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Is There a Difference Between Economic Power and Political Power?

There is nothing in an economy forcing anyone to work for a “capitalist.” The very existence of productive capital implies that the economy is somewhat advanced.

Controlling the Herd

Is There a Difference Between Economic Power and Political Power?

This article was originally published by Per Bylund at Mises.org

The term capitalism is highly confusing. The definition is clear enough: the private ownership of the means of production (capital). But the implications are very different depending on one’s political or economic perspective. Both are right and wrong. Let’s take a look at them.



So the power of the state (usually thought of as the power of “the people”) is in a sense limited by capital ownership. And, no doubt, policy-makers feel that their power is to some extent circumscribed by the influence of capital owners. (Whether this is a good or bad thing is a different issue.) So there’s a constant scratching of each other’s backs between the state and capital owners, as should be expected. Both want it their way, and the state’s apparatus (and the state’s means, to refer to Oppenheimer) only allows for one way. So no wonder capital owners and politicians are both cooperating and covering their own behinds.


Economically speaking, this analysis makes little sense. Why?



In other words, what uses of capital are to be valuable. This is hardly a position of power for capital owners – it is the position of a servant. Capitalists have wealth only to the degree they are and continue to be of service to consumers (that is, the “masses”). As soon as they stop, they lose that value or are “forced” (in an economic sense) to sell their capital to producers who better understand how to serve consumers. So how does this servant become a master? That’s the question that requires an answer in order to bridge the economic and political definitions.


The reason there are not options for people, so that they “have to” be employed by capitalists, has an extra-economic cause: it is, in other words, of political origin. So we’re necessarily back to politics.


The problem here is to treat both dimensions as they are equal. People of the left focus on the power aspect, and assert that it somehow has economic origin (in other words, they’re economically illiterate). People of the right focus on the economic aspect, and assert that there is no power (or, at least, no problem) due to capital ownership (in other words, they’re ignorant of the state’s influence on society and economy). Still, they use the same term for their very different concepts.

No wonder there is confusion!


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Contributed by Per Bylund of Mises Institute.

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