Power vs. Wealth in Politics

by Richard "Chip" Peterson, PhD,  June 15, 2010

    Politics involves power. Wealth involves money, which people may employ to exercise some degree of power. Many people aspire to obtain either wealth or power or both. However, there are major differences between wealth and power that people need to recognize. This essay tries to point out those differences.

    First, we will consider wealth. Wealth involves the ownership of assets which either can be sold to obtain spending power, held to produce desirable goods or to earn greater future spending power, or exchanged  for goods that people have. People desire wealth because it can be used to earn a future income or exchanged for goods and services they want either in the present or at some time in the future. The value of wealth is that it can be used to obtain goods or services provided by other people if it is given to the other people in a voluntary exchange; alternatively, it can be used (like land or a factory) to produce goods or services that other people will be willing to exchange items for in the future. Note that wealth is desirable because it can be used either in direct voluntary  exchanges with others or in the production of goods and services that will facilitate future voluntary exchanges with others. In  such voluntary exchanges, other people will be willing to surrender some of their goods or work efforts to benefit the wealth holder in exchange for some of the wealth holder's production or asset holdings. Through such exchanges (within limits set by the level of wealth or its income producing capacity) the wealth holder can acquire the goods or services that he or she desires when he or she needs or wants them. 

    Power can be obtained through the political process. Chairman Mao of Communist China is famously quoted for saying that "All power comes from the point of a gun." While we rarely see the point of a gun in our governmental system, our founding father, George Washington, is quoted as saying, "government is about force." Ultimately, even though we don't like to think so, try to not pay your taxes and eventually, someone with a gun (force) will show up to take you to jail or seize some of your assets, or both. A person with a gun may also show up to take you to jail or to court to make you forfeit some of your assets if you violate any one of numerous  governmental laws or regulations. 

    Some people seek governmental power as an alternative to wealth. With power, they can make other people provide them with the goods and services they desire without having to go through the possibly time consuming or ineffective process of trying to get people to agree to a voluntary exchange. A governmental official, such as Mao, can just order that people  be shot and seize their assets once they are dead. In fact, he did this when he consolidated his power in China after World War II. As the supreme ruler of China. Mao also had numerous concubines doing his bidding. In Soviet Russia, in the early 1930s, Stalin ordered that Kulaks be deprived of food and then collectivized the former owners'  farms in the Ukraine after they had starved to death. Stalin also made people do his bidding lest they be executed or sent to Gulags. People with extreme governmental power can make other people provide them with their assets or with any goods or services that the power-holder desires. The power holder can dispense with the trouble of engaging in involuntary exchanges by using governmental force as a substitute for negotiation. They can just take what they want and dispose of other (powerless) people as they wish. Communist leaders, and other tyrants, have exercised such power in most countries where they have taken over. While the new governmental leaders enjoy a rich and, often, self-indulgent, lifestyle, the common man often lives in fear and poverty.

    Of course, our government has not yet been taken over by communists. Our founding fathers were very careful to put many checks and balances and individual liberty protections in the U. S. Constitution in order to guarantee that the common man would control our government and not vice versa. Even though, power seeking government officials have sought to erode U.S citizens' constitutional protections in recent years, many protections are still intact. Nonetheless, many people still seek to obtain political power in the U'S.

    Let us consider some of the benefits of power in the U.S.. Congressmen and women have access to superior health care even while they are forcing restrictive health care options down the throats of most of the general public. They also can take expensive foreign junkets paid for by the taxpayers. They have large staffs that are paid to do their bidding, excellent retirement plans, and, frequently, access to valuable financial information provided by lobbyists who seek to curry their favors. Nancy Pelosi, as Speaker of the House, even has a private plane available to fly her around the country whenever she desires. 

    The President and his wife have huge staffs paid for with taxpayer monies. They have guards and secret service protection, can vacation at Camp David or in any of many more desirable locations, and they have excellent chefs and free entertainment provuded by leading stars in various fields. However, practically none of these activities must be paid for out of their private income. Michelle Obama reportedly spends more than $1 million per year on the salaries for her staff--much more than any other first lady. If a private citizen had an equally large staff, she would have to earn nearly $2 million in pretax dollars to pay for it. However, the taxpayers pays for her staff. Meanwhile, the president has the power to request that other people do his bidding or potentially can intimidate them into doing so. Previous presidents have reportedly  used FBI generated information to blackmail other politicians into doing their bidding or have tried to impose arduous IRS tax audits upon their political enemies. 

    The powers of politicians are great and many of those powers can be used to pay or force other people to do their bidding. Yet, these powers can be obtained by people who do not have wealth, per se. In fact, many politicians may claim that they are representing the poor and wish to tax the Wealthy in the interest of "Social Justice." Watch out for the term, "Social Justice," as it means that the politician wants to take the income or wealth of people they deem have "too much" and either use it to pay for governmental expenses, including their perquisites,  or give it to people they think will be more likely to support them politically. Meanwhile, such politicians may claim they are morally superior because, as measured by bank account balances,  they are not wealthy themselves--even though, if one were to add up the value of the perquisites they receive from taxpayers, they would be among the wealthiest people in the country. 

    As an economist by training and a past finance professor, I am particularly bothered by politicians who seem to think that they are morally superior because their "wealth"  is not measured by bank account values but rather resides in the form of governmental power and perquisites. At least most private people who have accumulated wealth (excepting those who have accumulated wealth indirectly through government granted monopolies or favors)  have done so through voluntary exchanges in free markets by providing goods or services that people want to buy at a price they are willing to pay. For example, Bill Gates of Microsoft became wealthy by providing the market with highly useful computer operating systems, Michael Dell became wealthy by selling computers more cheaply than other suppliers, and Steve Jobs became wealthy by constantly providing innovative Apple  products to the public. All became wealthy in free markets because people were willing to buy their products in voluntary exchanges. In contrast, politicians can obtain the accoutrements of wealth without having to pay for them because the taxpayers are forced to subsidize their living standards and their perquisites of power.


Email Chip with any questions., Chippete@aol.com

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