Michael Lind is a Politico Magazine contributing editor and author of Made in Texas: George W. Bush and the Southern Takeover of American Politics.

The primary election defeat of House majority leader Eric Cantor by the little-known Tea Party conservative David Brat has shocked business and financial elites as well as politicians and pundits. Conservative intellectuals such as Tim Carney have been arguing for a while that the right should adopt a new populism that targets “crony capitalism” and the collaboration of public and private elites at the expense of workers and small businesses. Brat is the first conservative candidate to have achieved a major electoral success by taking this line. He denounced Cantor for being too close to Wall Street and K Street, explained business support for immigration reform as a ploy for cheap labor and demonized the Chamber of Commerce and the Business Roundtable.

In his views about the minimum wage, Social Security and Medicare, Brat is a fairly conventional libertarian, but he became the first candidate to oust a sitting House majority leader since the post was created in 1899 not by speaking the libertarian argot of Ayn Rand and Friedrich von Hayek but by deploying the populist language of Thomas Jefferson, Andrew Jackson and William Jennings Bryan.


With that kind of talk, Brat and like-minded militants on the right are undermining the philosophy of market populism that has united the Main Street and Wall Street wings of the Republican party since the days of Barry Goldwater and Ronald Reagan. Market populism recycles the ideology of classic Jeffersonian populism—but expands the definition of the virtuous, self-reliant yeoman to include not only small business owners but also big business executives and capitalists. According to market populism, the virtuous yeomanry consists of family farmers and small, owner-operated businesses—and CEOs of multinational corporations and billionaire investment bankers and heirs and heiresses who inherited their wealth, like Paris Hilton.

Sooner or later the authentic Jeffersonians in the market populist coalition were bound to notice that the actual agenda of conservative politicians has less to do with the needs of small business owners and small farmers than with the desires of big companies and the financial industry—more H1-B indentured servants for Silicon Valley tech oligopolies, the defense of the “carried interest” loophole for Wall Street hedge fund managers. With their attacks on “crony capitalism,” “corporate welfare” and “corporatism,” angry outsiders on the right are threatening to replace business-friendly market populism with real populism.

And that, to the business community, is downright terrifying.

It ought to frighten the rest of us, too. Even if they sometimes have the right enemies, like loophole-planting lobbyists and too-big-to-fail financial firms, conservative populists have the wrong answers. Jeffersonian populism is irrelevant in America—and has been irrelevant for a very long time.

In the early years of the American republic, Jefferson, himself a slaveowner who hoped to solve the problem of slavery by colonizing blacks abroad, provided a utopian vision of a society of yeoman or small farmers who would be free both of aristocrats and of serfs. Jeffersonian populist ideology consists of a set of interlocking, mutually reinforcing axioms. Religion is good because it promotes personal virtue. Personal virtue leads to economic independence through hard work, while personal vice leads to dependence on others through idleness. A society of hard-working yeoman farmers will automatically tend toward rough economic equality as lazy, improvident landowners lose their land and hard-working, thrifty landless workers acquire land. Political corruption will be prevented by frequent rotation of citizen-legislators, and military tyranny will be prevented by reliance on citizen-soldiers in local militias, instead of a professional standing army.

Something like the Jeffersonian utopia was realized, at least for white male farmers, in the 19th-century Midwest (at the expense of the expropriated Indians, and thanks to the federal exclusion of slavery). But almost from the moment of the American founding, the Jeffersonian vision was undermined by the shift from an agrarian to an industrial economy. One by one, the axioms of populist ideology were rendered irrelevant by technology-driven economic and social change.

