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Introduction

Where does power lie in the modern world?  We need to know.  Quite often, we need to know in order to survive, to navigate the ever-changing challenges life throws at us.  And we need to know if we want to change the world, to make it a better place.

We probably need to distinguish at the outset between power and influence.  Power is the ability to make things happen; influence is the ability to contribute to the things considered when those with power make decisions - with the significance of this contribution varying from negligible to overwhelming.  We all have power in small ways (shopping is an exercise of power) but, inevitably, the larger the scope, the fewer are able to exercise power.

Nietzsche believed that the desire for power is the main driving force behind the human race, but he was not the first to identify this issue.  And many people have come to believe, as Orson Scott-Card put it, "The power to cause pain is the only power that matters, the power to kill and destroy, because if you can't kill then you are always subject to those who can, and nothing and no one will ever save you."  The obvious question, which we will not explore here, is whether power is the only ultimate human reality, or whether the use of power can be limited by morality.

Old forms of power rarely disappear, but over time they often change their appearance and shift around.  The following is presented as a nominal timeline, as that makes the narrative logic of the story clearer; reality is far messier, but these general outlines are a close approximation to a fair description, so let's start at the beginning.

In the Beginning

People have speculated about the structure of the earliest human societies, but we really don't have much evidence: nomadic societies leave little which lasts.  However, once farming takes hold, we have settled groups which can then accumulate objects.  Survival depends on mutual cooperation and knowledge: the important people are the ones with understanding and experience - which are almost always the elderly.

Once there are a large number of farming communities, then it becomes possible to form a group of bandits and steal what you need from these communities: they use violence, the power to cause pain, and the threat of it, to get what they want.  Such groups need strong internal discipline and must act together, so they need strong leadership.  This leadership has power over the group, but is insecure - the group will follow the person they most trust to lead well, and any mistake or failure may be used by a rival who persuades the group that they could do better.

Once you have one group of bandits, others will see the benefits of stealing food rather than producing it, and rival groups will spring up.  The bandit groups don't want to steal too much or too often from any community: if you weaken them too much, or completely destroy them, you can't come back and steal more in the future.  And you don't want other groups stealing from 'your' communities, so bandit groups are likely, over time, to develop a form of protection racket: give us some regular tribute, and we will ensure that this other group don't steal your food.  It is much easier - and far less risky - if the farming groups give you some of their food willingly.

You now have a basic social contract: the strong and violent 'protect' the weak farmers, who are taxed for the benefit of this protection.  This contract, and the details of the arrangements, need to outlast the individual leading the bandit group: the farming communities don't care who is leading the group, as long as they are protected and the cost is roughly what they are expecting.  The bandit chief is now running a fairly sophisticated organization, working with multiple groups over a large area, so they need a base of operations and reliable deputies.  Continuity of leadership also becomes important, so leadership is often passed from father to son.  The bandit chief becomes a King; the communities they protect become their kingdom.

At this point, you have two basic forms of power: knowledge and experience within the farming communities; knowledge and experience joined with strategy and violence within the bandit groups.

Nations Grow

The King needs to be clear about the scope of their authority: which communities acknowledge his rule and pay him tax, and which are protected by and owe their allegiance to someone else?  The borders become established, even if they are disputed from time to time, and the area the King rules becomes a nation.

An effective King produces peace and prosperity within their domain, and this creates comparative stability.  Stable prosperity produces surplus, which enables people to spend time, or even make a living, producing things which are not necessary for survival; people can develop specialized skills and develop specialized materials, which enables technological advancement.  The effective use of technology requires (like farming) understanding and experience; it also requires skill - try to fashion a horseshoe; even with directions from a skilled Blacksmith, what you produce at the outset will not be good.

Markets now sell beautiful and useful objects, as well as food and other necessities, which increases the use of money; as money becomes more significant, then the rich start to exercise another form of power.

Ruling a successful and stable nation is not a trivial undertaking.  People need to know what to expect, and what they are allowed - and not allowed - to do.  You need rules - laws, traditions, boundaries and the like.  For a very long time, the rules were whatever the Ruler said they were.  They may be written down, but they only mattered because the Ruler said they did, and one of the great thing about being the Ruler was that you could change your mind at any time.

