With the death of Ali, the first and most notable phase in the history
of Muslim peoples came to an end. All through this period it had been
the Book of God and the practices of His Messenger - that is, thc Qur'an
and the Sunnah - which had guided the leaders and the led, set the standards
of their moral conduct and inspired their actions. It was the time when
the ruler and the ruled, the rich and the poor, the powerful and the weak,
were uniformly subject to the Divine Law. It was an epoch of freedom and
equality, of God-consciousness and humility, of social justice which recognized
no privileges, and of an impartial law which accepted no pressure groups
or vested interests.
After Ali, Muawiya assumed the caliphate and thereafter the caliphate
became hereditary, passing from one king to another.
Taken from: http://www.usc.edu/dept/MSA/politics/firstfourcaliphs.html