THE IRON LAW OF OLIGARCHY

a writing by Timothy DeChenne

In 1911 Robert Michels, a German historian and sociologist, published a book entitled "Political Parties". In this brilliant but frequently overlooked work he introduced his notion of “The Iron Law of Oligarchy.” Looking back now, he seems to have put his finger on a central feature of organizational functioning.

An organization, Michels suggested, begins to form an oligarchy out of a need for efficiency. A large body is inefficient for decision making. Eventually a smaller group is delegated to make plans for the larger body, and this is all it takes. The smaller group begins to acquire more power, steadily, inevitably. It will happen even if no one, at first, wills it to be so.

This smaller, delegated group becomes a collection of insiders. They evolve into full-time specialists with access to all the information. As their status and power grows, they focus more on maintaining that power than on other kinds of goals. And of course since they possess all the administrative knowledge, they end up choosing their own replacements. The oligarchy becomes self-perpetuating.

It’s probably no surprise to learn that research over subsequent decades has repeatedly confirmed what might be called an “oligarchic drift” in virtually all types of organizations, whether business or government.

But here I want to stress how the venerable Iron Law applies not just to organizations, but to society as a whole—that is, to the entire complex aggregate of individuals and groups. This is hardly a radical, or even a novel, suggestion. Indeed, despite the obvious progress we've made over the centuries, I would not be the first reader to view the sweep of world history as a lurid, ceaseless cycle of oligarchic dynamics.

But to keep the scope of this little essay manageable, let's focus on a contemporary example. Let's focus on the current trend, most prominent within the U.S. but evident within other nations as well, toward increasing economic inequality.

For more than forty years now resources have flowed upward to an unusual extent. In 2016 the wealthiest .1% of Americans held nearly as much wealth as the entire bottom 90%. Some would have us believe this is attributable only to the factors of technoloical change and globalization. Those two trends have had an enormous, undeniable impact. But they are not the whole story. It is also true that much of our inequality has arisen from political choices made over the last few decades.

Which ones? At or near the top of the list are deregulation and privatization. These are policies promoted by the affluent and pushed through the system by their army of well funded lobbyists, with ideological support provided by their equally well funded think tanks.

But let us not forget their other tactics. For example, their invocation of mythical "trickle-down" effects and their success in securing tax cuts for corporations and wealthy individuals. Look also to their influence in the extension of intellectual property rights and the relaxation of anti-trust enforcement. Look to their victories in the decrease of unionization and the insertion of non-compete clauses into worker contracts. Look to their role in the achievement of unlimited campaign finance. And of course add in their opposition to government support for virtually every social program, be it education, health care, or retirement benefits.

Whatever the rationales offered for such policies, their actual purpose--there can be no mistake about this--is to make the rich even richer. And that they certainly have done, at spectacular levels. Their effect has been relentless, and sometimes disastrous. If this seems an exaggeration to you, consider just one example.

One of the holy grails of Conservative/Libertarian economic policy--so dear to the moneyed interests steering our republic--is the radical slashing of business regulations. This is proposed on the premise of increasing market efficiency, and thus benefiting everyone.

What is not mentioned is that such regulations are an essential aspect of our social cohesion. They are one of the ways we prevent our system from becoming abusive. They are one of the ways we pull together as a group, and thus survive.

Although it should have known better on the basis of our country's economic history, the U.S. government recently decided to test the "efficiency" premise once again. Pressured by the big money that stood to profit--banks, investment firms, assorted billionaires and their think tanks--a number of important business regulations were abolished at the end of the last century and the beginning of this one.

The result? A financial sector run amok, and the economic collapse of 2008. It resulted both from a variety of unsound business practices and, of course, the outright fraud that flourishes in the absence of closer oversight. In the subsequent Great Recession over nine million Americans lost their homes, and almost nine million lost their jobs. The U.S. economy, along with those of several other nations, was driven to the brink of collapse.

None of the major offenders went to jail, and our economic inequality continues apace.

In short, Michels’ shadow falls grimly, inexorably across this domain as well. It’s just that viewed from the perspective of society as a whole, the oligarchs are not bureaucrats. Rather, they are plutocrats.

Unlike the administrators in one of Michels’ organizations, plutocrats as an entire class obviously do not meet face-to-face to design their self-enhancing strategies. If we define the very rich as, say, the top one-tenth of one percent of earners, then in the U.S. that still amounts to thousands of people, many of whom have never met. Sub-groups of the very rich can and infamously do meet for special purposes, but plutocracy is not one enormous cabal.

Rather, the dynamics play out multiply and continuously. The fungible, ubiquitous resource of money becomes the means through which the Iron Law percolates through the social structure. Money begins innocently enough; it is merely a medium for efficient exchange. But over time, unless carefully controlled, the flow of money becomes the vehicle for concentration and replication of power.

