What is it called when the people have control over the government?

What Is a Plutocracy?

Plutocracy is a government controlled exclusively by the wealthy, either directly or indirectly. A plutocracy allows, either openly or by circumstance, only the wealthy to rule. This can then result in policies exclusively designed to assist the wealthy, which is reflected in its name—the Greek words "ploutos" and "kratos" translate to wealthy and power or ruling, respectively, in English.

Key Takeaways

• Plutocracy is a system of rule by the wealthy, directly or indirectly.
• Indirectly, plutocracy can take the form of regulatory frameworks and programs designed to benefit only the wealthy.
• Commentators state that rising income inequality has converted America into a plutocracy, with Congress getting richer on average.
• Plutocracy has been present since ancient times. The Roman Empire was considered a form of plutocracy in which a Senate consisting of the wealthy aristocracy had the power to elect local administration officials and propose new policies.
• Plutocracy is not to be confused with oligarchy, which defines a political structure in which power is concentrated within a small group of people that are not necessarily wealthy.

Understanding Plutocracy

Plutocracy doesn't have to be a purposeful, overt format for government. Instead, it can be created through the allowance of access to certain programs and educational resources only to the wealthy, thereby making it so that the wealthy hold more sway. The concern of inadvertently creating a plutocracy is that the regulatory focus will be narrow and concentrated on the goals of the wealthy, creating even more income and asset-based inequality.

In a plutocracy, access to political power is limited and requires one either to possess wealth or to have the support of the wealthy by being willing to serve their interests. This may be a matter of official rules and restrictions that explicitly require that a person have some specified level of economic affluence in order to exercise political authority, such as voting or holding public office. However, plutocracy more often arises informally and is implicitly embodied in constitutional, legal, or regulatory measures that create barriers to participation in politics and political life that can be met only through the possession or expenditure of significant wealth.

Plutocracy tends to be self-reinforcing: wealth is a prerequisite for access to political power, and the policies promoted by plutocrats secure their own hold on wealth and power.

Policies enacted and enforced in a plutocracy tend to redound to the benefit of the wealthy either directly or indirectly. The specific content of government policies may vary greatly based on local and historical economic, political, and social conditions. Again, these do not usually take the form of explicit policies that openly favor the wealthy as a stated policy goal, but nonetheless set in motion economic processes and practical consequences that favor the interests of the wealthy.

For example, most modern countries are nominally democracies that, in practice, require the support of wealthy donors to effectively campaign for office or influence policy. Expenditures by wealthy individuals and corporations on activities such as political campaigns, legal lobbying, "socially conscious" activism, and occasionally direct bribery determine most or all of public policy. As a result, a relatively small proportion of the population, with access to the majority of the wealth and control of the commanding heights of economics and finance, are able to shape both public opinion and public policy in their own interests.

Such policies are almost never promoted as explicitly favoring the interests of the wealthy, but tend to be cloaked in some other seemingly legitimate public policy goal that just coincidentally results in advancing or securing the interests of the wealthy. These ostensible justifications may run the gamut from protecting the environment to national defense to promoting public health. Increasingly, they may even be carried out in the name of things like fairness, equality, and righting historical injustices.

Public policies that favor the wealthy in a plutocracy often do so not by directly advancing their interests, but by harming the interests of the middle class and small businesses so that the wealthy tend to enjoy a more secure competitive position in day-to-day business, investment activity, and financial markets. Examples of such policies include legal barriers to entry (or regulations that function as barriers), free-market reforms that advantage wealthy individuals and large corporations, or public interest and educational campaigns that direct public scrutiny away from the wealthy and toward other segments of the population who can be made scapegoats for various inequalities and injustices.

Plutocracy in the U.S.

"Of all forms of tyranny the least attractive and the most vulgar is the tyranny of mere wealth, the tyranny of a plutocracy," President Theodore Roosevelt wrote in his autobiography. Roosevelt wrote this at a time when the wealthy paid little or no income tax and could afford summer homes in Newport that made the White House look shabby. 

Although many people talk about the widening gap between rich and poor in the United States, plutocracy is more an implicit concept than a formal governing model in any modern country. Author and former Harvard Business School professor David Korten believes that plutocracy "describes our situation in the United States far more accurately than the term democracy. We have been an Empire ruled as a plutocracy since our founding." 