Take the idea that personal virtue promotes economic independence, while personal vice leads to “welfare dependency.” Today’s Jeffersonian populists view the welfare state in terms of moral hazard, arguing that it permits able-bodied people sponge off the hard-working majority. No doubt a few poor people are lazy layabouts—but in modern industrial economies, only a minority of the unemployed owe their lack of jobs to their personal vices. From the beginnings, the industrial economy has suffered from business cycles, as a result of mismatches between production and consumption, as well as periodic financial panics. In addition, entire regions of the country can be blighted for years or decades, by the decline of some industries and the rise of others. All modern societies recognize that the answer is not to blame the victims and tell them to get religion and work harder, but rather to devise no-fault social safety nets for the millions who can be tossed into poverty by tsunamis in the stock market or the labor market—safety nets including workers’ compensation and unemployment insurance, and programs for retirees like Social Security and Medicare.

Nor does competition among hard-working, self-reliant yeomen lead to a high degree of economic equality in a modern industrial society. In an agrarian economy, a rich but lazy peasant might go bankrupt and lose his land to a thrifty poor peasant. In modern industrial economies, however, the most productive sectors are manufacturing, infrastructure and energy—all of them capital-intensive, high-tech sectors with increasing returns to scale, so that oligopolies or monopolies are often more efficient than small producers. That is why there are corner bakeries and even micro-breweries but no mom-and-pop aerospace manufacturers and no backyard steel mills, as Mao discovered at great cost during the Great Leap Forward. What is more, technological progress depends increasingly on massive amounts of R&D, which even national and multinational corporations are unable to provide on their own—thus the centrality of government-business-research university partnerships at the technological frontier.

The small businesses idealized by populists create many jobs—and they also destroy many jobs, because most small businesses fail. The federal government defines a “small business” as a business with 500 employees or fewer. But small isn’t necessarily a virtue. According to Scott Shane, a leading scholar of small business, between 1992 and 2008 the 79 percent of small businesses with fewer than 10 employees created only 15 percent of net jobs, while the 4 percent of small businesses that had 50 to 499 workers created 30 percent of all net jobs.

What is more, the startups that contribute the most to economic growth tend to be those with the potential to turn into huge, dynamic national and global firms. In contrast, multiplying owner-operated lawn-mowing companies does nothing for American productivity or living standards.

As technology-intensive industries have grown more concentrated in the last century and a half, so has the need to pool and direct funds for investment, swelling the class of professional money managers—and providing windfall profits for those who happened to buy the right shares at the right time. In a modern industrial capitalist economy, a lazy, decadent billionaire—perhaps one who inherited his or her unearned wealth—can make more money on returns from investments in a short time than a virtuous yeoman can make in a lifetime of hard work.

While the National Guard will continue to have a role to play, today’s military requires skilled professionals, not amateurs. There can still be amateur politicians today—but their ignorance of today’s specialized government will put them at the mercy of knowledgeable staffs and K Street lobbyists. Iowa Republican Senate candidate Joni Ernst has boasted that she knows how to cut pork in Washington because she grew up castrating hogs on the farm. But the days when the ideal American was an omnicompetent amateur who could butcher a calf, pass a law in the statehouse, wield a musket in the militia and hire the county drunk out of a sense of charity and put him to work mowing hay for his own good are long gone. That America was already dying when William Jennings Bryan rallied rural and small-town America for one last heroic protest against the emerging America of giant corporations, government bureaucracies, metropolitan foundations and research universities more than a century ago.

In short, the real argument of today’s Jeffersonian populists is not with the Chamber of Commerce or the Business Roundtable. It is with modernity.

In their relationship with modernity, the so-called populists of the left are quite different from the populists of the right. The wing of the Democratic party associated with Sen. Elizabeth Warren of Massachusetts is often described as the “populist” wing. But while the center-left may find it useful to brandish rhetorical pitchforks, its worldview has little to do with old-fashioned yeoman populism. Instead, today’s “populists” of the left are rooted in New Deal liberalism, America’s version of European social democracy. The progressive Ouija Board channels the spirits of Roosevelt, Truman, Kennedy and Johnson, not the ghosts of Jefferson, Jackson and Bryan.

