In oligarchies, Plato further warned, the majority are poor and disempowered, while a small ruling class consolidates power and subverts laws to press their own interests over the common good.
More recent conceptions of oligarchs refer to a wealthy class – usually but not exclusively in business – that exercise control over key parts of the economy and could exert strong influence over the government itself. Russia’s Magnificent 7 who controlled much of Russia’s banking system in the post-Soviet Union transition period, and China’s princelings who are comprised of children of the original high-ranking Communist officials during the country’s cultural revolution are among the possible examples.
How dominant (or potentially dominant) are the oligarchs in their respective economies? Figure 1a, for example, shows the “material power index” developed by Jeffrey Winters of Northwestern University. This indicator is the ratio of the average wealth of the top 40 richest individuals and the GDP per capita of the country.
Furthermore, figure 1b provides a snapshot of “oligarchic intensity” as measured by the total wealth of the top 40 wealthiest individuals in each of the selected economies, expressed as a share of total GDP. Between 2011 and 2015, most countries in the sample experienced an increase in both oligarchic intensity and the material power index, suggesting increasing wealth (relative to the over-all economy) among this small group of individuals.
The Philippines stands out due to the dramatic increase in its “material power index” during this period. Put differently, the country’s top 40 richest individuals experienced a dramatic increase in wealth in the past 5 years – growth outpacing that of the average income of the Filipino.
Figure 1A. Material Power Index across Selected Economies
Figure 1B. Oligarchic Intensity across Selected Economies
The international research on oligarchs paints a complex picture of their role in development. Several studies concede that oligarchs in Ukraine and Russia may have managed their respective firms much more effectively than either the government or non-oligarchic businessmen. Yet even as oligarchic countries could grow fast initially, analysts like Daron Acemoglu of MIT contend that democratic systems will eventually outperform oligarchies, largely since the latter creates the incentives to protect against competition and stunt innovation.
Hitting where it hurts
Perhaps it’s in this light that President Duterte seems to have called them out. “Ang plano talaga is, destroy the oligarchs that are embedded in government. Yan sila, I'll give you an example, publicly – Ongpin, Roberto."
President Duterte’s recent tirade against oligarchs in general and Ongpin in particular has already generated a swift response from the financial market. Following the President's comments on the ills of online gambling in early August, PhilWeb shares plunged resulting in paper losses of about Php 14 billion at the time of writing this piece.
In his public comments, President Duterte has emphasized specific problematic characteristics of oligarchs—they obtain government contracts using political connections, and they engage in illegal activities to gain an advantage such as insider-trading. Scholars of Asian industrialization such as Paul Hutchcroft of Australia National University, called this either “booty capitalism” or “crony capitalism.”