PHILOSOPHY OF DEVELOPMENT

ASSIGNMENT ONE

TERM PAPER ON

SHIFTING BALANCE OF POWER BETWEEN ECONOMICS

AND POLITICS

Shivraj Singh Negi

HS07H022

Third year Development Studies

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Shifting Balance of Power Between Economics and Politics
The shift in favor of economics, in the power equation between economics and politics, which

started in 17th century, has gathered pace in the last few decades. Economics has displaced

politics as prime driver for nation states. Political decisions are now increasingly constrained by

economic considerations. Nation states and politicians do not look for political or military

superiority as their prime motive, but it is economic prosperity that they value much more.

Geopolitical considerations are driven more and more by economic factors. Instead of signing

grand military alliances against common enemies, nation states now pursue treaties of free

trade more enthusiastically. Political Unions are a thing of past, but the world is now

increasingly dominated by economic unions. EU, NAFTA, ASEAN, APEC, G8, G20 etc are all made

of economically powerful actors. Power itself, to quote Mao no longer flows from the barrel of

gun, but from the economy. The threat of capital flight, due to the ease of transportation and

communication revolution, has significantly increased the bargaining power of business with

politics.

This shift is closely linked with the way modern social imaginary has changed about the

importance of politics, and what people actually see as the fundamental goal of the society.

With the emergence of modernity, in his book Modern Social Imaginaries Charles Taylor says

that society’s definition of morality also changed. Thinkers like Grotius and Locke were two

thinkers who started the shift towards a new morality. In this new morality the individual was

more important than the society. The earlier moral order was based much on philosophy of

Plato and Aristotle. Plato constructed the moral order based on the premise of how an ideal

city or society should look like.

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This new moral order was different as society was seen as something that is formed of

individuals who willingly participate in it. It should start with individuals, unlike Plato, and

should exist for their mutual benefit. Society does not make individuals but individuals form

society, and this is done with the support of a previously existing moral order and with the aim

of achieving certain common ends. The moral order is based on the fact that all people have

certain moral obligations towards one another and all are entitled to certain natural rights. The

objectives that society tries to achieve are exchange of mutual benefits and security. For Plato,

individuals existed to make society just. The new moral order brings about a change in which

the role of God is envisaged in daily life. The new belief that individuals exist before society,

rejected the old order in which an individual “can be a proper moral agent only when

embedded in a larger social whole,” and replaces it with the new notion where “one can be a

fully competent human subject outside of society.”

The recognition that society and its political institutions can only arise with a preexisting moral

background and recognition of individual rights meant that politics became subservient to

individuals. It was seen as something which should be able to achieve individual cooperation

and mutual exchange so as to provide security and prosperity for all. It should be organized in a

manner so that it is able to defend individual rights, and enable individuals to make

independent decisions about their lives and their place in society.

This process was further catalyzed by what Taylor calls in Chapter 4 as ‘Great Disembedding’. It

was a long process of disenchantment, and was a result of change in the way individuals and

societies are perceived. In earlier order where society was supreme every individual, just like in

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Plato’s ideal city, had a place or a position and they were identified by their place in relation

with others. This was best shown by the Biblical metaphor of Great Chain of Being, where a

hierarchy binds everything in universe in a structure which is ultimately connected to God. All

the different worlds, organisms and objects are bound in this hierarchy. As this notion of

hierarchy was broken by a new order which emphasized the importance and equality of all

individuals, it gave rise to new structures each of which were centered on individual.

The three new structures or realms each of which was centered on individual were economy

(Chapter 5), public sphere (Chapter 6) and the Sovereign People (Chapter 8). These new

structures disconnected the society from polity (Chapter 5). Also the concept of time, as

embodied in the Biblical concept of End of Days and Judgment Day myths, which is moving

towards one direction determined by a higher being, was slowly replaced by a new one. The

new society was not going anywhere, it was just moving ahead without any higher purpose in a

direction all determined by its own actions. Taylor says that from earlier ‘ordinary time’ time

became ‘horizontal’.

This process of Great Disembedding, though central to modernity also gave rise to certain

negative characteristics of modernity such as anomy, meaninglessness, social disintegration,

loss of traditional way of living, and growing instability as individuals find it difficult to find their

place in society without the support of earlier structures.

In Chapter 5 Taylor says that the notion that God governs the world according to a benign plan

is ancient, and in the eighteenth century this notion evolved into an appreciation about how

human life is designed so as to produce mutual benefit. The benign design is held responsible

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for the existence of mutual benevolence and the ‘invisible hand’ factors (daily human actions

and interactions which systematically result in general happiness, but are generally not

explicitly intended to bring about that benefit). The most famous example of this is given in

Wealth of Nations written by Adam Smith. He says that the search for our own benefit, driven

by our own self interest generally results in welfare for all through markets. The general

purposes of human beings mesh and this involves everyone in exchange of advantages or

mutual benefits.

