All Commentary
Monday, February 1, 1988

Economic Power

Joseph S. Fulda, a regular contributor to The Freeman, is Assistant Professor of Computer Science at Hofstra University and resides in Manhattan.

Economic power is a recurring theme among political theorists ranging from radical political economist John Kenneth Galbraith on the left to neoconservative intellectual Irving Kristol on the fight. The doctrine that wealth is power is almost never challenged in our day and in many rather subtle ways has come to underlie much public policy: Public campaign financing, campaign contribution limitations, equal time, antitrust laws, and estate taxes are examples. This concept, which originated in the late nineteenth century and has since lain dormant in the public mind, needs re-examination.

Any analysis of economic power must begin with a clear conception of power and its antithesis, liberty. Power, as I understand it, is the capacity to rule others: to make decisions for them without their consent and, in particular, to allocate their time and direct their energies. Liberty, in contrast, is a condition of noninterference and self-rule in which people make decisions for themselves without asking any man’s leave and in which they themselves apportion their time and channel their energies in such manner as to them seems most satisfying.

An Unholy Alliance

If the capacity to coerce is the sum of power, it is hard to see how it inheres in a pile of riches. The usual reply is that wealth can be used to obtain instruments of coercion along with those willing to use them, and that power can indeed be found in a stockpile of weapons and men of violence. Now this is all very true, but inasmuch as the unholy alliance between wealth and force, public and private, is universally proscribed in free republics, it cannot account for the tirades, so common in the media, against economic power. Neither bribery nor organized crime, typical examples of the alliance, is the object of their fulminations. Economic power in that sense has no apologists and, therefore, no detractors.

Nor is it the holders of power, as we have defined it, who stand accused of its use in the economic realm. Indeed, government is seen as the enemy of economic power, Galbraith’s “countervailing power,” the embodiment of Kristol’s populist temper. Government may indeed tax, subsidize, regulate, and monopolize, but it is rather the wealthy and the corporations who are said to enjoy economic power. But the only power which properly attends on wealth alone is dominium: “the complete power to use, to enjoy, and to dispose of property at will” (The American College Dictionary). But is this power? That is, is it control over one’s own domain or control over the domain of others? Far from being a “power,” dominium is a liberty, the liberty to do with the fruits of one’s labor and the return on one’s investment as one wills.

Market “Power”

Thus, proponents of the concept of economic power must be referring to something other than power over the economy. What they mean, in fact, by “economic power” is the ability to influence a variety of social and economic conditions through the use of one’s wealth in a volitive, rather than coercive, manner. In a market society, those with the most purchasing “power” ultimately decide what will be produced in greater measure than those with less purchasing power. Likewise, those with the most to invest will proximately decide what goods will be produced and what services will be offered in greater measure than those with less to invest.

Yet this influence over the free economy is central to its operation: Either what is produced will determine what will be consumed, as in the command economy, or what will be consumed determines what is produced, as in the market economy. Likewise, either profits and losses will take capital from those not satisfying consumer wishes and reward those more sensitive to others’ needs, or capital will be allocated and production decisions will be made in accordance with political, rather than economic, criteria.

The notion of economic power, then, is really nothing other than what an honest socialist would admit is economic freedom, what Marx called “that single, unconscionable freedom.” This freedom, mistakenly labeled power, is often resented when it comes to play in the political sphere; this resentment leads to all manner of “election reforms.” It is also resented in the economic sphere, and leads to a variety of anti-competitive “regulatory reforms.” It is perhaps most resented in the social sphere—just recall Mrs. Reagan’s difficult first months as First Lady—and results in sweeping demands for a new social order.

What is really resented is the necessarily unequal nature of this influence that will always obtain when men are left free. The gums of the far left denounce concentrations of wealth as power, because the resulting influence over who will lead and what will be produced and consumed is something they feel is best left with them and their plans for our future.

The Hypocrisy of Collectivism

What other explanation can honestly be put forth for collectivist denunciations of wealth in capitalist society, in view of their decidedly hypocritical “solution”? After all, they propose to combine all corporations into one giant Corporation, to endow it with all natural resources, to arm it, to invest it with legislative and judicial powers, to grant it the police power, to imbue it with quasi-spiritual authority, to place its public relations department in charge of the media and its acquisitions department in charge of the military and then, as final sublimating acts, to replace a much-de-cried self-perpetuating board of directors with a self-perpetuating Party elite and to simply rename this new Corporation, the State.

That is the socialist prescription for concentrations of both wealth and power, and it is a very clear guarantee of poverty, misery, and tyranny, the three things alone which socialism has produced beyond comparison. Not for nothing is socialism thus sometimes, however inaccurately, described as “state capitalism”! If one is truly interested in limiting economic power, one should consider limiting government—for that is where power properly understood lies.