Economics as power

Let’s take a brief cue from the economics profession and attempt to drastically simplify reality in an effort to gain some understanding.  Here’s my simplification: a very, very small clique of people own all the productive resources of society.  In fact, let’s assume it’s just one person.  What would be his (we are still in a male dominated society) incentives?

I think it’s clear that the maintenance of power would be the only driver and ‘economic’ arguments would have little force.  Additional income for this individual is a meaningless incentive as he already owns all productive resources.  Like the historic battles between kings and nobles, he could be expected to support policies that increased his power and oppose those that didn’t.

A Keynesian economist will argue that stimulus through deficit spending is beneficial to our owner since it would immediately be returned through increased sales.  This logic would be summarily rejected.  The benefits from increased sales have little meaning since everything is already owned and whatever upside there is doesn’t come close to offsetting the significant downside.  Stimulus represents a diminution of power which opens the door to the idea that the masses can live independently.  Deficit spending will be avidly opposed, not out of fear of being repaid, which is nonsense since every penny comes back to him anyway, but out of fear of a decrease in power.  Recessions and even depressions are of no great concern as long as centralized ownership remains.  Here’s Andrew Mellon during the 1930’s: “liquidate labor, liquidate stocks, liquidate farmers, liquidate real estate… it will purge the rottenness out of the system. High costs of living and high living will come down. People will work harder, live a more moral life. Values will be adjusted, and enterprising people will pick up from less competent people.”  Can there be any doubt he is speaking on behalf of power?

This picture of course is simplistic.  The economy is owned by more than one person and, even in our highly flawed democracy, other voices can be heard.  But I think it’s far closer to reality than the absurdly unrealistic assumptions of mainstream economics and political science which view the economy and political democracy as an auction of equals.  Interestingly, the theory known as Realism in the discipline of International Relations, if applied to the economic world, would support my argument.  Realism recognizes only power and sees nations as driven by their amoral power interests.  It’s widely supported by those with conservative views but it would be devastatingly bad public relations to openly apply this theory to economics and political science.

A great deal can be explained by this simplistic view of power.  Recession, deflation, and depression are not great deals to the highest levels of society and ideas that devolve power to the population – Keynesian deficit spending, for example – will be strongly opposed.  Support will be limited to policies that promote concentrated power: privatizations, reduced public spending, and regressive taxation.   The power of this elite can be seen by the lack of meaningful action during the current crisis and in the abdication of populist discourse by center-left parties throughout the world.

Viewing economics as power explains an awful lot.