In order to rule effectively, the King needs reliable information, which means the King needs people he can trust to tell him what is happening around the nation - especially any threats or incipient rebellions; he also needs trusted people who will ensure that his wishes are carried out when he is not watching.  These trusted people are inevitably rewarded for their loyalty and service, so they are rich, but the main factor is that they have access to the King, so they have some influence over the King, and this proximity to the throne constitutes another form of power.  These trusted people and their families become the aristocracy.

Every powerful person tends to become surrounded by people who want to make themselves essential, and they are almost inevitably people who agree with the boss.  So the boss becomes surrounded by an echo chamber of their own opinions, and the more powerful they are, the more people they need to tell them what is happening and to implement their decisions, so the more control is exercised over the information they are given and the people who have access to them.  When dictators fall, it is often due in large part to their disconnection with reality.

Some of the decisions the Ruler makes are implicitly one-off: declare war on this country; banish this person and give his castle to that person; and so on.  Other decisions are of continuing importance - things like standard weights and measures, who, what and how you are expected to worship, who you are allowed to marry, and the penalties for various crimes.  A new King is not going to start changing all these details, so they become established as a set of laws, which are updated slightly every now and then.

Most of the time, one of the biggest questions is the obvious one: how much tax should people pay?  Life is much easier for the King if other people are seen to be making that decision.  Anglo-Saxon Kings used to convene national councils of important people (called 'witans'); these had a variety of roles, but setting taxes was always important.  The councils continued, with a different name, after 1066; the King would meet with the barons and their superiors, and they would advise him.  It seems these 'great councils' rarely changed his mind, but it is possible that more happened behind the scenes than is put into the offical record.

Over time, the great councils become seen as representing the nation, and in the inevitable power struggles, the power of the King becomes balanced against the power of the people (or, at least some rich and powerful 'representatives' of the people) - after all, it is obviously true that the King is only the King while the people recognise him as such.  In the Magna Carta (1215), the barons formally gain the right to be consulted by the King; in the 1230s, the great council starts to be called 'parliament' - from the French 'parler', a conversation.

The King has to support an increasing number of people who are required to collect and administer his money and other assets, and to administer the laws which are enforced in his name; the tasks involved turn into jobs, and the jobs turn into institutions, and institutional power is created.  Religious groups may operate as one of the institutions under the control of the King and the royal court, they may establish independent institutions, or they may be some mixture of the two.  It can be hard to distinguish between these three scenarios, as no significant institution can exist without the implicit permission of the King, so any religious institution which becomes important is automatically involved with the state, often in complicated ways.

Some of these institutions which grow out of the court and work with the court (like the Treasury and Inland revenue are called the 'civil service', while other institutions (like the justice system and religious structures) operate at arms' length from the secular powers, to avoid the appearance of political influence.  These institutions have little direct power, but they influence what those with power are able to do, or able to do easily.  The law applies to the King, so it also applies to the aristocracy, but the aristocracy (and, to a lesser extent, the rich) have influence over, and frequently hold significant positions within, the institutions which make the rules, so the rules support the status quo and enable those with power of any kind to retain it, and not be too inconvenienced by them.  So, for example, when building the new railways, the tracks might run through farms and the occasional village, but they tend to avoid the estates of the landed gentry.

It's often easy to spot where the law is being used to benefit the rich and powerful; we don't seem to mind as much when it is used to benefit industries; and it can be less easy to notice where the benefit is implicit - "The law, in its majestic equality, forbids the rich as well as the poor to sleep under bridges, to beg in the streets, and to steal bread" (Anatole France).  And a (possibly) more recent development is when the industries and groups which benefit are illegal or considered antisocial: the most obvious example is Prohibition in the USA, which led directly to the rise of institutional corruption and powerful organised crime groups; and the only people who benefit from laws which prevent the naked human form from being seen in everyday 'polite' circumstances are those who operate in the pornography / 'adult entertainment' industry, which (surprise, surprise) is incredibly powerful - after all, nobody was ever harmed by the simple sight of a naked human.

