Saturday, February 27, 2010

Economic Power versus Political Power

A crucially important intellectual and philosophical mistake that is made by many, many people today, and for more than a century past, is to equate economic power with political power. Let me state clearly that they are not ACTUALLY the same thing, nor are they EFFECTIVELY the same thing. The crucial distinction between the two is the absence or presence of cooercive ability. Economic power, in and of itself, whether possessed by an individual or a corporation (which is nothing more than the free association of the individuals that comprise it), has no ability to force you, or I, or anyone, to do anything. Economic power is not coercive. Political power is coercive, or can be, because the government, in a civilized society, is the only institution that can legally use force against the citizens. Force, in the hands of the government, is the threat of property expropriation, imprisonment, or death. And if you don't believe the government has the right to use force against you, try not paying your taxes.

The distinction between economic and political power is important because the misunderstanding has led to the criminalization of the most productive members of society, the businessmen, and the lionization of some of the most criminal members, those politicians who purport to save us, the little guys, from the evils and excesses of capitalist greed. The businessmen are "greedy industrialists", and the politicians are "public servants." Right.

Economic power is the power to invest, to pay wages, to expand production, to do cutting edge research, and yes, perhaps to bankroll the political campaign of a would-be politician. Left alone, in a free-market system, it is nothing more. It does not force me to shop at Wal-Mart, it does not force me to eat at Macdonalds, and it does not force me to vote for the candidate it supports. It is only when economic power combines with political power that it can acquire a coercive nature and force me to do something against my will. Many lament that the combination is exactly the problem, that big business lobbies the government, steers it, owns it, and by default, us. To that statement, one must ask two questions: Why is business intertwined with government?, and whose fault is it?

The answer to the first question is: for their own survival. The maze of regulation and taxation is so thick, and the nature of antitrust law so capricious, that businesses must have representation among lawmakers. If they do not, all it takes is for one ambitious senator or congressman to make an allegation of prices too low (restraint of trade), prices too high (monopoly), or prices the same (collusion, conspiracy), and a CEO who has worked his entire adult life to build the company of his dreams can be declared a criminal and sent to jail.

A recent example of this "trust-busting" involved Microsoft in the 1990s. Prior to charges being levied against Microsoft for various "anti-competitive" practices, which were nothing more than the company competing vigorously to put its products in the hands of consumers, Microsoft prided itself on how little it cared about the federal government, only keeping one lonely lobbyist in a spartan office on the beltway. After their unjust prosecution for being good at what they do, and faced with the unfortunate understanding that the antitrust laws allow for them to be punished at anytime, for anything, they now maintain a small army of lobbyists in Washington.

The answer to the second question should now be clear. Lobbyists, and businesses that are intertwined with government, are the fault of the government. This is not to say that businesses, left alone in a laissez-faire environment would never try to curry favor with a government. Many businessmen would prefer the easy work of lobbying a politician for advantage instead of the hard work of building a reputation for high quality and good service. Only that in that situation it is the responsibility of the politicians to protect the sanctity of the government, the reputation of the free-market system, and the liberty of the people by denying the request. The way to get rid of the army of lobbyists, and to eliminate the unhealthy combination of economic and political power is to regulate less, not more.

It is not the businessmen, but the politicians who have a greater measure of power over us. It is their political power that should be limited and checked, as the founders clearly recognized and intended. Economic power, or wealth, lacking the mandate or the power of force, requires no such limits in a free-market system. It should be left alone, in the hands of those who created it, to do whatever they wish.