Power: Economics vs. Political Power

The difference between economic power and political power:

Economic power is exercised by means of a positive, by offering men a reward, an incentive, a payment, a value; political power is exercised by means of a negative, by the threat of punishment, injury, imprisonment, destruction. The businessman’s tool is values; the bureaucrat’s tool is fear.

What is the difference? The difference between political and economic power is the difference between plunder and production, between punishment and reward, between destruction and trade. Plunder, punishment, and destruction belonging to the political realm; production, reward, and trade belonging to the economic realm.

But when misused, economic power tends to beget political power even in democratic and pluralistic societies. In the United States, this tends to work through campaign contributions and access to politicians that wealth and money tend to buy. This political channel implies another, potentially more powerful and distortionary link between inequality and a non-level playing field. It may also create pathways from inequality to instability, because both the economic and political implications of inequality can create various backlashes.