Over time, the parliament becomes more democratic (see Democracy: An Introduction), people discover that Queens are able to rule as effectively as Kings, and the distinction between advising and deciding becomes less clear: the Monarch retains the right to make decisions, but only after consulting, and executive power slowly shifts from the Monarch to Parliament.  Even today in the UK, Acts of Parliament only become law when the Monarch signs them - when they gain the 'Royal Assent' - so the Monarch remains the symbolic head of state and retains nominal power, but the actual power is held by the Parliament.

People sometimes talk about 'the establishment', but this is not an institution, a single thing: it is a network of state-related institutions and people - those who have important positions within those institutions, and the aristocracy.  The establishment inevitably works to protect itself and support the status quo, because the people and the institutions all derive their position and power from the current systems.  As new people gain wealth they are first befriended by and then drawn into the establishment, so by the time they gain real power, they would not dream of using it to cause significant damage to the establishment.  Very occasionally, enough new people gain significant wealth - enough new people to form a self-sustaining community for a while - and then you have a period of social upheaval, until the 'new money' finds its place in the new, slightly updated, establishment.

Power at the local level, which is mostly rural, still operates through knowledge and experience, but this is increasingly influenced by the rich and those who can operate technology through knowledge, experience and skill; and the institutions of state increasingly impact ordinary people, imposing national or regional strategies through violence and the threat of violence.  Control of the institutions of state is held by some combination of the Monarch and Parliament, both of which are strongly influenced by the rich and the aristocracy. 

Companies Rise

Throughout recorded history, there have always been some people who sold their services: obvious examples are the blacksmith and thatcher.  They often passed their experience and skill on to the next generation, who generally followed in the family business.  But these were businesses operated by people, not institutions - the business was operated solely by the person providing the service, who ran it as they saw fit.  Similarly, the parish churches were run by the local priests, who could (with a few restrictions) do what they wanted; while the parish church would outlive the priest, it was not an institution in the functional sense of the word: it had no strategies, plans or objectives which survived from one priest to the next; the state church, on the other hand, was an institution - it could make plans and commitments which would outlast the individuals who were involved at the time.

People in the same line of work may be rivals, but they also have many interests in common, so they learn to cooperate.  These associations form into guilds, which exercise institutional power which is independent of the institutions which grow out of (or are sanctioned by) the royal court.  Apart from these, and farms, and possibly some religious institutions, for a very long time there are almost no human structures which last beyond the lifespan of the person who established them; occasionally, a family manages to keep an enterprise going for a few generations.  But this changes.

In 'What Controls the World?', the Background section starts like this.

When you look at the inventions which have shaped the modern world, one of the most significant was the creation of the limited liability company.  This originated in England, with Monasteries and Guilds in the 15th century, and developed into joint stock charters in the 17th century - the success of one of the earliest, the East India Company, founded in 1600, inspired many others.

The joint stock (or 'limited liability') company is a new kind of entity: it is legally a person; it can buy and sell - property as well as goods; it can enter into contracts and be sued.  But it is not a person, it cannot die, although it can be wound up, and it has no conscience - a company can do things which no respectable person would do.  It is a non-human which may never die, and it only has one purpose: to make money for the shareholders.

Every company develops a culture, a kind of corporate personality, which is often set by the founder; the people who work for it learn that 'this is the way things are done around here'.  Sometimes the people at the top attempt to change the corporate culture, but that is a hard thing to do - and a very hard thing to do quickly.

In Western Europe, up to 1600, apart from the church and the occasional war, most people lived most of their lives with minimal contact with any institution.  They lived in families and villages and Hamlets, occasionally in towns, they went about their business, growing things and making things, and using them or selling them to other people - usually, people they had known all their lives.  Today, we still have families, and some of us have neighbours we know, but almost all the rest of our lives consists of dealing with companies.

We don't grow our food, we buy it; we don't draw water from a well, we buy it; we don't make our clothes, we buy them; when we don't walk, we don't ride on a horse which we care for and feed, we ride in a car which was made by a company, and is powered by fuel we buy from another company.  Everything we need, apart from air and human contact, is provided by a company - a non-human entity which only exists to make money.