Princeton University professor Martin Gilens and Northwestern University professor Benjamin I. Page concluded in a study that "multivariate analysis indicates that economic elites and organized groups representing business interests have substantial independent impacts on U.S. government policy, while average citizens and mass-based interest groups have little or no independent influence."

Others have come to similar conclusions. According to 2017 research by Thomas Hayes and Lyle Scruggs, political science professors at the University of Connecticut, the concentration of state incomes with select individuals produces a sharp reduction in social welfare schemes. They write that "income concentration at the top has become so skewed, and politicians so reliant on their support for re-election, that representation in America may have veered quite far from the ideal of one-person, one-vote in recent years."

Plutocracy In the U.S. Congress

Plutocracy appears to be a well-established and increasing trend in the U.S. Congress. Roll Call estimated that total wealth in the 115th Congress (2017-2019) was at least $2.43 billion, or 20% more than the collective riches of the previous Congress. Meanwhile, according to estimated net worth calculations by the Center for Responsive Politics, more than half of the members of the 116th Congress (2019-2021) are millionaires.

There have recently even been calls to make plutocratic wealth requirements of Congress more explicit by prohibiting less-wealthy members from sleeping in their offices. This would require them to rent or purchase local housing in one of the most expensive real estate markets in the world and effectively bar middle-class Americans from serving in Congress.

Plutocracy in the U.S. Congress also plays out into policies that overwhelmingly favor the wealthy at the expense of the middle and working classes. The 116th Congress wrote and passed several multi-trillion-dollar relief and stimulus acts, in response to fears of COVID-19 that had devastated small businesses and working-class jobs in the service sector. In part, as a result of this new spending, the net worth of U.S. billionaires increased by $1.8 trillion, and the market capitalization of many of the U.S.'s largest companies, especially in the tech sector, jumped considerably.

Simultaneously, the 116th Congress took no legislative action to halt or discourage widespread civil disorder and looting that destroyed small, independent businesses across American cities in 2020. Several members of Congress even publicly expressed support for "unrest in the streets" and promoted bail funds for rioters who allegedly looted small businesses and shot at police.

Is Congress Plutocratic?

The policy choices made by the 116th Congress leaned heavily toward plutocracy, with massive benefits for the wealthy amid skyrocketing unemployment and the destruction of many small, independent businesses.

Plutocracy vs. Oligarchy

Oligarchy defines a political structure in which power is concentrated within a small group of people. However, unlike a plutocracy, this group of people doesn't necessarily have to be wealthy.

For example, an oligarchy can consist of a military ruling a country, a central committee of revolutionary communist leaders, or even rule by expert technocrats. Only when an oligarchy is concentrated among a small group of wealthy individuals can it also be considered a plutocracy.

Examples of Plutocracy

Plutocracy has been present since ancient times. The Roman Empire was considered a form of plutocracy in which a Senate consisting of the wealthy aristocracy had the power to elect local administration officials and propose new policies.

In recent times, America is held as an example of a nation with elements of plutocracy, as explored above, due to the disproportionately powerful influence wielded by the wealthy in the country's election and policy-making process.

In the early 1900s, America was also heavily influenced by a small group of plutocrats based in New York City. This was eventually investigated by the Pujo Committee. Now household names, some of these individuals included business titans and robber barons such as J.P. Morgan, William and John D. Rockefeller, and others who had virtual monopoly control over the U.S. financial system.

Plutocracy FAQs

What does plutocracy mean in government?

Plutocracy indicates a government that is controlled exclusively by the wealthy, either directly or indirectly.

What is a plutocrat?

A plutocrat is an individual who has political influence or power because of their wealth.

Is America a plutocracy or oligarchy?

There is a lot of debate on whether the United States is better defined as a plutocracy or oligarchy, rather than a democracy. Ultimately, this depends on who you ask, and what kinds of individuals make up our current presidential and congressional administrations.

Where did the word plutocracy come from?

The word "plutocracy" comes from the Greek words "ploutos," meaning wealthy, and "kratos," meaning power or ruling.

What is the difference between a plutocracy and an aristocracy?

While a plutocracy is a government ruled by the wealthy, an aristocracy is a form of government ruled by an elite few or a privileged, minority ruling class. An aristocracy often has both money and nobility or hereditary favor, such as in historic Britain and India.

The Bottom Line

Because of the self-reinforcing cycle of wealth, access to political power, and the impact of public policy on the economic relations of society, plutocracy is a rather common form of government, even where the nominal model of governance is democratic.