Beruflich Dokumente
Kultur Dokumente
ASSIGNMENT ONE
TERM PAPER ON
AND POLITICS
HS07H022
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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
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Shifting Balance of Power Between Economics and Politics
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
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
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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Shifting Balance of Power Between Economics and Politics
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
loss of traditional way of living, and growing instability as individuals find it difficult to find their
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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Shifting Balance of Power Between Economics and Politics
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,
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Shifting Balance of Power Between Economics and Politics
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
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
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
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
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
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
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.
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
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
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
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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
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
Shimko, K. L. (2005). International Relations: Perspectives and Controversies. Houghton Mifflin Company.
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