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Society controlled by the wealthiest citizens

A plutocracy or plutarchy is a society that is ruled or controlled by people of great wealth or income. The first known use of the term in English dates from 1631. Unlike most political systems, plutocracy is not rooted in any established political philosophy.

The term plutocracy is generally used as a pejorative to describe or warn against an undesirable condition. Throughout history, political thinkers and philosophers have condemned plutocrats for ignoring their social responsibilities, using their power to serve their own purposes and thereby increasing poverty and nurturing class conflict and corrupting societies with greed and hedonism.

Historic examples of plutocracies include the Roman Empire; some city states in Ancient Greece; the civilization of Carthage; the Italian merchant city states of Venice, Florence and Genoa; the Dutch Republic; and the pre World War II Empire of Japan (the zaibatsu). According to Noam Chomsky and Jimmy Carter, the modern United States resembles a plutocracy though with democratic forms. Paul Volcker, a former chair of the Federal Reserve, also believed the U. S. to be developing into a plutocracy. One modern, formal example of a plutocracy, according to some critics, is the City of London. The City (also called the Square Mile of ancient London, corresponding to the modern financial district, an area of about 2.5 km2) has a unique electoral system for its local administration, separate from the rest of London. More than two thirds of voters are not residents, but rather representatives of businesses and other bodies that occupy premises in the City, with votes distributed according to their numbers of employees. The principal justification for this arrangement is that most of the services provided by the City of London Corporation are used by the businesses in the City. Around 450,000 non residents constitute the city's day time population, far outnumbering the City's 7,000 residents. In the political jargon and propaganda of Fascist Italy, Nazi Germany and the Communist International, Western democratic states were referred to as plutocracies, with the implication being that a small number of extremely wealthy individuals were controlling the countries and holding them to ransom. Plutocracy replaced democracy and capitalism as the principal fascist term for the U. S. and Great Britain during World War II. In Nazi Germany, it was often used as a dog whistle term for Jewish people in their antisemitic propaganda.

Reasons why a plutocracy develops are complex. In a nation that is experiencing rapid economic growth, income inequality will tend to increase as the rate of return on innovation increases. In other scenarios, plutocracy may develop when a country is collapsing due to resource depletion as the elites attempt to hoard the diminishing wealth or expand debts to maintain stability, which will tend to enrich creditors and financiers. Economists have also suggested that free market economies tend to drift into monopolies and oligopolies because of the greater efficiency of larger businesses (see economies of scale). Other nations may become plutocratic through kleptocracy or rent seeking.