The relationship between wealth and power is essentially the relationship between potential and actual

Tuesday, February 8th, 2022

The relationship between wealth and power, Carroll Quigley argues in Weapons Systems and Political Stability, is essentially the relationship between potential and actual:

Wealth is not power, although, given time enough, it may be possible to turn it into power. Economic power can determine the relationships between states only by operating within a framework of military power itself. That is, potential power has to become actual power in order to determine the factual relationship between power units such as states. Thus the relationship is not determined by manpower, but by trained men; it is not established by steel output, but by weapons; it is not settled by energy production, but by explosives; not by scientists, but by technicians.

When economics was called “political economy” up to about 1840, it was recognized that the rules of economic life had to operate within a framework of a power structure. This was indicated at the time by the emphasis on the need for “domestic tranquility” and for international security as essentials of economic life. But when these political conditions became established and came to be taken for granted, political economy changed its name to “economics,” and everyone, in areas where these things were established, became confused about the true relationships. Only now, when disorder in our cities and threats from external foes are once again making life precarious, as it was before the 1830s, do we once again recognize national security and domestic tranquility as essential factors in economic life.

In the past century we have tended to assume that the richest states would be the most powerful ones, but it would be nearer the truth to say that the most secure and most powerful states will become the rich ones. We assumed, as late as 1941, that a rich state would win a war. This has never been true. Wealth as potential power becomes effective in power relationships, such as war, only to the degree that it becomes actual power, that is, military force. Merely as economic power it helps to win a war only potentially and actually hampers progress toward victory. We could almost say that wealth makes on less able to fight and more likely to be attacked. Throughout history poor nations have beaten rich ones again and again. Poor Assyria beat rich Babylonia; poor Rome beat rich Carthage; poor Macedonia beat rich Greece, after poor Sparta had beaten rich Athens; poor Prussia beat richer Austria and then beat richer France several times. Rich states throughout history have been able to defend their positions only if they saw the relationship between wealth and power and kept prepared or, if they were able when attacked to drag out the war so that they had time to turn their wealth into actual military power. That is wheat happened in the two World Wars. In each case the victims of German aggression were able to win in the long run only because there was a long run. If the Germans had been able to overcome the English Channel, their victims would not have had time to build up their military power.

Thus we see that wealth in itself is not of great importance in international affairs. It must be turned into military power to be effective, but then it ceases to be wealth. Wealth turned into guns no longer is wealth. But guns can protect wealth.

Comments

  1. Gavin Longmuir says:

    As Bill Clinton might have said, it depends on what the meaning of “wealth” is.

    Today, we mistake a stock certificate or a Treasury bill for “wealth”. But those are not real wealth. Real wealth is the coal mine, the steel mill, the factory — the physical assets that generate real goods and services for which people will trade.

    Quigley may have had a point when countries which had pieces of paper also had real physical assets. But this time it really is different.

    Look at the US today. It cannot put a fighter plane into the sky without imported chips from Taiwan; it cannot drop a smart bomb without imported parts from Switzerland. The world has changed.

    Nuclear weapons had a lot to do with this, by making all-out war a losing proposition for everyone. China’s leaders were smart enough after Mao died to recognize this. They switched to economic war.

    Economic war is slow. It takes decades, and looks a lot like “Free Trade” to the dummies on the losing end. The US offshored its once world-leading manufacturing capacity to China, which is now the world’s #1 in steel-making, ship building, automobile manufacturing, and much more. And the US has been reduced to a Cargo Cult economy, exporting IOUs in exchange for real goods.

    Someday, China will use its economic might to impose its political will on the DC Swamp — without firing a shot. Real wealth will result in real power.

  2. Pseudo-Chrysostom says:

    Keystone companies that many different economic sectors depend on, such as freightlining, some of which have been in business over multiple generations to this day, are going out of business now, due to unwillingness to simply raise their prices in response to an inflating money supply.

    In ordinary times, the instinct to keep prices as low as possible is usually adaptive; but of course these are not ordinary times, and an attempt to keep prices stable in the face of inflation by cutting costs internally is like trying to drop a ladder down a bottomless pit. A business owner cutting into his own wiggle room, which is capital, in response to an inflating money supply, which is a matter of programming, is committing a basic category error.

    Moneys are used, in broad terms, as approximations of potency. The potency necessary to bring about a state of affairs, potency created the accomplishment of a state of affairs, potency facilitated by a certain state of affairs. A state of affairs like ‘having an oak log cabin’ in Afghanistan would be more involved to bring about than the a similar state of affairs in Maine, and differing ‘money price’ would be an expression this.

