country. It is estimated that the country’s 50 richest individuals had a combined wealth equivalent to 85% of the country’s GDP in 2008. However, the figure dropped to 45% of the GDP by 2013 caused by the 2008 Financial Crisis. Oligarchs have a firm grip on the political sphere in Ukraine, with some of the most influential Ukrainians being perceived as oligarchs by the general public. The influence of oligarchs in Ukraine stems from their wealth which they can use to advance their interests. Some of these influential individuals used their wealth to control major political parties in the country. To understand why this is the case for Ukraine, we must go back in time to the 1990s when a class of oligarchs emerged  with the collapse of the Soviet Union and independence of Ukraine. These individuals, many of whom rose from nothing to become billionaires, took advantage of their political networks to amass wealth. The rise of the oligarchs in Ukraine happened as the economy was in transition to become market-based, a process which featured the privatization of public assets.

Some Of The Oligarchs In Ukraine

A study was conducted in January 2001 by the Kyiv International Institute of Sociology aimed at understanding individuals regarded as oligarchs by the public in Ukraine. Some of the individuals who fit the description in the country according to the study include prominent people in Ukrainian politics. An example is President Petro Poroshenko who is regarded as among the nation’s most powerful figures. Other past Ukrainian heads of state who are also oligarchs include Yulia Tymoshenko, the nation’s former Prime Minister; Ukraine’s former president Viktor Yanukovych; and Kyiv’s former mayor Leonid Chernovetskyi. The country’s wealthiest person, Rinat Akhmetov, and the country’s second-wealthiest person Ihor Kolomoyskyi were also mentioned as possible oligarchs in Ukraine.

The Iron Law Of Oligarchy

The Iron Law of Oligarchy was introduced by renowned 20th Century sociologist and economist Roberts Michels. Roberts Michels had observed that political movements in Europe, despite being inspired by selfless ideals such as public participation when starting out, would ultimately morph into oligarchies which were dominated by a select few. According to the sociologist, companies and organizations were inherently oligarchies with no possibility of being direct democracies even if they attempted to circuvment oligarchic tendencies. In his theory, Michels stated that organizations are run by an elite class of leaders who, instead of leading through servitude, lead through dominating and even manipulating an organization’s structures. The existence of this leadership class puts the organization’s wellbeing at significant risk since these leaders will go to great lengths to advance their agendas, even if it means censorship or even blackmail.

Explanation

Roberts Michels outlined that the precursor to all oligarchies is the establishment of a bureaucracy. Any functional organization will need to have bureaucratic policies to be efficient in its operations. However, the bureaucratic policies result in the centralization of authority which is held by a few individuals in the organization and who will ultimately become delineated from the other workers in the organization. After experiencing the perks of being in leadership, the individuals will use any means necessary to keep their positions to the detriment of their colleagues in the organization. The law also has it that according to human crowd psychology, people have an inherent need to be led.

Application Of The Law

Some organizations have in the past attempted to fight the oligarchy tendencies stipulated in the Iron Law of Oligarchy with little success. An example is the Social Democratic Party in Germany which in its early years fought oligarchy by having all decisions being discussed regardless of their significance. However, maintaining these policies became impossible as the political party grew as the growth brought with it the need of having a streamlined processes.

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