The Iron law of oligarchy is a political theory, first developed by the German sociologist Robert Michels in his 1915 book, Political Parties. It states that all forms of organization, regardless of how democratic or autocratic they may be at the start, will eventually and inevitably develop into oligarchies.

Robert Michels was disturbed to find that, paradoxically, the socialist parties of Europe, despite their democratic ideology and provisions for mass participation, seemed to be dominated by their leaders, just as the traditional conservative parties.

Studying political parties, he concluded that the problem lay in the very nature of organizations. Modern democracy allowed the formation of organizations such as political parties, but as such organizations grew in complexity, they paradoxically became less and less democratic. Michels formulated the "Iron Law of Oligarchy": "Who says organization, says oligarchy."[1]

Michels stressed several factors that underly the "Iron Law of Oligarchy."

Any large organization, he pointed out, is faced with problems of coordination that can be solved only by creating a bureaucracy. A bureaucracy, by design, is hierarchically organized to achieve efficiency — many decisions have to be made daily which cannot efficiently be made by large numbers of people. The effective functioning of an organization therefore requires the concentration of much power in the hands of a few.[2]

This process is further compounded as delegation is necessary in any large organization, as thousands - sometimes even hundreds of thousands - members cannot make decisions using participatory democracy; this has been dictated by the lack of technological means that would allow large number of people to meet and debate, and also the issues related to the crowd psychology. The delegation however leads to specialization: the development of bases of knowledge, skills, and resources among a leadership, which further serves to alienate the leadership from the 'mass and rank' and entrenches the leadership in office.

Bureaucratization and specialization are the driving processes behind the Law. These create a specialized group of administrators in a hierarchical organization. Which, in turn, leads to the rationalization and routinization of authority and decision-making, a process first and perhaps best described by Max Weber, and to a lesser and more cynical extent, by the Peter Principle.

The organizational characteristics that promote oligarchy are reinforced by certain characteristics of both leaders and members of organizations. People achieve leadership positions precisely because they have unusual political skill; they are adept at getting their way and persuading others of the correctness of their views. Once they hold high office, their power and prestige is further increased. Leaders have access to, and control over, information and facilities that are not available to the rank-and-file. They control the information that flows down the channels of communication. Leaders are also strongly motivated to persuade the organization of the rightness of their views, and they use all of their skills, power and authority to do so.[3]

By design of the organization, rank and file are less informed than their "superiors." Finally, from birth, people are taught to obey those in positions of authority. Therefore the rank and file tend to look to leaders for policy directives and are generally prepared to allow leaders to exercise their judgment on most matters.

Leaders also have control over very powerful negative and positive sanctions to promote the behavior that they desire. They have the power to grant or deny raises, assign workloads, fire, demote and — that most gratifying of all sanctions — the power to promote. Most important, they tend to promote junior officials who share their opinions, with the result that the oligarchy becomes self-perpetuating. Therefore the very nature of large-scale organization makes oligarchy within these organizations inevitable. Bureaucracy, by design, promotes the centralization of power in the hands of those at the top of the organization. [4]

The consequences

The "iron law of oligarchy" states that all forms of organization, regardless of how democratic or autocratic they may be at the start, will eventually and inevitably develop oligarchic tendencies, thus making true democracy practically and theoretically impossible, especially in large groups and complex organizations. The relative structural fluidity in a small-scale democracy succumbs to social viscosity in a large-scale organization. According to the "iron law," democracy and large-scale organization are incompatible.
-http://en.wikipedia.org/wiki/Iron_law_of_oligarchy

Conclusions: Perhaps, because democracy is impossible, we should design an undemocratic system, but design it with extreme care, so that it may be more resilient and responsive than 'democracy'.