A number of other key legal and structural developments were required to make companies so successful - for example, the development of contract law and insurance - and these were delivered by Parliament and the other institutions of state.  The growth of empire depended, in part, on the legal framework being operated: colonisation of places such as North America and Australia assumed that we can settle because nobody owns this place - the idea of indigenous land rights was easily dismissed in the light of the profit the companies planned to make.  This process continues: as this article was being written, news arrived that a US court has struck down Internet neutrality rules originally introduced by Obama, repealed by Trump and reinstated by Biden.  According to a US industry group (a modern guild), the decision was "a victory for American consumers that will lead to more investment, innovation, and competition in the dynamic digital marketplace."  In other words, it will enable a few large companies to make even more profit.

Adam Smith's groundbreaking book, 'An Inquiry into the Nature and Causes of the Wealth of Nations' (1776) talked about the 'invisible hand' of the market, but Smith was writing at a time when trade was almost entirely conducted between individuals, and the invisible mechanism of the market depended in part on human greed, but also in part on human compassion and morality.  It also depended on a stable currency, reliable weights and measures, and an effective legal framework - obviously, I won't bring my apples to sell in the market if people are able to simply walk off with them without paying; less obviously, perhaps, I won't bring apples to sell  unless the law makes it clear that these apples belong to me and not to the landowner I rent my farm from.

For a while, the East India Company ruled much of India, but it also traded and fought all over the world, and was the largest company in the world; at one point, it operated three armies, which had around 260,000 soldiers between them - which was double the size of the British Army at the time.  It was founded in 1600 and continued for close to 300 years - the last of its soldiers were integrated into the British Army in 1895.  It was, inevitably, deeply entwined with the nation's institutions; arguably, it was nationalised at the end because the complexities of keeping it independent were no longer worth the effort.  And the size and power of the company must have caused some discomfort in the British establishment: it is hard to control something which has an army twice the size of your own.

Companies seek profit; to make profit, they seek power; and they can gain power by establishing a monopoly - through being the only source of something people want.  Nations limit the power of companies by preventing the formation of monopolies, which requires more legislation: this is one of the few areas where companies usually do not get what they want.

Different nations impose different restrictions on the activity of companies - most obviously in regulating employment law, health and safety, and pollution.  While the majority of trade is within a single nation, national laws in these areas are effective: companies bitterly object to these laws ("If you stop me employing children, I will be forced out of business!") but when the law applies to all the companies, your competitors don't gain any advantage, and in the long run you gain from having a better educated and healthier workforce.

Power Moves

As companies and the legal structures to support them developed, we see power moving from the nation - the Monarch, the parliament and the national institutions - to these companies, independent institutions which at times become incredibly rich and powerful.  This movement of power is, in part, due to the size and power of the companies, but it is also partly due to the way they restructure the national economy.

A Monarch can rule over a rural economy and have almost unlimited power; as long as the surrounding nations don't try to pick a fight, the nation will thrive or struggle, depending on the wisdom and luck of the Monarch.  But the rise of companies and industrialization leads inevitably to international trade - you may be able to grow all your own food, but no nation has direct access to all the resources it needs for complex industrial processes.

So the health of the economy increasingly depends on international trade, which means that the ability of the nation to raise taxes increasingly depends on the actions of other nations and the people in them, and the international trade has an increasing impact on national activity.  So, as the import of cotton cloth into Britain increased, domestic production of wool and linen products decreased; to combat this, Parliament passed the 1700 Calico Act, blocking the importation of cotton cloth; this resulted in some smuggling of cotton cloth, but also in the importation of raw cotton and the establishment of a new indigenous industry to process it.  Rulers continue to try to rule, but the actions of people beyond their control mean that much of what they try to achieve is circumvented, and actions often have unintended consequences - as we can see in the complicated story which leads up to the infamous 'Boston Tea Party'.

So, today, governments have the legal power to set interest rates.  But interest rates affect the cost of borrowing, and hence the flow of money into and out of the country, which affects the exchange rate, which affects the cost of importing and the profit you can make from exporting, which can lead to companies making record profits and/or going bankrupt, which affects the tax the government can raise.  And so on.  The government can set the interest rate, but if they set the wrong rate, the international market will punish this mistake and the government - and hence the nation - will suffer as a consequence.

