I am attempting to do a series of posts entitled "Big Questions", in which I ask questions I see as fundamental to economics and political economy. I intend to revisit these posts repeatedly, revising and refining ideas, if not to settle the issues then at least to continue to develop a fuller understanding.
What is power and how does it work in our society?
The simple definition of power is the ability to make someone do what you want instead of what they want. Coming from International Relations theory, there is also the idea of "soft power", which is the ability to make someone (or another country) want the same thing you do.
To clarify the hard/soft power disctintion: if you threaten somebody with a gun, they might agree to hop on one leg all day, but they would probably stop if you didn't have the gun. Offering them lots of money might have the same effect; those are forms of hard power. Soft power involves changing their goals and motivations to something outside of your own actions. If you convince someone they will become fit and beautiful and rich by hopping on one leg all day, they might jump regardless your firearms.
Within our society we have countless ways of concentrating power. Physical violence and the threat of physical violence is the most obvious form of power, and we have concentrated it to a large degree in local and national governments, in the police and military. Political power is another obvious concentration: we give control of laws and spending, and/or control of executive bureaucracies with the power to tax and monopolies on violence, to certain people as decided by electoral systems.
Economic power, the power to purchase resources, products, services or labor, is somewhat more complicated. Because money can pay for all kinds of different things, and therefore has a funny relationship with time, it is too simplistic to say that money correlates with economic power. Rather, we need to factor in the future and the predicted future ability to acquire money. This is what is happening with the loans or with the stock market--with particular drama with IPOs.
There are other forms of power as well. The concept of soft power provides a hint, that not all power is coercive. Certainly most economic power is not coercive. Can we break down types of power to gain a better understanding of it?
Power can be coercive or it can be mutual. It can be exploitative or it can be beneficial to any number (from zero to infinity) of the parties involved. The exercise of power can also be equalizing, neutral or distancing in the way it affects future power relationships.
Coercive versus mutual: The clearest example of power may be the upraised fist or the barrel of a gun. Violent force is often used in the bluntest of manners to coerce someone into doing something against their will: allowing someone to take their wallet, or relinquishing control of Texas. Clearly, this power is coercive.
There are two things interesting about coercive violent power, however. First, it is far more often passive than active. The phrases "exercise" or "use" of power are misleading: you rarely have to shoot a gun to use the power it gives you. Second, note that even though violent power is coercive, it is still changing what people want. It just does a very bad job of it. A person threatened by a gun wants to jump on one foot, because they see the alternative as being shot. But as soon as a better alternative emerges--the swift removal of the gun from your hand by means of a roundhouse kick, say--the desire to hop dissipates.
The scenario gets more complicated with other forms of power. Is the power of money coercive? Money is a different way to get people to change their minds, but we already said that money is a form of hard power because changing someone's will with money is contingent on your actions. The difference between money and violent force is that there is is no threat. Economic exchange is, in theory, optional to both parties and therefore only happens on mutual terms. Political power and violent force are, in theory, outlawed from economic transactions, and that makes it harder to make people change their mind. Nobody is doing something against their will, and there is therefore no coercion.
If economic power was unfettered by state political and force power, it would presumably be far less mutual. The ways in which we see economic power corrupt the state in our current system either would not exist (because the apparatus of power would not be there for the economic power to co-opt or corrupt) or economic power would either openly employ means that are illegal now or take state power for their own. Imagine a company town, with rules specified by the company, that you cannot legally leave.
In thinking about mutually-exercised economic power bounded by the state, however, I find it easy to lose sight of power altogether. If every transaction is mutual, how does someone have more power than another person?
Remember that hard power is the ability to make someone's actions contingent on your own actions. It's not that having money equals having power. A dollar is not a quantified unit of power. Its exchange does not represent some exchange of power. Rather, the power here is in the ability to shape the terms of the deal: power is the ability to shape the circumstances and change people's minds. A market system may eliminate certain types of transactions--someone might never sell their dignity, for example--by bounding the possible terms of a deal--they might trade their dignity for their life or the life of a loved one. But a bounded system of economic exchange does not totally equalize the ability of each participant to to set the terms of the deal.
Exploitative versus beneficial: Another metric we can examine power along is exploitative versus beneficial. While the coercive/mutual axis is based entirely on the immediate attitude of the various parties toward a situation, the exploitative/mutual axis is based on the parties' benefit. Benefit is a tricky concept, however, because it can be short or long term, and it can be defined as an infinite number of things, because it is subjective.
For example, I could force you at gunpoint to give me your ice cream cone. This is an exploitative use of the power the possession of the gun has given me. But what about if I force you to give me your ice cream and eat a head of broccoli instead. This might be against your will, but it may benefit you in the long run. That's fairly straightforward. But what if you and I both sign an agreement yesterday that, if you tried to eat ice cream today, I would take it from you at gunpoint and make you eat broccoli instead? I use this example not to support paternalism but simply to make the case that the idea of benefit is less straightforward than it may seem.
Soft power is by definition beneficial, at least to the extent that a person has a complete understanding of their self-interest. The same could be said of mutually exercised hard power. Coercive power, however, is the opposite: it can be said to be beneficial only to the extent that a person does not have a full understanding of their self interest. There are plenty of examples where this is the case: the tragedy of the commons, for example. Parental power is also useful and important because children do not know what's best for them.
Equalizing vs neutral vs distancing: I have not developed this thought too deeply, but I will add it here nevertheless because it strikes me as potentially useful in understanding wealth distribution and equality issues.
If we can compare amounts of power held in a situation, which in itself is not a small assumption, we may be able to distinguish how some abstract sum of power is transferred. That is: how does an interaction change the balance of power? We can easily imagine a mutual transaction that both parties view as in their benefit. We can also also easily picture a powerful person exploiting a less powerful person. Because of the multifaceted and situational nature of power, however, we can also imagine situations where the less powerful gain at the expense of the more powerful: such as a poor man picking a rich man's wallet. The poor man is able to exploit the rich person's lack of awareness or attention.
Even mutually beneficial transactions economic transactions bounded by state power need not be neutral. Indeed our economic system is set up to distance economic actors by rewarding those that are successful (and by extension, in a zero-sum system, punishing those that are not): we grant state protection to inventors of new products so that they might gain economic power as a reward for their creation. Market power may be bounded but it is by no means free of other forms of power--just look at food prices in an airport.
Powerful people may exploit weaker people, weaker people may exploit powerful people due to situational changes in power, and even mutually beneficial transactions may result in changes in relative power. We can distinguish these as equalizing or distancing based on whether they increase or decrease power disparities.
Where does this leave us in terms of power and economics? If we are going to understand economics in the real world, which we must do for policy purposes, then we need to understand how state power creates, circumscribes, and shapes economic power, and how economic power functions internally and influences the state in return. We need to understand how these types of power ebb and flow and interact over time, and we must begin to examine how our institutions shape power distributions.
We do this all the time without being aware of the larger implications. Look at education: our government pays for everyone's education because we believe that everyone is entitled to an (basic) education. Especially on the federal level, this results in a transfer of wealth from net taxpayers to net tax (and social service) recipients. This is a use of state power and it has important effects on the distribution of economic power (an educated person has much more economic power in a labor market than an uneducated person), but we rarely think of it as such because it is so widely accepted and rationalized.
The point of this post is that these kinds of power transfers and influences are everywhere in society, whether we notice them or not. Hopefully the above defintions will give us a bit of conceptual vocabulary when exploring these power interactions.