Maybe this week I can take a closer look at what I call “economic power,” by which I mean of individuals, not to be confused with “market power” of firms in non-competitive markets. I’ve noticed some people may have some trouble with the term. Economic power, as I use the term, is just wealth, money, financial resources, more broadly legal claims that allow one to control resources in the context of resolving interpersonal conflicts of preferences over resources and the use of resources.
Ever hear someone propose there is no coercion in markets? Seems quite lovely, doesn’t it? Everyone gets whatever he or she wants? No, not really. Everyone gets whatever he or she wants and has the economic power to obtain. Great, so they’re giving economic power away? No, not really. Someone is defining economic power using legal property specifications, enforcing those definitions, making rules for using it to resolve particular interpersonal conflicts of preferences and to distribute it. Want to see coercion? Go outside the rules someday. See what happens. In all systems other than real, actual, violent, bloody, dysfunctional anarchism, government force, coercion, lies behind the resolution of interpersonal conflicts of preferences, whether they’re resolved using economic power in markets or any other mechanism.
Some time ago, someone asked me why I kept talking about economic power rather than simply preferences when discussing markets. I don’t think he was being insincere. Probably just under the influence of bad economics in the conservative style, which suppresses such issues. Well, perhaps a bit confused as well by the fact any given transaction typically involves only a small fraction of one’s economic power, people are rarely priced out of markets entirely, and thinking about aggregate transactions and economic power involves a further step. The poor, with low economic power, can usually participate to some degree, but soon enough they run out of economic power. The rich, of course, participate right along with them, at first, albeit because of the power differential more at the level of whims than needs. And, of course, the economic power of the rich allows them to continue using markets to claim resources long after the economic power of the poor has been exhausted. The rich can participate all day long, every day, and always be ready to come back for more. Markets allocate resources to those who have the economic power to claim them, and, yes, also the desire or preference to have them, not to those who have the strongest preference. They’re not magical or utopian. They don’t give everyone whatever they need or want. A starving poor child may have a strong preference for food, but the market will address the fleeting whim of the rich man or woman. That’s the whole issue. If one doesn’t understand that, one doesn’t really understand markets or the normative issues involved.
If one recognizes the role of economic power in resolving interpersonal conflicts in markets, and the role of coercive government, political power, in defining, distributing, using it, and supports certain forms of ethics in that area, one may end up a traditional conservative. Nothing wrong with that. A traditional conservative has his or her ethical views on the subject of economic power and the proper use of it, like anyone else, and is willing to engage in a democratic system with those having other views to reach some forever temporary resolution. Although at one level traditional conservatives may find using economic power and markets to resolve interpersonal conflict superior to other potential mechanisms associated with government activity, they accept democracy as the means to resolve disputes relating to that issue.
If one has difficulties with the role of economic power in resolving interpersonal conflicts in markets, or the role of government power in defining, distributing, using it, one may end up with one of three extended forms of conservatism: libertarianism, anarchism, fascism. I find these extended forms of conservatism considerably more obnoxious than the traditional form because they’re all more or less incompatible with the democratic ethos and generate unnecessary confusion and conflict. If one simply ignores the legal power backed by government coercion underlying economic power wielded in markets, one may end up with “libertarianism,” fake anarchism, an incoherent matter of selective perception that interferes with sensible discussion of the relevant issues. If one recognizes the legal power backed by government coercion underlying economic power wielded in markets, but supposes attempts by democratic government to revisit or revise those laws or use other mechanisms uniquely coercive and inappropriate, one may end up with fascism. If one rejects the need for government coercion underlying economic power wielded in markets, supposes one can have stable markets without law, without property specifications, without rules on the use of economic power, one may end up with utopian anarchism. Those three expressions of extended conservatism: “libertarianism,” fascism, and utopian anarchism, are united in their opposition to democratic government, which they propose is inconsistent with the ethical resolution of interpersonal conflicts, freedom, liberty, etc. The nexus of relatively democracy-friendly traditional conservatism and anti-democracy extended conservatism involves “minimal,” “small,” “inactive” democratic government. But true to my word to keep things a bit shorter, let me take that up again a different day.
To understand the relation of democracy to markets, one must understand the role of “economic power” in resolving interpersonal conflicts of preferences in markets, and the role of government in addressing the ethical issues associated with defining, distributing, and using it.
