Economic Power

In Behavior Psychology, there are four options available for modifying behavior: apply reward, withhold reward, apply punishment, and withhold punishment. To promote desired behaviors, one can either reward the behavior or punish the lack. To deter undesired behaviors, one can either punish the behavior or fail to punish the lack.

These are understood in analogy with the "carrot and stick" analogy, wherein one can get a donkey to pull a cart either by offering a carrot or beating it with a stick. One is considered a positive motivator while the other is a negative motivator. The driver can either offer or withhold a carrot, and can either apply or withhold the stick.

Although both reward and punishment can be used to bring out a desired behavior, and both reward and punishment can be used to suppress an undesired behavior, the difference between them is crucial.

Since people insist on equivocating between public employee unions and real unions, the protests in Wisconsin have people discussing the power of corporations and why this country needs unions to protect the workers from corporations. This always accompanies an argument about the dangers of economic power. Then there is an appeal for the government to protect the people from corporations.

But what exactly is economic power and how is it different from political power? Economic power is entirely the power of reward, the "carrot." A multi-billionaire, no matter how much economic power he has, cannot force anyone to do anything. All he can do is keep offering more money, more incentive, until people agree to do what it is the multi-billionaire wants.

This stands in stark contrast to political power which is entirely the power of punishment, the "stick." When a political official wants something done, the form it takes is a command with the threat of punishment to back it up. It is true that sometimes the government offers subsidies, which appear like gifts or bribes, but the only time the government has "carrots" to offer is when it has taken "carrots" from others first.

This is illustrated best by Rockefeller Center and by Phizer Corporation in New London, Connecticut. When Rockefeller wanted to build his center, he purchased the property to do so. This was done in 1930, which although after the "gilded age" was still before the modern regulatory state and according to modern conventional wisdom there was nothing to restrain the wealthy from doing whatever they wanted.

There were two holdouts. One property owner wanted far more than John Rockefeller was willing to pay, and the other simply didn't want to sell. For all his wealth he was not able to force the two property owners to sell him for the price he offered.

In the modern age, where the government acts to protect people from the rapacious rich, Pfizer simply bribed the city council of New London to seize the property of the homeowners and deliver it to Pfizer. It is true that modern corporations do have some stick power, but only because some sticks are given to them by the government.

The abuses of modern corporations are a direct result, instead of a cause of, government intervention. Anyone who is arguing that government intervention is needed to protect the people from the power of the corporations is either equivocating economic and political power, or is reversing cause and effect.