Until very recently, hardly anyone gave oligarchs any thought. That's not just us saying that; Collins' trend line shows lookups for 'oligarch' were on the rise as early as 2008. Elsewhere around the web, more recent trend graphs show more immediate record heights.

Our neglect of oligarchs and their realms had a lot to do with the fact that these über-wealthy persons prefer operating in the shadows. Yes, that's meant to sound as sinister as it does. Oligarchs use their vast wealth to influence politics and the direction of society; what merits consideration and what gets rejected out of hand.

Our oligarchic innocence was stripped from us the second that Russia took centre stage. In mid-February, the Russian head of state decided on a violent and destructive course of action against a sovereign nation; this campaign was to be funded by his oligarchs.

Names of Oligarchs funding Putin's war:
Yuriy Alekseyevich Soloviev: VTB Bank executive and FC Dynamo (football club) owner.
Sergei Sergeevich Ivanov: president of Alrose diamond mine and Gazprombank board member.
Petr Fradkov: executive with Promsvyazbank.
Alexander Aleksandrovich Vedyakhin: Sberbank executive.
Andrey Patrushev: secretary, Security Council of Russia.
Yury Slyusar: aviation industry magnate.
Gennady Timchenko: president of Volga Group, a private equity firm.
Igor Sechin: former Deputy Prime Minister; now an oil executive with Rosneft

But then, two unexpected turns of events. Thanks to the courage and determination of the Ukrainian people, Leader Putin did not succeed in his quick-and-easy-victory strategy. And NATO countries responded to his attack by sanctioning the people and entities funding his war chest.

Now that those oligarchs' assets have been either frozen or seized, we can talk about oligarchs at our leisure.

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Explaining Minoritarianism

Italian sociologist Robert Michels postulated that democracies mirror large organisations because, no matter how democratic they start out as, ultimately, they end up being run by a comparatively small population. His theory came to be known as The Iron Law of Oligarchy.

Oligarchies are not necessarily predicated on extreme wealth; they may also form as a result of ethnic or religious rule.

Apartheid in South Africa is a prime example of such. The Black population make up the overwhelming majority of that country's population. Despite that, for decades, they were ruled over and restricted by the wealthy, minority White population.

Another type of minority rule may take place in Parliament, where the minority party has the power to block legislation. However, as they do not have enough votes to enact laws against the majority's wishes, it is an imperfect example of a minoritarian.

This type of minority rule is not the same as an oligarchy. Oligarchs exert power over how societies are governed through money and influence while rulers, with minority and majority factions working in concert - even as they oppose one another, do the actual governing.

Apartheid South Africa was minority rule but not oligarchic
South African apartheid is a good example of minority rule but the country was never an oligarchy. Photo by Gregory Fullard on Unsplash

What Is an Oligarchy?

Now that we know oligarchs don't rule - they don't hold elected office, write bills or pass laws, what makes a country an oligarchy?

The best, easiest and most fun way to explain an oligarchy is 'You scratch my back and I'll scratch yours.'. They are, in a nutshell, a tit-for-tat arrangement between a person who wants to wield political power and a group of people with the money to make it happen.

Let's say that Spiderman wants to run for president of the United States. He's well-known, moral and always does the right thing (well, almost always). Unfortunately, his altruistic crime-fighting pursuits have earned him no income so he doesn't have the money to run for office. Enter the oligarchs.

"We'll fund your campaign if you'll sign (what we want) into law." they tell him. Such political wish lists may include agenda items like repealing laws that restrict their interests, enacting laws that promote their interests and embracing causes they favour - education reform, abortion restriction and suchlike.

Spiderman really wants to be the president so he agrees to the oligarch's laundry list of wants. In return, they donate piles of money to his campaign and, soon enough, he wins the presidency. Now, he has to walk a tightrope between doing everything he promised the oligarchs and legislating on behalf of the people who voted him into office.

You can pretty much guess whose issues he will attend to the most, can't you?

This is a vastly oversimplified example of how oligarchies function. There are several oligarchs and many more lawmakers to court. Usually, they appeal to one group of lawmakers to support their social and/or religious preferences and another group to support their economic interests so that their initiatives are guaranteed success.

That is how oligarchs buy political protection to continue operating in the shadows... that is, until sanctions rain down on them.

