By Ben Domenech - August 13, 2013

I appreciate Ezra Klein's engagement with libertarian populism, and what he views as a fraudulent perspective from the populists on the left and right. But I have a few issues with his analysis. First, I've seen nothing from the small cadre of libertarian populist writers out there that suggests life in America's economy today is a zero sum game, or that bigness alone is the cause of all ills. The problem is not the bigness of the corporate Bigs -- it's that they have partnered with Big Government to insulate themselves from competition, socialize risk, and warp the marketplace in their favor by building "bigger moats", to use Jamie Dimon's phrase, around themselves. This exacerbates many existing problems and, in fact, inhibits the kind of economic growth that takes us out of zero-sum politics.

To pick one example totally at random, consider Jeff Bezos's Amazon and their shift in support for an internet sales tax. Is the problem with Amazon that it's big? Of course not. I love Amazon as a consumer, and their bigness in the past week allowed them to bring me some tasty macadamia nuts, a new watch, a new book by Jay Richards, and a streaming David Fincher film. What's the problem with Amazon? Well, Amazon opposed the internet sales tax supported by stores like WalMart for years. Why did they change their mind? In part, it's because they realized they could make more money providing rent-seeking services to small businesses, processing the tax for them, knowing that the regulatory burden involved would prove particularly troublesome for mom and pop shops. They saw an opportunity to suck thousands of sellers away from places like eBay and into the Amazon Marketplace, not thanks to competitive value, but thanks to a sweeping new government policy. Amazon got to where it is by being a reliable and innovative company, and they are now supporting an effort to prevent competition from local sellers of books and other goods and make it more costly for potential competitors to enter the space where they have a dominant market share.

This is why libertarian populists oppose cronyism: because we recognize that a system which uses the power of government to hold down the next Amazon -- the young, innovative, hungry businesses that work to compete -- has all sorts of terrible unseen outcomes, including a more stagnant economy, one with less upheaval but also less innovation, and one which allows for higher prices. Imagine the world we would live in today if Washington had put its thumb on the scale for Wang or Commodore in 1983 and smothered Microsoft, Apple, and Intel -- favoring the powerful over the companies run out of garages. The tech sector would still be hugely important, but it wouldn't be what it is today -- and in its absence, we would see less wealth, fewer jobs, lower productivity and more. Except we wouldn't know that's what we missed out on.

As for Klein's comments about the poor: the poor are doing better in this economy by many measures than they have in past recessions -- while income inequality has grown, mobility measures show more consistency -- but I'd argue that's almost entirely due to private companies and the benefits of competitive arenas of the marketplace (dramatically lowering costs, expanding access, forcing innovation, etc). At the same time, the costs of energy, food, and insurance premium costs are eating up larger portions of family budgets (to say nothing of how the cost of higher education inhibits mobility). In each arena, the regulatory/subsidy state is preventing competition and profiting from the poverty of others, creating disincentives for success. This in turn creates a societal bias toward the false security of government-run mediocrity instead of the promise of liberty and prosperity.

It's far too simplistic to say this is corporations versus the poor, and Klein is correct that this is not what's going on here. What's going on is that the Bigs have worked in tandem to create a system where corporate rent-seekers can profit from the paternalistic technocratic state. Where do subsidies come from? And where do they go? Someone has to run the life of Julia after all.

What's most notable about Klein's examples is that they all represent redistributional inputs, with the actual outcomes a dubious proposition: take money from one person, funnel it through the Bigs, give it to another, who in turn gives it back to the Bigs. And is this making any of their lives better? Or, like the Oregon Medicaid study revealed, is it just providing a paternalistic sense of security? Giving poor people more money, on the condition they stay poor, to purchase government approved corporate products and services via pretend markets closed to competition from small business doesn't help the poor. Quite the opposite, in fact: the current entitlement state is designed to help the poor stay poor more comfortably, and help the Bigs profit from their poverty -- a system where Big Agribusiness and Big Energy lobby for subsidies, tariffs, mandates and quotas, and then profit from the entitlement programs which direct taxpayer funds toward them through the pockets of low earners. We live in a world where the Big Wall Street banks make billions off getting a cut from the swipe fees of every food stamp debit card for 47 million people across the country.

The point of welfare should be to help poor people stop being poor. Ronald Reagan's belief that "Welfare's purpose should be to eliminate, as far as possible, the need for its own existence" is completely absent from the world Klein frames. Many well-intentioned paternalists on both sides of the aisle believe the starving masses really are helpless, incapable of seeking out a better life for themselves in the absence of Leviathan's handouts. Except this is a system which best serves the Julia Profiteers, not Julia herself. Throwing money at the problem misses the point that social capital can't be redistributed, and inputs of money don't yield outputs of mobility. Frederic Bastiat's line about the bad economist being one who confines himself only to visible effect is apt: all the current system has to offer is the input of money sent in the direction of people, with no measure of the negative outcomes of disincentivizing success or crowding out private, voluntary alternatives to the State.

This is the difference between the technocrat and the populist, writ large: true populists trust the people -- even the poor people.