As Joe Biden was leaving office, he stated in very blunt terms that an “oligarchy is taking shape in America of extreme wealth, power and influence that threatens our entire democracy”. He was taking aim at what he called the ultra-wealthy “tech-industrial complex” (think Elon Musk) that wields increasingly “unchecked power” over Americans.
What he didn’t say is that this oligarchic tendency has been growing for decades, actively enabled by both Democrats and Republicans. His quote, however, is a welcome break from the narrative that western countries have ‘rich people’, whereas only poor countries have oligarchs.
There is widespread belief that the United States is a liberal capitalist democracy, but can we also say that it is an oligarchy? If we accept that oligarchy can exist within a democracy, then I think the answer is yes. Oligarchy is fundamentally about the exercise of power by the richest citizens.
We typically think about oligarchy as being part of political systems that are undemocratic and authoritarian, such as Russia or China. But there is a longstanding tradition in the study of political economy warning about the threat of extreme wealth concentration within liberal democracies – precisely because of the oligarchic tendencies this creates.
This tradition goes all the way back to Aristotle, the ancient Greek philosopher. He warned about the threat of extreme wealth concentration because it created the conditions for a rich minority to take control of the political system and govern in their own interests.
His definition of oligarchy still resonates today because it narrowly focused on the fact that a small, tiny minority of people control massive concentrations of wealth in society. The power resource of the extremely wealthy is the control of economic resources, which can be deployed for all sorts of different political objectives, creating political inequality.
This tradition of studying oligarchy within a democracy argues that the core political objective of oligarchs is to defend their wealth. One obvious way to advance, maximise and protect this wealth is to influence government policy through lobbying. Or, in more extreme cases, to capture the state and directly rule in their own narrow self-economic interests.
In contemporary US politics, this means protecting intangible intellectual property rights, controlling the infrastructure of tech markets, removing regulations that constrain market power, and aggressively minimising corporate income and wealth taxes. This is precisely what we can expect to see under Donald Trump. His cabinet contains the highest number of billionaires ever in the history of the US government. He has made no apology for inviting the world’s richest men into his inner circle with the plan to work directly with them in designing a radically new autocratic-libertarian political project.
De facto political power
The threat of oligarchy to democracy is also built into the R>G theory of the economist Thomas Piketty. This theory argues that when the rate of return on capital (profits, dividends, interest, rents, and capital gains) exceeds the economic growth rate (particularly wage-income), wealth will become more and more concentrated in the hands of the few.
The evidence for this concentration of wealth in the United States is overwhelming. As shown in the enclosed graph, the richest 1% control far more wealth than the middle class. In fact, they control and command more wealth than 90% of the US population. However, the question of oligarchy is less about the richest 300,000 people in the US, but the extreme concentration of wealth among the billionaire class, or the 0.0001%.
The richest 800 people in the United States control more than $6 trillion in wealth. Among the richest of these, in 2024, their wealth grew by more than $100 million a day. This massive expansion and concentration of wealth is mostly bound up with the ownership of financialised corporate assets and the right to monetise intellectual property in big tech monopolies.
Tech billionaires pay effectively no tax on this wealth. In addition, as shown in the graph enclosed, they pay much lower taxes on their income than the middle class or high-earning professionals. This is because their oligarchic power comes from the ownership and control of wealth-producing capital assets, particularly the infrastructure of the internet, not income. The rise of artificial intelligence is going to further amplify these worrying trends towards extreme wealth concentration.
If you think the oligarchic threat to democracy is simply the perspective of left-leaning academics, consider the core theory of the recent Nobel prize winners, Daron Acemoglu and James Robinson, on Why Nations Fail. They have produced a prolific body of work, but central to their core theory on institutions is the idea of who controls de facto political power.
De facto political power in a society comes from the control of economic resources. This wealth-power can be deployed in numerous ways to undermine political and economic institutions, including taking control of political institutions to undermine liberal democracy and market competition. Nations fail when political and economic institutions are controlled by elites who govern in the interest of the few, not the many.
Hence, the recent winners of the Nobel Prize for Economics won by systematising an argument that has existed since the writings of Aristotle. We know from political science that the only way to stop the oligarchic threat to democracy is for an autonomous state to enforce market rules aimed at minimising and regulating concentrated corporate power.
Central to this is the use of taxation and antitrust legislation. High and effective wealth taxes on billionaires and the ultimate owners of multinational groups are not tools for revenue generation. They are tools to regulate their economic and market power. Likewise, for antitrust legislation and competition law, they are tools to stop oligarchy.
We must acknowledge the United States as shaped by oligarchic power, a concern that extends way beyond its borders due to its global influence. Trump and his inner circle must be exposed for what they are – extremely wealthy corporate elites governing in the interests of the super-rich. Addressing this power is essential to protecting democracy from the corrosive effects of extreme wealth concentration.
Originally publishes in the Business Post, January 26th, 2025
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