TGIF: The Populist Trap

If you care about individual freedom and general prosperity, you'll want to avoid all shades of populism like the plague. It is economic illiteracy proudly proclaimed and writ large. As an alternative to libertarianism, it is bad in its own right—freedom is not on its agenda—but it is bad also because it is wedded to nationalism. That is, it treats the nation-state—not individuals and their projects—as the fundamental unit. It's ours against theirs. Disregard the hosannas to persons, families, and local communities. It's the nation that matters. 

Don't believe me? Then why do populists always want to interfere with people's right to trade as they wish regardless of borders? Never mind that protectionism holds the seeds of economic and military conflict and that unmanaged global trade is global cooperation.

I'm tempted to say that basically, the populist believes that scarcity is a capitalist plot. (There's some unwitting vulgar Marxism in that.) Populism presents itself as the politics of grievance: "working people" are fed up with an elite conspiracy of elected officials, bureaucrats, and "corporate" cronies who enrich themselves at the expense of ordinary people.

Bailouts and subsidies give the grievance some credence, but it's exaggerated. The unnamed culprit is market dynamism—or freedom. Entrepreneurship, innovation, and consumer sovereignty bring change in the demand for goods, which understandably makes people nervous. The bias favors the status quo. Blacksmiths and assembly-line workers are no longer wanted.

Anyway, since coercive government power is the only way to grab privileges at other people's expense, power itself should be—but never is—the villain. Greedy "Big Business" is the target. No distinction is made between bigness achieved through successful service to consumers and bigness achieved through anticompetitive government interference with market relations.

What is the populists' alternative? They say they want a government that serves working people. Never mind that people produce to consume, not vice versa. How do they intend to get the government and economy they want? Through democracy, though they ignore the elitism inherent in any political system. Politicians in a democratic republic need to cobble together majorities to get elected and reelected, but when in office they have elbow room to set the agenda for the one-size-fits-all program that they decide best serves the people's needs. Since people don't understand economics and are biased against markets and foreigners, the program brings tariffs (which hurt American consumers and workers by raising prices and provoking retaliation), bailouts, and deficit spending financed through the hidden inflation tax. Fiscal restraint is not a priority. Every penny of the budget has a constituency behind it.

We find populist agitation within what is misleadingly called the "right-wing" and "left-wing." On the left, the populists try to counterbalance inane identity politics, which in their view has pushed class politics off the agenda. They seem not to realize that class politics is an earlier form of identity politics; it holds, wrongly, that an inherent and irreconcilable conflict exists between haves and have-nots, between employers and employees, that can only be rectified by making the state more powerful than it is today. Never mind that mass production must come before mass consumption, and markets have wiped out much poverty worldwide. The headline-rich "inequality" red herring will keep everyone distracted.

When a Republican populist (say, J. D. Vance) hears the term economic freedom, he is likely to envision unilateral scope for the sovereign state: specifically, a strong leader who wields tariffs, trade quotas, sanctions, antitrust prosecution (which protects inferior competitors, not consumers), and more in his crusade to strengthen the "U.S. economy" by increasing exports (by muscle if necessary), blocking imports, saving or restoring "American jobs," and punishing businesses that provide superior consumer service. What he doesn't envision is free individuals trading goods, services, and labor with whomever they want, including new immigrants who seek a better life without government permission.

The populist can't tolerate individual freedom because, in his view, that would be chaos. He rejects consumer sovereignty, so he goes with the only thing left: the state. He has yet to learn what has been known at least since the Scottish Enlightenment of the late 1700s: that the best kind of social order is spontaneous order, the order that results from free, cooperative, commercial human interaction, not central planning or industrial policy.

The populists, "left" and "right" point to people's economic hardship, but it never occurs to them that government intervention, of which there is no shortage, could be at fault. Are housing prices too high? They blame immigrants (who improve our lives along with their own), not the myriad government building restrictions. Are supermarket prices rising? Blame corporate greed and ignore the money-creating Federal Reserve. This blindness to government intervention is on display with every issue. The populists never see the straitjacketed markets, only too little democracy. But democracy can't get us out of the mess it's got us into. Virtually everything the government does affects market relations. Yet voters know nothing about economics. They don't even know that prices fall when supply rises.

The populists find industrial policy more to their liking than freedom. That's central planning—economic and social engineering, "picking winners"—without nationalization. It's subtle socialism, and it has the same flaws. No one can know enough to plan the economic interactions of billions of people. Anyone delusional enough to think he and some "experts" could manage that task should be laughed off the stage. Aside from the knowledge problem, the incentive problem will always plague us. We know what Lord Acton said about how power corrupts. But power also attracts the already corrupted.

But aren't the populists at least antiwar? Sometimes. They tend to oppose U.S. participation in the Ukraine-Russia war—now. But they can't be relied on. They tend to favor arming Israel in its Gaza onslaught. As nationalists, they always present a potential for conflict, these days with China and Iran. We saw that in Trump's term as president. He cannot be counted on to dismantle the trip-wire alliance system, and he's enthusiastic about the de facto alliances with Israel and Saudi Arabia. Think of the arms sales! That's good for American workers, right?

Let's not forget the link between border security, which populists demand, and the drug war, which they also love. That link offers populist leaders many opportunities for bloody intervention south of the border. One more thing we can be sure of: the populists do not see global trade as a peace-maker, or trade restrictions as a source of conflict. Globalization, even without a government role, is a dirty word. I see no reason for comfort here.

Even when the populists oppose wars (did Trump oppose any?), it is not so that the taxpayers can keep their money and spend it as they like. No, the populists stand with progressives: they want to transfer the money from the Pentagon and CIA to domestic departments. Details may differ, but that's all.

The best reason to oppose war and the preparation for it, aside from the obvious one, is that they require a bloated, intrusive government, battalions of bumbling bureaucrats, and the diversion of scarce resources from consumers to military contractors. Populists just want to redistribute the bloat.

It may be that the "right-wing" populist leaders are phonies and don't mean what they say. Some in the "left-wing" tribe say that about Trump and his running mate, Vance. Maybe that's true. But if they are liars who stand for something else, we can be certain they don't stand for shrinking the state and expanding individual liberty. That's not on the menu these days.