Ever since the Ukraine invasion provoked sanctions against Russian oligarchs, it seems everyone is asking: Who is an oligarch? And why do Americans feel comfortable employing the term to describe Russian billionaires while many recoil at the thought of labeling U.S. billionaires the same?
Could it be the pervasive belief that American billionaires earned their fortunes via the competitive free market, while those in Russia got rich through theft? Or could it be that we view Russia as a uniquely authoritarian state that grants its affluent special privileges and undue influence over public policy and the political system?
To get some expert insights, Institute for Policy Studies researcher Omar Ocampo interviewed Jeffrey Winters, author of the 2011 award-winning book Oligarchy and Director of the Equality Development and Global Studies program at Northwestern University.
This conversation has been edited for length and clarity.
Omar Ocampo: Let’s start with the basics: How do you define oligarch and oligarchy?
Jeffrey Winters: An oligarch is someone who is empowered by wealth. This differentiates them from someone who is empowered by political office. An individual who occupies the presidency of a state is a tremendously empowered person compared to ordinary citizens. They can set in motion all kinds of things, but he or she does not necessarily have to be a tremendously wealthy person to hold office. Wealth tremendously concentrated in very few hands creates a special kind of empowerment and it can be used in a lot of different ways politically.
Things get a little bit more complicated with the term “oligarchy.” It has often been thought of as “rule by the few,” but, in Aristotle’s original formulation, it was “rule by the wealthy few.”
One thing that all oligarchs do politically is what I call wealth defense. Oligarchs are obsessed with it, and it is an obsession the rest of us don’t have because we don’t have an enormous fortune to defend. But I guarantee that the moment you or I have a massive fortune, you would begin to ask yourself, “How do I make sure that I hold on to my wealth and do with it as I wish? How do I ensure that no democratic society redistributes my wealth or no other oligarch forcefully takes it?”
In short, oligarchy is the politics of wealth defense.
OO: In your book you write that, despite the expansion of political freedom and democracy through history, oligarchs were still concerned with democratic majorities threatening their wealth. Can you talk about the wealth defense industry? When did it emerge and when did it become sophisticated and powerful?
JW: One thing I found very interesting about twentieth century oligarchy in the US is that oligarchs were tremendously empowered up until the Great Depression. Then, from 1935 all the way up to 1975, the wealth of the top 1 percent flattened. They were still rich, but it was not a period of growth for them. Meanwhile, for the average household, the real standard of living tripled. Why did this happen?
A combination of two things: the Great Depression and World War II. It turns out that crises are not very good for oligarchs. They are at their strongest during what I call the “politics of the ordinary.” This is when their wealth power dominates elections and institutions.
Another factor is that by the 1960s, we had a welfare state, strong unions, and tax rates on the wealthy that reached 80 and 90 percent. The response of the oligarchs was to find ways to withdraw their resources from the system, move their money offshore to avoid taxes, and have a behind-the-scenes industry that is going to lobby for them. This originated in Chicago during the 1950s where brilliant tax and trust lawyers created the first offshore banks, shell companies, and secrecy jurisdictions. They founded an industry where the sole purpose of lawyers, accountants, lobbyists, and wealth management specialists is to ensure that the wealth of oligarchs is protected.
What kind of democracy do we have if this kind of power, so incredibly unequal, is being expressed on a daily basis off the radar screen while the rest of us, with our limited democratic power, struggle?
OO: Is it possible for wealthy people to be oligarchs even if they are not interested in politics or are apolitical?
JW: Think of a power resource as something that empowers you, but doesn’t necessarily define what you will do with that power. Wealth is a power resource and it can be used to undermine wealth concentration. Is there a high probability that being wealthy will skew your interests and motivations toward wealth defense? Most oligarchs have actually used their wealth power for that goal. But it doesn’t have to be that way. Beyond core material questions, oligarchs are all over the map in terms of what they support and they throw their resources into those struggles.
OO: You’ve mentioned that democracy and oligarchy can neatly coexist, but when have they clashed? What was the result?
JW: When democracy first appeared over 200 years ago, it emerged in already very unequal societies. The promise of democracy was that there would be more justice and equality over time. But the story of democracy and oligarchy is one of remarkable safety for oligarchs and democracy being consistently redesigned when it overperforms.
We do have examples of democracy going “off the rails,” meaning it behaved too democratically.
Take for example the United States under the Articles of Confederation. State legislatures were representative and democratic to a remarkable degree — such that, in several states, they were dominated by farmers, ordinary citizens. White people, yes. Property owners, yes. But they were not rich, they were ordinary. And those legislatures were very responsive to what they needed. That responsiveness led to a redesign of the U.S. Constitution to make sure that it was not responsive. We got great stability on the basis of that redesign, but in turn we received a United States that is vastly more unequal in 2022 compared to 1789. We have both more democracy and more inequality. That alone should say to people that something is not working.
An international example is Chile. Leftist Salvatore Allende wins the presidency and begins to pursue policies that the wealthy find threatening. The response from those with oligarchic power was to murder him and his cabinet, and to kill, torture, and disappear the political players that got him elected in the first place. A U.S.-backed military regime comes to power and destroys the left. Then, re-democratization occurred when it was much safer for oligarchs and elites.
I’m sorry to say that this story gets repeated over and over. The lesson is not very uplifting, but is the result of having a voice with no power.
OO: I want to end with some solutions. You mentioned that crises – the Great Depression and the second World War – set the material conditions for the establishment of a welfare state and redistributive policies. What are some policy tools that could effectively combat or mitigate wealth concentration and oligarchy?
JW: Oligarchs and elites will never give that which is not taken. We cannot wait for them to share their wealth and power. Any sharing of wealth and power and equality and justice has been won by meeting power with power. It’s the only way politics works. Any time we have seen major advances of people from below it’s because they organize.
Crises are incredibly important moments for introducing institutional change, but the challenge is this: It’s very hard to mobilize while you’re waiting for an opportunity. You can make incremental changes during the politics of the ordinary, but the real opportunities to restructure institutions and give setbacks to oligarchs and elites happen in moments of crisis.
The amount of mobilization that occurred for three decades before the Great Depression made the deep policy changes of the New Deal possible. When the 2008 financial crisis happened, there were no unions and no mobilization. That bailout was on the terms of the oligarchs. It was a missed opportunity because we weren’t ready. One of the most important reasons to organize is not for instant gratification, but to be ready when there is an opportunity and a moment for real deep change.
Oligarchs are at their strongest when transparency is at its lowest. Why do secrecy jurisdictions matter so much? Because we don’t know ultimate ownership. The U.S. government knows every last penny you and I earn because we are transparent to the system. The government is entitled to know income yet wealth is a matter of privacy. The masses should embrace a campaign of “wealth is not a private matter— it is a public matter.” There should be as much transparency on wealth as there is on income.
If we started to really tax wealth, you would be surprised to see how quickly everyone would want to jump off the Forbes billionaires list. Today, oligarchs fight to get on that list. That right there is a sign of tremendous oligarchic power and security. It is an indication of how unthreatened they feel. We need to tax wealth, but we cannot tax what we cannot see.
No one understands the tax code, and that’s intentional. It is so complex that only the wealth defense industry is able to get through it. We should have a simple – not a flat – tax. There is a very big difference. Oligarchs like a flat tax more than a simple tax. A simple tax says: “Here are the tax categories, you pay it, and there are no write-offs.”
If transparency applied to both income and wealth, and if we had a tax code that was simple rather than complex, those two in tandem would be devastating to oligarchs.