This fundamental model became new economic order. This also gave rise to economic

liberalism and propelled the economy to a new centre place in society. The economy becomes

one of the central imaginary of modern social order. The other two that Taylor outlines are

‘public sphere’ and the ‘practices and outlooks of democratic self-rule’. The public sphere was

made of the institutions and practices which enabled free individuals to form and express their

opinions about the manner in which political and economic power should be utilized. It gave

birth to media and notions of free speech. The popular will of the body of the people became

new source of legitimacy and authority, and expressed through a democratically elected

government it was the sovereign power of the land. This idea of democratic self rule is related

with emergence of concept of democratic nations, citizenship and civil society. The political

institutions were no longer derived from the will of God. And neither were they seen as existing

for some higher divinely determined purpose. They emerged out of society made of individuals,

and existed for the benefit of society.

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The new economic order was based in the notions of exchange of advantages in which the

equally free and autonomous and there is no hierarchy unlike the earlier order. Slowly the idea

of ‘political economy’, attributed to Montchrétien, arose and using which Montchrétien

conceptualizes a new theory of state that sees it as primarily a facilitator of economic activities

and principle goal of state being economic prosperity. Simultaneously, the rise of nation states

also increased the importance of economic activity. As the first nation states with the first

bureaucracies, the first organized taxation systems and large government expenditures arose it

needed vast amount of monetary support. Nations needed huge armies to maintain, unlike

militias maintained by feudal lords in earlier order. The post-Napoleonic era saw large armies

crushing smaller ones by the huge weight of numbers. This was extremely costly in terms of

manpower and resources. It needed huge economic support, increased production and trade.

The trading and the business class became important for the ruling classes. Once some nations

began to develop an economy their rivals were also forced to undergo the same process. Also,

Nation states needed secular underlying forces to bind people from diverse cultural

backgrounds. Economy and trade provided the most secular binding force.

The rising centrality of economy increased the importance of being settled in one vocation or

‘economic role’ and improved the social status of working class. The economic order reduced

elitism of old classes as a new powerful economic class grew. There was a growing realization

that one can be 100 % religious in any vocation, and it is not necessary for one to become a

monk or lead a monastic life in order to be religious. Also a vast majority of people cannot help

but live the daily life of production, family, work and sex. This realization led to the

sanctification of ordinary normal life, and made it a site for the highest forms of Christian life.

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This thrust economy into the central role in a society and increased importance of working

class, who were seen as engaged in activities that are directly beneficial to society by producing

material goods and benefits.

This was a big shift in social imaginary as society was now seen in terms of economy in which all

voluntary participants are engaged in mutually beneficial activities of production, trade and

consumption. This system is regulated by itself through a series of ‘invisible hand’ factors. The

most important purpose and agenda of this new understanding of society is economic

collaboration and exchange.

This new commercial society, with its explicit recognition of the centrality of an individual as a

free being born with certain natural rights, dethroned war as the highest human activity and

instead gave that role to the production. The old warrior ways and codes of honor were seen as

non-utilitarian and non-productive. They were seen as an unnecessary drain on society’s

resources and manpower. Already the rise of huge standing national armies had made military

dependent on economic support, this growing realization meant that the ruling classes could no

longer martial resources for warfare by fiat. The relationship became one way, and left military

power dependent on economic power. The process continues to this day, as most powerful

militaries are backed by large developed economies. Nations can disregard the importance of

economic power at their own peril, as seen in the case of USSR and currently with North Korea

which has adopted the policy of ‘military first’ in its budgetary planning.

The nature of warfare itself has undergone significant change. Whereas earlier, as written by

Clausewitz in On War, war was seen as an extension of politics but now warfare and military

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muscle supports the economic objectives. No longer is a military muscle considered necessary

to defend the economic power, but the economic power is seen as capable enough to defend

itself. The large developed economies no longer maintain huge standing armies or feel the need

to display their military muscle very often. The old honor, interest and fear theory as three

fundamental driving reasons for war no longer applies. Increasingly it is commercial and

economic interests that drive various actors to use of military power. Some of the underlying

reasons for most of the conflicts in the world today are economic. Most striking examples will

be American interference in Middle East, Chechen conflict and Civil wars in Africa. Global

political maneuverings are determined more and more by economic considerations.

The technological revolutions in transportations and communication have freed the business

from constraints of location. It is now very easy to manufacture components in different parts

of the world, assemble the product at a different place and then ship it to a distant market.

