Sociology Index



Corporatocracy is defined as a system that is indirectly controlled by huge corporations, under the guise of democracy. Corporatocracy establishes powerful political and legal connections so that business owners are free to pursue their activities, legal or illegal, without any fear of the law. Corporatocracy has been criticized since it leads to economic exploitation, unfair lending practices, and dishonest use of national treasury and resources. Corporatocracy is very much visible in situations when CEOs are excessively paid, corporate taxes are planned differently, and free trade agreements are signed. In the income analysis at the University of Berkeley, economist Emmanuel Saez asserts that income inequality is one of the prime characteristics of a corporatocracy, and a relative growth in income had occurred only among the elite group of citizens. Corporatocracy functions on the foundation of a collaboration between the government and corporate entities. Large corporations, the government, and financial institutions constitute the pillars of corporatocracy. Corporatocracy is also visible in bank bailouts, excessive pay for CEOs as well as complaints such as the exploitation of national treasuries, people and natural resources. The term corporatocracy has been widely used by critics of globalization.

Large, powerful corporation assists a political candidate to secure the post he desires. Such political candidates will morally be obligated to the corporation. Whenever the corporation requires legal and political help, the elected leader obligated to provide the necessary assistance to the corporate entity that helped the political candidate get elected. Though the elected governments seem to be in control in a democracy, they have been influenced by the power of the corporations.

Economist Jeffrey Sachs described the United States as a corporatocracy in The Price of Civilization (2011). He suggested that it arose from four trends: weak national parties and strong political representation of individual districts, the large U.S. military establishment after World War II, large corporations using money to finance election campaigns, and globalization tilting the balance of power away from workers.

Nobel Prize winner of economics Joseph Stiglitz wrote in May 2011: "Much of today’s inequality is due to manipulation of the financial system, enabled by changes in the rules that have been bought and paid for by the financial industry itself—one of its best investments ever. The government lent money to financial institutions at close to zero percent interest and provided generous bailouts on favorable terms when all else failed. Regulators turned a blind eye to a lack of transparency and to conflicts of interest." Stiglitz explained that the top 1% got nearly "one-quarter" of the income and own approximately 40% of the wealth. - Joseph E. Stiglitz. "Of the 1%, by the 1%, for the 1%". Vanity Fair.