“The iron law of oligarchy” is a political theory, first developed by the German sociologist Robert Michels in his 1911 book, Political Parties.

It asserts that rule by an elite, or oligarchy, is inevitable as an “iron law” within any democratic organization as part of the “tactical and technical necessities” of an organization.

Michels’ theory states that all complex organizations, regardless of how democratic they are when started, eventually develop into oligarchies. Michels observed that since no sufficiently large and complex organization can function purely as a direct democracy, power within an organization will always get delegated to individuals within that group, elected or otherwise.

Michels argues that democratic attempts to hold leadership positions accountable are prone to fail, since with power comes the ability to reward loyalty, the ability to control information about the organization, and the ability to control what procedures the organization follows when making decisions.

All of these mechanisms can be used to strongly influence the outcome of any decisions made ‘democratically’ by members.

Michels stated that the official goal of representative democracy of eliminating elite rule was impossible, that representative democracy is a façade legitimizing the rule of a particular elite, and that elite rule, which he refers to as oligarchy, is inevitable.” (sourced from Wikipedia)

Stiegler refines the Iron Law of Oligarchy, in his Theory of Economic Regulation, also suggesting that the big guys will always win and the little guys will always lose. He bases this conclusion on the following premises:

The fundamental asset controlled by the state is the power to coerce. Any group that can control how this power is used can profit.
Since we are self-interested actors, we will seek to get the state’s coercive power to support our interests. Efforts to do so, however, are costly.
Large firms win because:

Large firms have high benefits from mobilizing (the stakes our high). Since they are a small group, and since they are fairly homogeneous, they have no difficulty with collective action problems (they can lobby efficiently).
Small firms don’t organize for political reasons because of collective action problems (very high coordination costs).
Consumers don’t organize because the costs of doing so are high compared to the benefits (very high coordination costs).
This is made crystal clear in the financial crisis of 2008 and the current economic collapse. In 2008 the perpetrators of the reckoning were provided with cheap loans that negated free market forces while rewarding excessive risk taking. This free flow of cheap money continued for the next decade. Financial markets as an efficient pricing mechanism of the productive allocation of finite resources died in 2008. What we were left with was a clear display of The Iron Law of Oligarchy.