What Is Economic Power?

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  • Written By: Malcolm Tatum
  • Edited By: Bronwyn Harris
  • Last Modified Date: 23 October 2019
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Economic power is the ability to exert control over the type of economic decisions that are made, typically due to the range of resources that are readily accessible for use in manipulating the course of the economy. In the case of the power exerted by a nation, this means having the capability to sway the direction of the economy by choosing how the nation’s resources are deployed in the economic effort and how goods and services are allocated as a result. As part of the overall process of making use of economic power, a number of different approaches may be utilized to ensure the desired outcome.

At times, economic power is viewed more as a broad category for more specialized powers that may be used to influence the direction of the economy. For example, the purchasing power held by a business or entity may be the tool that is used to trigger changes in economic trends. With this application, choosing to purchase more products associated with a certain market or group of markets may be helpful in reversing the effects of a recession or slowing the forward progress of a period of inflation. At other times, choosing to refrain from purchasing goods within a certain market may in turn weaken the influence of that market on the overall economy, hopefully restoring some degree of equilibrium.


Economic power may also be manifested as bargaining power. With this application, one or more entities are in a position to negotiate terms that affect the future direction of the economy. Companies operating within the same industry may bargain to develop a standard pricing arrangement that is beneficial to everyone concerned, or a nation may negotiate with industries to set standards that help to ensure citizens can afford the goods and services supplied by those industries.

Another manifestation of economic power is monopoly power. In this scenario, one entity, or a select few entities, control supply and pricing for goods and services. This is in contrast to a more competitive market in which multiple entities seek to secure market share and compete both in terms of price and availability of goods and services in order to meet consumer demands and expectations.

Economic power can be used to bring about positive change within an economy or can be utilized to serve the interests of a relatively small collective of individuals, businesses, or even nations. In the best of circumstances, the judicious use of this type of power helps to create more favorable situations for everyone concerned by stimulating the economy and making the acquisition of essential goods and service easier for consumers. At the same time, economic power may be used to marginalize some of the players within the economy, a situation that is likely to produce negative results in the long run.


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Post 3

I find it surprising when I hear about economic power spoken about in a good way when it comes to the global economy or market economy. Another name for when one business or nation manipulates the course of an economy or sets prices is called a "monopoly." This is exactly what we do not want in a free market economy.

In a free market economy, business or nations compete but it's ultimately demand and supply that make decisions about prices.

Post 2

I always think about economic power as purchasing power, even at the individual level. And it's only possible for people to have economic power if they have jobs and if products and services are affordable. I guess this is why economists pay so much attention to employment rates.

An economy which produces few jobs or where prices are too high for people to afford will just go downward from there. When people have economic power, they help the economy grow and develop. And when the economy grows, people have more economic power. So both factors go hand in hand.

Post 1

The downside with being in the global economy is that when things don't go well for a single nation with a lot of economic power, rest of the smaller economies follow suit.

There are so many examples. For example, there was the Asian economic crisis where a crisis in one economy dragged the rest of the nations in the region into the economic crisis.

And when things don't go well for big economic powers now like the US or China, it impacts everyone else negatively. So having economic power isn't always a good thing. A country with economic leverage can have crises as well.

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