Technology and Economic Power

Abstract

Technology and economic power share one characteristic: economic theory has long ignored them. Starting with the industrial revolution, technology has been the first driver of economic growth. But it is only a couple of centuries later that economic theory gave it the place it deserves—as an engine of economic cycles. In classical economic theory, economic power did not exist. Market mechanisms excluded it—many suppliers sell to many buyers without any mutual influence and without any say on price. The only exception was monopolies, and their power was evil. The emergence of the modern corporation, the multiplication of oligopolies, and the Depression were all needed to slowly demonstrate that markets as defined by classical theory are the exception, not the rule. The rule is that economic power is what every enterprise is aiming for, by seizing every possible advantage from the imperfect markets they are acting in. The larger corporations of today are the powerful institutions that drive the economy; they exercise all sorts of power; and they themselves are the stage of multiple power plays. But admitting power, talking power—no! Power remains anathema. In his enlightening 1952 book, American Capitalism—The Concept of Countervailing Power, John Kenneth Galbraith explains why: classical economic theory, obsolete as a model of the reality, lives on as an ideology which serves well the people in power, notably the heads Philos. Technol. (2014) 27:279–283 DOI 10.1007/s13347-013-0148-1