These two elements—concentration and replication—are related, but let’s address them separately.

In the U.S. the concentration of plutocratic oligarchy is a cycle played out continuously in all three government spheres—legislative, executive, and judicial. The top .1% of earners—and more particularly the top .01%—control the campaign funds that elect legislators, presidents, and directly or indirectly, judges. Their corporations are the farm teams from which these figures often emerge, as well as the lucrative havens to which they typically retire. And of course their lobbyists, indefatigable and omnipresent, labor mightily to insure playing fields tilt steeply in their favor.

No market is truly “free”. Every market operates according to a bewildering variety of rules. The relevant matter is who makes the rules, and thus, whom the rules favor.

The important rules are not just the familiar issues of tax policy. As Robert Reich notes, they also involve the often overlooked nuts and bolts of property, contracts, monopolies, bankruptcy, and enforcement. These are all tilted toward the rich in a variety of ways. And why does the tilt develop? Because the rich control the political process that, in turn, establishes the rules that make them richer.

Unfortunately most of this goes unnoticed by the rank and file. What most of us notice instead are only the biggest ticket items, such as the Supreme Court decision allowing unlimited corporate campaign contributions.

But the vicious circle of wealth concentration is only part of the process. The other part is a cycle of self-replication. Just as Michels’ bureaucrats chose their own replacements, so do contemporary plutocrats. And whom do they choose? Why their children of course.

Here again the dynamics of money are not necessarily a conspiracy, but rather a continuous process of one advantage leading to another.

From the very beginning, toddlers of the rich walk a manicured path. They are born to parents who themselves, usually, had good health care and education. They eat nutritious meals in well-kept homes nestled in the safest neighborhoods. They bask in the parental assumption of eventual success. And when it comes time for school (or pre-school) they attend the best private institutions. After all, money is no object.

Even if affluent parents settle for the local public school, the quality of that school is likely to be much higher than one in a struggling neighborhood. In the U.S. public education is funded largely by local property taxes, and of course those taxes are tied to the assessed value of property. So wealthier neighborhoods generate better funded schools. Institutional inequality is baked in early by the educational tax base.

If the child gets in trouble as an adolescent, a parental contribution to the mayor’s re-election campaign might help clean up the mess. And when it comes time for college admission, large sums will be spent on entrance exam tutors. Although there is little cause for concern, since Dad’s alma mater has an alumni preference policy that will probably guarantee admission anyway. If not, if the child turns out to be less than the sharpest tool in the shed, again no worries. Large sums of money await him or her in the inheritance.

Prepared and selected in this way, children of the rich roll gently onto that notoriously tilted playing field. There they continue to accrue an increasingly concentrated advantage, enabled by the laws their elders secured.

Of course most plutocrats do not describe the process in this way. For them the extreme inequality of wealth is almost exclusively a product of ability and dedication. All the other factors discussed here tend to be discounted. And this is not surprising. As Yuval Harari notes, "it is an iron rule of history" that those at the top of the hierarchy tend to deny the actual circumstances of their origin.

Some plutocracy apologists emphasize a different counter-argument. Inequality, they maintain, is not objectionable in itself. Rather, it is poverty that is objectionable. What is important, they say, is that everyone has enough, not that some people have more.

On the face of it this argument seems plausible. Indeed, if poverty were eliminated and only a modest degree of inequality existed, due only to differences in ability and dedication, there would be much less concern. But of course this is not the current situation in the U.S. For some time now we've had staggering inequality, and to a great extent that is due to control of the political system by the wealthy.

Furthermore, there is evidence that such inequality can be more than just inequitable. Apparently it can be toxic as well. Looking at countries across the world, there is a positive correlation between their degree of inequality and a variety of other social problems. Examples include drug abuse, obesity, high dropout rates, low voter turnout, political distrust, and low social mobility.

Control of the system by the affluent prevents the diversion of wealth to the common good, and thus to the benefit of the vast majority of citizens. Can there be any wonder why so many of the rich oppose expansion, or even maintenance, of the social safety net? Hardly. What need have they for government sponsored retirement benefits, or unemployment payments, or health care? Indeed, they are happy to tell us what they think of such matters: "What this country needs is people with more self-reliance!"

And thus the circle spins. Like the movement of a body in space, oligarchic drift tends to continue until it is forcibly interrupted.

Is there hope for a truly substantial, enduring reduction in inequality? Historically across the world this has almost never happened without assistance from such cataclysms as mass warfare, violent revolution, or lethal pandemic. Can we achieve it today through ordinary political processes?

I would like to say I'm hopeful. I really would.

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