What Is Plutocracy? Definition and Examples

Plutocracy is a term describing a society governed either directly or indirectly by extremely wealthy people. A common characteristic of plutocracy is the frequent enactment of government policies that benefit the wealthy, often at the expense of the lower classes. Since plutocracy is not a recognized political philosophy or form of government, its existence is rarely admitted or defended. Instead, the word is typically used in criticizing what is considered to be an unjust system.

Plutocracy Definition

Plutocracy describes a recognized type of government, such as democracy, communism, or monarchy, that either intentionally or by circumstance allows the wealthy to control most political and economic aspects of the society. Plutocracy can be created either directly by enacting economic policies advantageous to the wealthy, like investment tax credits, or indirectly by making vital social resources such as education and health care more easily accessible to the wealthy than to the less financially advantaged classes.

While plutocracy might be found to some degree in all forms of government, it is far more likely to become permanent in those that do not allow regular free elections such as totalitarianism, authoritarianism, and fascism. In democratic countries, the people have the power to vote plutocrats out of office.

While the first recorded use of the term in English dates to 1631, the concept of plutocracy has been present since ancient times. As early as 753 BCE, the Senate of the Roman Empire was controlled by a group of aristocrats whose wealth afforded them the power to elect local government officials and dictate new social policies. Other examples of historic plutocracies include pre-World War II Japan under Emperor Hirohito and the Kingdom of France before the French Revolution of 1789.

In 1913, U.S. President Theodore Roosevelt wrote, “of all forms of tyranny, the least attractive and most vulgar is the tyranny of mere wealth, the tyranny of a plutocracy.”

Plutocracy vs. Oligarchy

An oligarchy is a type of government ruled by a small group of people chosen because of any of several attributes such as their education, military record, social status, education, religion, or wealth.  

In a plutocracy, only the wealthy rule the government. Not always government officials, the plutocrats may be extremely affluent private individuals who use their wealth to influence elected officials through legal and illegal means, including lobbying, bribery, and sizeable election campaign contributions. 

In practice, both plutocracies and oligarchies represent the voice of a self-interested minority of the society. As a result, both terms are typically used negatively to express the fear that a ruling minority will place its interests and priorities above those of the country. In that context, the people are more likely to suffer oppression and discrimination under both oligarchies and plutocracies.

Plutocracy in America

Recently, the effects of income inequality coupled with the influence of wealth in government and politics have led some economists to argue that America has become or is moving towards becoming a plutocracy. Others suggest that the nation is at least a “plutonomy,” a society in which an affluent minority control economic growth.

In his 2011 Vanity Fair magazine article “Of the 1%, by the 1%, for the 1%,” Nobel-Prize winning economist Joseph Stiglitz contended that the influence over the government by the wealthiest 1% of Americans is increasing, a key characteristic of plutocracy. A 2014 study conducted by political scientists Martin Gilens and Benjamin Page, while not declaring the U.S. a plutocracy, concluded that most Americans now “have little influence over the policies our government adopts.”

Some economists, however, suggest that the effect of income inequality on the American government is not increasing in the way Stiglitz implies. Economist Steven Horwitz, for example, notes that the actual cost of living in the U.S. has been falling consistently for people of all income levels for decades. Horwitz notes that between 1975 and 1991, the average income for the lowest 20% of income earners rose in actual buying power at a higher rate than that of the top 20%. “So the slogan ‘the rich get richer while the poor get poorer’ turns out not to be the case,” wrote Horwitz.

Income inequity aside, many political scientists point to the U.S. Supreme Court’s 2010 Citizens United v. Federal Election Commission ruling as evidence of America’s drift towards plutocracy. This landmark 5-4 split decision ruled that the federal government cannot limit corporations or unions from contributing money to influence the outcome of elections. In effect, Citizens United granted corporations and unions the same political speech rights as individuals under the First Amendment. The ruling led to the creation of campaign contribution super PACs, which are allowed to raise and spend unlimited amounts of money.

In a Washington Post interview, political scientist Anthony Corrado summed up what he considers the threat of Citizens United. “We have really seen the rise of a new plutocracy and the dominance of a very small group of wealthy donors who give enormous sums.”

Sources and Further Reference

• Stiglitz, Joseph. “Of the 1%, by the 1%, for the 1%.” Vanity Fair, May 2011, https://www.vanityfair.com/news/2011/05/top-one-percent-201105.
• Piketty, Thomas. “Capital in the Twenty-First Century.” Harvard University Press, 2013, ISBN 9781491534649.
• Kapur, Ajay. “Plutonomy: Buying Luxury, Explaining Global Imbalances.” Citigroup, October 16, 2005, https://delong.typepad.com/plutonomy-1.pdf.
• Taylor, Telford. “Income inequality in America is the highest it's been since census started tracking it, data shows.” The Washington Post, September 26, 2019, https://www.washingtonpost.com/business/2019/09/26/income-inequality-america-highest-its-been-since-census-started-tracking-it-data-show/.
• “Top Net Worth - 2018: Personal Finances.” OpenSecrets, Center for Responsive Politics, https://www.opensecrets.org/personal-finances/top-net-worth.
• Evers-Hillstrom, Karl. “Majority of lawmakers in 116th Congress are millionaires.” OpenSecrets, Center for Responsive Politics, April 23, 2020, https://www.opensecrets.org/news/2020/04/majority-of-lawmakers-millionaires/.
• Horwitz, Steven. “The Costs of Inflation Revisited.” George Washington University, 2003, http://econfaculty.gmu.edu/pboettke/summer/horwitz.pdf.
• Wilson, Reid. “How Citizens United altered America’s political landscape.” The Hill, January 21, 2020, https://thehill.com/homenews/campaign/479270-how-citizens-united-altered-americas-political-landscape.