In 1800, the British government could work in partnership with the East India Company; they could reward compliment behaviour; they could encourage, threaten and cajole.  By 1950, there were far too many companies for any government to manage, or even to know what most of them were really doing.  But this also weakened the protections provided by employment law, health and safety, and restrictions on pollution: companies just employ children in unsafe factories polluting rivers in Asia.

The East India Company and other similar bodies, were the earliest multinational corporations, but they were each clearly controlled by a single nation.  By 1900, multinational mining companies were developing, with oil steadily gaining importance.  After the Second World War, multinational manufacturing companies grew in number and influence.  After 1980, computers became significant, with first hardware and then software companies trading around the world, but the rules of international trade still mostly functioned.

In the early 1970s, it seemed obvious to me that multinational corporations were able to function outside the control of any nation: if you make something illegal in your territory, we will transfer our activity to somewhere where it is not illegal.  Design, manufacture, sales and governance can all take place in different countries; change the tax regime, and we will change our accounting procedures to vary the amount of profit we declare to you.  So it seemed obvious that the only way nations would be able to control and tax multinationals would be if they cooperated - either through the United Nations, or some other equivalent body.

But this didn't happen.  Just as nations work to prevent monopolies - 'divide and rule' - so the multinationals use the same strategy of divide and rule among the nations where they work.  I'm thinking of building my factory here, but Denmark is offering to supply all the infrastructure for free... what can you offer?  And while strong nations can generally prevent monopolies, weaker nations have to accept whatever investment they are able to attract; the Wikipedia article even identifies this as one of the five main characteristics of a Multinational corporation: "Many large multinational companies have varying degrees of monopoly in some areas due to economic and technical strength or production advantages."  They are big and they are powerful, so they can get away with it.

Establishing an actual monopoly is not the only way to greater power as a company: if you can make yourself essential, that works too - you have created an effective monopoly without the regulatory concerns which accompany the real thing.  Also, if you can grow to the point where you are 'too big to fail', you are then able to adopt risky tactics, secure in the knowledge that if you succeed, the profits are all yours, while if you fail, the nation states will bail you out.  The 2008 financial crash was entirely due to banks investing massively in risky mortgages; the rescue package pumped money into the banks, and left the nation states impoverished; no regulations were imposed on the banks to prevent this from happening again.  After all, the people running them are decent chaps and they have assured us they have learned their lesson.

These days, there are some charities and 'community interest' or 'non-profit' companies, but almost everything you do involves dealing with profit-making companies: non-human entities which exist only to make money, and whose activities are only restricted by national laws and the fear of a PR disaster.  These entities can make longer-term plans, they can engage in research and product development, but they generally concentrate more on the financial constraints of the next quarter's results, the dividend to be paid to shareholders and the share price; the share price matters because those at the top often hold large quantities of shares (or, even better, options on those shares), and their performance is largely judged on the basis of the share price.

And the Result Is

Explicit power today is probably more distributed than at any point in human history.

At the individual level, knowledge, experience and skill can give you some limited power - perhaps to run your own business, but more often to use as bargaining chips with an employer.

Social status - either the traditional aristocracy or simple fame - gives influence, which can often be leveraged to gain actual power.

Status within a company or institution can also provide a measure of influence; a very high position within a company or institution can give you power; if the company or institution is itself important, then the power can be significant, and the role generally brings with it significant wealth.

Those who run important companies have a great deal of wealth and power; the inevitable consequence of this is that those who run nation states have less power than ever before.  The government has the power to mess up the complicated systems we all depend upon, but can do very little to improve them, and the only significant and achievable thing they could do - transfer money to the poor - is vetoed or watered down by everyone who benefits from the current system.

Violence, and the threat of violence, are rarely used in the developed world, but money has taken over that role.  Powerful people will rarely threaten to kill you, but they are able to threaten to banckrupt you if you get in their way - and generally able to carry out that threat ; in many ways, this is more effective: the dead don't suffer, but you can suffer serious financial hardship for a very long time.  This is an extreme and rare scenario, but the system in which companies control our lives with money is underpinned by the very real threat of violence if we fail to comply with their demands.  Nobody actually intends to hurt you, but if you fail to pay your debt at some point the company's system may well transfer the debt to a debt recovery company, who will threaten you and then send the bailiffs in.