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Types of Oligarchies

We understand oligarchies to function principally as the power behind the political throne but they may operate in different ways, too.

For instance, a putative oligarchy may be a small group of individuals who have massive influence over a certain business sector. Tech giants - Google, Cisco, Meta and so on may have formed a putative oligarchy to work in concert, promoting mutual interests. Food industry oligarchs do the same.

Oligarchs of the food industry wield political influence to protect their interests
Major food producers will often form a putative oligarchy to protect their interests. Photo credit: xmichh on VisualHunt

To fit the definition of a putative oligarchy, all three of these conditions must be met:

  • the company owners must own the largest private companies in the country
  • they must control multiple businesses, all of which coordinate their activities
  • the oligarchy, as a whole, holds enough political power to ensure its interests are promoted

You shouldn't confuse a putative oligarchy with a monopoly - a state wherein one entity retains control over every aspect of an industry. Monopolies are economic in nature while oligarchies strive for political protection to promote their interests.

Likewise, you shouldn't confuse a brain trust with an intellectual oligarchy.

A brain trust is a group of highly qualified specialists that advise heads of state on different aspects of governing, such as foreign policy and education. An intellectual oligarchy proposes actions against those who are less intellectually gifted than they are.

Here, a reference to social media companies might not be too far off the mark, though they've not (yet) been defined as an intellectual oligarchy.

Regardless of what type of oligarchy, the common themes are power and tyranny. The oppression and control they exert may not be immediately felt or pressing but it nevertheless exists. Indeed, you likely felt/experienced it during our war with COVID.

How Oligarchies Work

Up to now, we've armed you with a general explanation of oligarchs and how an oligarchy powers its aims and purposes. However, we left out one very important detail.

Recall for a moment the back-scratching illustration given in a previous segment. Considering the operational dynamic between politicians and oligarchs, do you wonder what happens if the elected official doesn't make good on their promises?

The oligarchs will withdraw their support and, instead, support the opposing candidate. They may also work, always behind the scenes, to discredit the unfaithful partner who benefitted from their largesse.

In other oligarchies - Singapore, Columbia and the US, the political class seldom if ever holds the oligarch class to account, even if they break the law. In fact, they may amend existing laws to create the appearance that the oligarchs have broken no laws, or they will simply turn a blind eye to any malfeasance.

In some cases, they will go out of their way to protect the oligarchs, even at the expense of their electorate. That's what happened in the aftermath of the 2008 banking crisis in the US. The bankers were bailed out at the taxpayers' expense and absolved of any wrongdoing. They even got to keep all of their ill-gotten gains.

That's not the way things works in Russia.

In Russia, oligarchs serve at their Leader's pleasure. As long as they continue to bring in huge revenues and acquire riches abroad, they may continue living lavishly with full protection from the state. However, if they give the Leader any cause for displeasure, they will be stripped of their wealth and privilege, imprisoned and possibly put to death.

Russian oligarchs are not the power driving politics
Unlike other oligarchies, Russian oligarchs are not the power behind the political throne. Photo by Elena Mozhvilo on Unsplash

Oligarchs and the War Economy

Now, with knowledge of how Russian oligarchs are held on a tight leash, it's easy to understand how and why the Russian oligarchs were supposed to fund the war in Ukraine.

Keep in mind that we're talking about billions and billions of dollars - not roubles. Assets held in foreign banks, properties in foreign lands, oligarchs' companies trading on foreign stock markets... All of that was meant to be a war chest for Russia; they were never assets belonging exclusively to individuals.

Whether Russian oligarchs intended to pony up is moot at this point. The Russian head of state apparently never anticipated western leaders' swift actions to block access to foreign capital and markets.

Russia's economy had severely contracted even before the war; cutting the country off from foreign stock markets caused the rouble to crash. Even if there is a stockpile of Russian money, it is so devalued now that it could hardly buy enough munitions to sustain a prolonged campaign.

China is a wildcard. Recently, the Russian leader turned to his quasi-ally, maybe to probe how strong their ties are.

Whether China decides to help fund the war (not likely, considering Mr Xi's stance on sovereign nations, but not impossible) or continues to push for conciliation is still up in the air.

In fact, everything is up in the air right now.

How, discover how the most profound economic calamity in modern history unfolded.

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