Multinational Companies have global supply chains spread across several nations. The

geographical proximity to sources of supply and raw materials or to markets is no longer a

critical determinant of a company’s ability to compete effectively. The emergence of a liberal

trading order, in the form of WTO, common markets, FTAs (Free Trade Agreements) have

helped this further. This process has made it very easy for businesses to transfer or move

investments from one part of the globe to another. The capital has become more mobile in

recent years, as earlier technological and political barriers have crumbled. The easier mobility

of capital has resulted in decreasing power of governments to control these flows. Since capital

always flows to places where there is least amount of taxes and regulations and the

government interference is low, the ability of government to control business through coercive

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means of taxes and regulations is dwindling. Governments now go out of their way to offer

lower taxes and fewer regulations in order to attract capital flows. Sovereign governments are

no longer free to determine the level of taxes and the amount of regulations as different

economic actors and considerations constrain them. In case if government tries to tighten the

capital flows, or regulate it the capital will simply migrate to another place.

In the eighteenth century, warfare was seen as separate realm from politics, while economy

never featured in the power equation. With the rise of first national armies, starting with the

Grand Army of Napoleon, warfare became an extension of political objectives of state. This was

first articulated by Clausewitz in his book On War, where he argues that in any military

campaign the basic political aim of the conflict should never be forgotten. War should always

be fought for political purposes and it should be seen as an extension of politics. Moreover, big

armies require vast resources and manpower, which can only be done by a political regime

which has significant amount of popular support and which can inspire soldiers on some higher

ideological platform. Populations can be made to sacrifice comforts only if they can be

convinced that they are fighting for a higher cause. This required revolutionary ideologies.

Warfare, as a ding-an-sich or as an isolated act of violence became a thing of past, as it became

terribly costly to wage an absolute war. The only notable exception to this would be Hitler’s war

against Soviet Union, a total clash of ideologies as Hitler thought it to be, which came close to

be an absolute war. But even there, the conclusions of Clausewitz that an absolute war will be

an absurdity as it will defeat the very purpose for which it is waged, held true. Overall, gradually

with the rise of sovereign nation states military became subservient to the ends of politics and

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dependent on economy. But, politics still controlled economy and since it could martial

resources for military ends, politics remained supreme among all three.

But in the latter half of twentieth century we are witnessing a shift in which both military and

politics are subservient to economic objectives. Politics is losing ground to economics, while it

uses military power increasingly for serving economic purposes. Earlier military power was a

tool which politics maintained by economic support and used for achieving certain objectives

for itself. But now, it is tool which is used to serve economics. And the degree of servility is

slowly increasing. It is not the military power which is increasingly servile to economics, but the

entire political realm is becoming servile to economics. This is mainly because as nation become

more and more interlinked and interconnected with one another; exercise of military power

will become more difficult. Two nations which are part of a single global supply chain or with

significant amount of trade and commercial relations are much more likely to resort to political

and economic maneuverings rather than military.

What we are witnessing now is a global reordering of old equations between military, economic

and political spheres. Military power became subservient to politics by the end of 19th century.

Now politics is becoming subservient to economic sphere, and this change is similar to change

in military-politics relations earlier. It may soon happen that politics may be seen as an

economic end, or an extension of economics. It will be required to serve only economic

objectives, and to never operate in isolation or by itself. Politics will also lose the ding-an-sich

category, and absolute politics will become a thing of past. Politics will be driven by larger

economic objectives of different players.

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Economics and Trade are much more secular than identities of religion and region, and also

have the capability to transcend national identities. Globalization has connected people across

identities, and connected them in borderless world. Nation states and their governments are

slowly losing control over the inexorable march of technology and trade and the ability to

determine and shape their policies and priorities on their own. They are increasingly bound by

considerations of international law, investment priorities, need to attract capital and stay

business friendly and popular movements in various fields (environment, labor laws, agriculture

etc) often led by INGOs (International NGOs like Amnesty, Greenpeace, Human Rights Watch).

As the sovereign power gets diluted, the realm of politics which holds the key to sovereign

power will also lose relevance. And as trade and commerce binds countries in tight economic

relations, political maneuverings without consideration for economic factors will become

difficult, in a manner similar to how rise of nation state made military maneuverings without

political objectives irrelevant.

The interplay between economics and politics will be really interesting to see in the 21st

century. But, just because we are moving in a certain direction does not mean that we will

eventually reach a goal. The entire shift in power balance between economics and politics

depends a lot on Globalization. And this process may be dampened by some unforeseen factor.

But in a business as usual scenario, it is very clear that politics will become subservient to

economics.

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Bibliography

Clausewitz, C. V. (1997). On War. Wordsworth Editions Limited .

Friedman, T. L. (2006). The World is Flat . Penguin Books Limited .

Shimko, K. L. (2005). International Relations: Perspectives and Controversies. Houghton Mifflin Company.

Taylor, C. (2004). Modern Social Imaginaries. Duke University Press.

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