    By presenting a money price to a man in exchange for something, you are signaling ‘i am powerful enough to have this’, in terms of your person, in terms of your household, in terms of a broader system you may be participating in; such potency that you may be facilitating for the later being remunerated in kind. It is saying that, instead of sending fighting men to take thing (and men to drive it, and men to fabricate it, and men to source it…), we simply skip the whole messy dance and you just give it to me (whom the proprietor can then say the same thing to other parties for whatever he needs that is within the means of his ‘liquid potency’ in turn).

    In this light, more farcical thought exercises of relative value like ‘trading a bottle of water for a bar of gold to a perishing man in the desert’ start missing the forest for the trees; in such an extreme case, the traveling man could well either simply take the gold from the perishing man by force, or the perishing man could well simply take the water by force, or the traveling man could well simply share his water regardless.

    Any given money, being a creation inside Being, naturally cannot also encompass all Being with complete felicity; which is not to say they may not be felicitous; which is also not to say they may not be more or less felicitous.

    It is to say, instead of any particular being needing to be a whole nation unto itself to bring about things, they may each all participate in a same nation; this is the economy that moneys facilitate.

  3. Jim says:

    Gavin Longmuir, never attribute to stupidity that which is adequately explained by malice.

    “Economic war is slow. It takes decades, and looks a lot like “Free Trade” to the dummies on the losing end. The US offshored its once world-leading manufacturing capacity to China, which is now the world’s #1 in steel-making, ship building, automobile manufacturing, and much more.”

    They knew what they were doing.

    They knew what they were doing.

    They knew what they were doing.

    (Repeat until it sinks in.)

  4. Sam J. says:

    Gavin Longmuir says, “Today, we mistake a stock certificate or a Treasury bill for ‘wealth’. But those are not real wealth.”

    Let’s see if I get this right. You’re trying to convince us that wealth, is not wealth.

    I wonder why this would be? I wonder why convincing people that this is true would be beneficial? And who would it be beneficial to?

    It’s all a black void. Such a mystery.

  5. Gavin Longmuir says:

    Sam J: “You’re trying to convince us that wealth, is not wealth.”

    Not trying to convince you of anything, Sam. Simply pointing out that a chasm has developed between the Real Economy (where people produce real goods & services for which other people are prepared to trade the real goods & services they themselves produce) and the Financialized Economy (where people imagine that others are so keen to get those pieces of paper that they will trade real goods & services for them).

    At its best, the Financial part of the economy helps to direct savings (deferred consumption from the Real economy) into investments which increase the future production of real goods & services. But when people fall for the Money Illusion and start to think the pieces of paper are more important than real production, we get a bubble. Then we get a collapse. Not good.

  6. Sam J. says:

    “…a chasm has developed between the Real Economy… and the Financialized Economy…”

    True but that’s not what you said. You said,

    ”Today, we mistake a stock certificate or a Treasury bill for ‘wealth’. But those are not real wealth.”.

    Misdirection.

    I asked the pertinent question, which is just who did this “…stock certificate or a Treasury bill…” or other go to and why?

    If you want say, lumber. You can’t directly trade a treasury bill for it but you can readily trade it for cash and buy all the lumber you want, so saying the treasury bill is not “wealth” is…misdirection.

    I assure you if you were to bring a truck load of, “not wealth”, treasury bills to my house I would readily trade the car I have up on blocks for them.

  7. Gavin Longmuir says:

    Sam,

    Remember that all anything is ever worth is what someone else is prepared to trade for it on the day the current holder wants to sell it. One day, Facebook shares are worth a lot of $, the next day not so many $. Has there been a loss of “wealth”? Or is it merely a loss of the perception of “wealth”?

    Real wealth is the capacity to produce goods & services which other people want. (Or, in the case of Treasury Bills, the capacity of the government to take from their population). There is an important difference between the financialized paper “wealth” which is the focus of the stock & bond markets and the real-world wealth which is supposed to underpin that paper. Unfortunately, the financialized tail is now wagging the real-world dog. There will be consequences!

  8. Jim says:

    Gavin Longmuir: “Has there been a loss of ‘wealth’?”

    Yes.

    Gavin Longmuir: “Real wealth is the capacity to produce goods & services which other people want.”

    Real wealth is the capacity to induce people to produce the goods and services that you want plus the capacity to pass that capacity to your offspring.

    That’s why they call it “intergenerational wealth”.

    Ask any family office.

  9. Harry Jones says:

    Real wealth is being able to secure all the goods and services that you yourself want, no matter what happens. Part of that is intelligence and good judgment. Part of that is freedom to do as you judge best. The rest is capital.

    Intergenerational wealth is why we have a clueless elite. All the scions have is capital, and the freedom they can buy (rent, actually) with capital. They think that’s all they need.

    Connections? The only connections they have are with each other. That’s why they’re inbred.

  10. Sam J. says:

    Gavin Longmuir,”wealth is not wealth,…wealth is this, wealth is that or the other or…”

    Contextual synonym in the realm of physics.

    “Consider a round cow.”

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