Power, Subsidiarity, and the Economy of Exclusion

• Author: Charles M. A. Clark
• Date: 01 September 2019
• Published date: 01 September 2019
• DOI: http://doi.org/10.1111/ajes.12294

Power, Subsidiarity, and the

Economy of Exclusion

By Charles M. a. Clark*

abstraCt. According to Pope Francis, an “economy of exclusion” is an

economy with barriers that prevent individuals and groups from

participating in the economy and society to their full potential. Power

is a key determinant for both exclusion and inclusion. All economies

are based on power relations and an “economy of exclusion” is an

abuse of power. This contribution looks at what economic power is

and how it can build barriers of exclusion or pathways to inclusion.

We use income inequality as a measure of exclusion, giving a general

history of power and inequality to demonstrate the role of power.

Lastly, we look at the concept of subsidiarity in Catholic social thought

as a principle to guide the use of power in the economy.

Introduction

The economy is a system of power. An “economy of exclusion” is

the result of the systematic abuse of power. To fully appreciate Pope

Francis’s critique of the “economy of exclusion” requires an under-

standing of the role of power in the economy. Unfortunately, the topic

of power does not get much attention in economics. Following meth-

odological individualism, economists typically view economic activity

as if it were autonomous. All action is seen to take place in the interac-

tions of the traders, oblivious to outside influences. In the theoretical

market of perfect competition, everyone is powerless, the market is all

powerful. Yet we do not live is such a world. Economic actors are not

autonomous; their actions are influenced by society and the past (his-

tory). Often, they are influenced by the power of other actors (firms,

the state). Moreover, economic activity is often directed towards posi-

tioning oneself in the economic, social, and political realms of society

(status and emulation) as a way to acquire power.

American Journal of Economics and Sociology, Vol. 78, No. 4 (September, 2019).

DOI: 10.1111/ajes.12294

© 2019 American Journal of Economics and Sociology, Inc.

*Senior Fellow, Vincentian Center for Church and Society. Research Fellow, Center for

Global Business Stewardship. Professor of Economics, Tobin College of Business, St.

John’s University (NY). Email: clarkc@stjohns.edu

924 The American Journal of Economics and Sociology

Economic actors (individuals and collective groups) also need

agency (power over their own actions) in order to engage in eco-

nomic activity, power that comes from the “rules of the game.” These

rules can create pathways for inclusion (institutions that allow and

facilitate participation in the economy), or they can create barriers for

exclusion, which will prevent or limit the participation of some and

create benefits for others. Pope Francis’s attack on the “economy of ex-

clusion” is directed at the abuse of power, abuse we see in individual

actions and indifference, and abuse we see in the setting of the rules

of the game to exclude many for the benefit of a few. Francis (2013:

§§54, 56) is challenging the “crude and naïve trust in the goodness of

those wielding economic power and in the sacralized workings of the

prevailing economic system” and the “ideologies which defend the

absolute autonomy of the marketplace.” The “absolute autonomy of

the market” is based on the assumption that all participants have no

power, which we know is not true. The abuse of power is the major

cause of the excessive inequality Pope Francis has often spoken out

against, power that is shielded by the view that markets are autono-

mous and market outcomes are inherently just:

As long as the problems of the poor are not radically resolved by rejecting

the absolute autonomy of markets and financial speculation and by attack-

ing the structural causes of inequality, no solution will be found for the

world’s problems or, for that matter, to any problems. Inequality is the root

of social ills (Francis 2013: §202)

In this contribution we will first look at what power is and how power

shapes the “rules of the game.” Then we will look at how power has

been used to increase and decrease income inequality. Lastly, we will

look at the principle of subsidiarity in Catholic social thought as a

way to better evaluate the use of power, with the hope that it adds

a perspective that allows economists to develop a broader normative

understanding of power.

What Is Power and Why Is it Important?

Power is often defined as the ability to impose one’s will on another

individual or group such that it influences their behavior or actions.

925Power, Subsidiarity, and the Economy of Exclusion

Economic power relates to the exercise of power within the eco-

nomic sphere of social life. Economic action is always social action; it

involves others, thus it always involves the exercise of power, either

over one’s own actions (agency to act, absent someone else’s power

over you) or over the actions of others. Both exercises of power

require a supporting social context, institutions that facilitate action

and that give meaning to the actions of individuals and community.

Even when we find purely voluntary trading between two completely

free and independent individuals we will find a social and legal struc-

ture to facilitate the exchange. Adam Smith’s two hunters meeting

in the woods to exchange deer and beaver is an imaginary, one-off

trade, not an established structure of exchange. All economic actions

have laws and regulations behind them, establishing what people can

and cannot do, and setting expectations of how the other person

in a trade will behave. We see this clearly in the use of a socially

established and often legally enforced medium of exchange (money),

without which economic trading would be rare rather than the normal

way we meet our basic needs.

Some other examples of the exercise of economic power in eco-

nomic life include: taxes and government spending; fiscal and mone-

tary policy; health and safety regulations; environmental regulations;

advertising and the sales effort; firms organizing and coordinating

the activities of their employees; and the most basic, people spend-

ing money (which we call “purchasing power”). The consumer who

buys a good at a store exchanges money for that item. The money

is embodied purchasing power, backed up by the law (legal tender

laws) and accepted practice, which define the rights and limits of each

of the participants in the exchange, as well as by society’s common

interest in the exchange (rules to facilitate exchange; a share of the

money in the form of a sales tax to help fund necessary government

programs). While power is a necessary aspect of the economy and

economic activity, it is also open to abuse.

In The Anatomy of Power, John Kenneth Galbraith (1982) lays out

a very useful scheme for understanding the mechanics of power. He

notes that there are three instruments of power (condign, compensa-

tory, and conditioned) and sources of power (personality, property,