Money gives power; it enables you to rent or buy somewhere to live, to buy food to eat and water to drink; it may even enable you to have some fun and entertainment every now and then.  But the distribution of money is carefully restricted: the rich tend to believe that they themselves are motivated by noble sentiments, but poor people have to be motivated by need in order to work hard; hence, they aim to keep the majority poor and hungry so they will be motivated to work hard, and unable to muster the resources to question or challenge the system.

We are taught that money gives you security, and this is partly true: if you have money, you can buy most of what you need.  But money moves quickly, and there are many people who used to think they were financially secure, but discovered they are not secure after all - Foodbanks report an increasing number of people who have reasonable jobs, but are still unable to feed their families.  Or homeless charities report meeting people who had good jobs, but then something happened; they lost their job, then they lost their home, then they lost their family.  At this point, many people turn to drink and drugs, not because they provide an answer, but because they provide some temporary relief from the discomfort and regret.  As well as financial capital, we need social capital, friends who care about us and will help us when needed - but this is increasingly hard to build in the modern world.

The nation states maintain the laws and the infrastructure which the companies depend upon for their operation and profits, and the companies ensure that the status quo is maintained, so that their profits can continue.  Until, of course, global warming results in the total breakdown of human civilization, but preventing this is not their responsibility.

It may appear that the many complicated structures we have built serve the primary aim of obscuring power and responsibility.  Politicians readily take the credit for much that they have not done, and then get blamed for much which is not their fault.  But if we believe the politicians are in charge, we will not ask about who is really running the show.

A basic rule of criminal investigation is: follow the money.  'Cui bono' - who benefits?  In our current legal and economic system, the richest are consistently getting much richer, and poorest are struggling more and more; those in the middle are just managing to keep their heads above water.  According to Oxfam, the world's five richest men have more than doubled their fortunes (from £321 billion to £688 billion) between 2020 and 2023.  According to the World Economic Forum, the current trends are clear: large companies and rich individuals are getting richer; is also clear that nations and ordinary people are getting poorer.  The graph of US national debt over the past 100 years is frightening.

There are many resources documenting how the distribution of wealth has changed.  So, for example, in 1976, the top 1% of wealthy people owned 19.9% of the world's wealth; by 2001 it was 33.4%, and by 2020 it was 43% according to the 2020 Credit Suisse Global Wealth Report.  According to the TRT World article, "That top-tier one percent amounts to 52 million people who are all millionaires in net wealth (after debt). Within this elite fraction are 175,000 ultra-wealthy people (those with over $50 million in net wealth), or 0.1 percent, who in turn own 25 percent of the world’s wealth"  In contrast, the poorest half of the world's adult population owns just 1%.

What can be done about this?  The structural starting point is simple enough.  Require greater transparency (so we all know who makes which decisions, and who gets what money and other benefits), break up effective monopolies, break up any company which is too big to fail, and charge companies for the resources they take and for cleaning up the pollution they produce.  After that, you can start to address some of the more difficult issues about protecting societies and cultures.

But, just as important as changing the economic system, we need to build up society - the human structures, stable families, long lasting friendships, building compassion, trust and commitment.  Then we will be able to take back control of the companies, and choose to run them with a different set of priorities, so that doing good is as important as making a profit.

Footnote

I have not read it yet, but the 2009 book, Economics of Good and Evil by Tomas Sedlacek, seems to be a relevant text in this area - see it on Amazon and Bookwise.

If you have the time, here are some useful resources.

• Read or listen to Robert Reich.  For a start, try The Big Picture: How We Got Into This Mess, And How We Get Out of It (just over 6 minutes), You Are Being Lied to About Inflation (5 minutes), ("The underlying problem is not inflation. It’s corporate power. The entire American economy is concentrated into the hands of a few greedy, corporate giants with the power to raise prices.") and The Truth Behind “Self-Made” Billionaires.
• Or listen to Bernie Sanders giving a short talk about oligarchy and how the very rich are buying protection for their wealth.
• Or listen to Richard J Murphy explaining in 9½ minutes why The Bank of England is driving the UK economy into recession (the banks and the wealthy are driving the UK economy in a direction which is opposed to the wishes of the government and the interests of the country).