Progressives want the gains from productivity growth to be shared in higher wages and they want more generous social safety nets, like expanded Social Security. But unlike populists in the Jeffersonian tradition, American progressives don’t think it is somehow virtuous to be self-employed or demeaning to work for someone else for a wage.

Jeffersonian populism is based on the ideal of personal independence. Social democracy is based on the recognition of social interdependence. Nothing could be more alien to the right-wing version of populism than Elizabeth Warren’s celebrated riff in 2012:

You built a factory out there? Good for you. But I want to be clear: You moved your goods to market on the roads the rest of us paid for; you hired workers the rest of us paid to educate; you were safe in your factory because of police forces and fire forces that the rest of us paid for. You didn’t have to worry that marauding bands would come and seize everything at your factory, and hire someone to protect against this, because of the work the rest of us did.

Barack Obama offered similar sentiments in 2012 as well:

If you were successful, somebody along the line gave you some help. There was a great teacher somewhere in your life. Somebody helped to create this unbelievable American system that we have that allowed you to thrive. Somebody invested in roads and bridges. If you’ve got a business—you didn’t build that. Somebody else made that happen.

Warren and Obama are echoing themes from the American tradition that rivals Jeffersonian populism—the tradition of Hamiltonian developmentalism. Inspired by Alexander Hamilton, the first secretary of the Treasury, the Hamiltonian tradition has always viewed government, business and labor in America as partners in a common enterprise of national development, not as adversaries in a battle to the death. While Jeffersonian populism has always been strongest in the rural South and West, Hamiltonian developmental capitalism has been championed by the parties of the commercial and industrial Northeast and Midwest—the Whigs and Republicans in the 19th century, and more recently the increasingly northern Democrats.

Hamiltonian champions of national development and Jeffersonian populists may be equally disgusted by instances of flagrant corruption, like Eric Cantor’s gutting of an insider-trading bill by including a provision exempting the spouses of members of Congress. (And indeed, Brat flayed Cantor’s role in the STOCK Act on the campaign trail.) And pro-manufacturing Hamiltonians may be as hostile as Jeffersonian champions of small business to unproductive speculation and manipulative activities in the FIRE sector (Finance, Insurance, Real Estate).

But many of the policies that Jeffersonian populists attack as “crony capitalism” and “corporate welfare” strike Hamiltonians of left, right and center as legitimate and necessary. Where industries are natural geographic monopolies, like water, sewage and electricity, either public ownership or public regulation are in the public interest, to ensure universal service and to guard against predatory monopoly. Nor do Hamiltonians object to the government as venture capitalist, using procurement, subsidies and other methods in financing new industries and technologies, at the price of occasional failures like the solar-power company Solyndra.

Bailouts of too-big-to-fail financial institutions may well be a mistake. But bailouts of industrial corporations like General Motors are a different matter. For more than two centuries, Jeffersonian populists have been drawn to a policy of isolationism—and with good reason. If the United States intends to remain a great military power, then the federal government cannot be indifferent to the fate of the manufacturing industries on which military power depends. If rival countries subsidize and protect their “national champions” in manufacturing, then the U.S. must either do the same or allow foreign governments to target and eliminate strategic American industries in favor of their own.

What if the crackup of the Goldwater-Reagan market populist coalition leads to a reshuffling of alliances? Could businesses that support public investment in infrastructure and R&D and education find themselves allied with social democratic liberals against Jeffersonian populist opponents of big business and big government? Could the Business Roundtable and the Chamber of Commerce discover that they have more in common with the center-left than with the radical right?

It happened once before. Between the 1950s and the 1970s, America’s big industrial corporations—reluctantly, in many cases—made their peace with organized labor and the expanded federal government bequeathed by the New Deal. That period of government-business-labor collaboration—“crony capitalism” and “corporatism,” as the Tea Party right would describe it—was the Golden Age of American capitalism.

Since the 1970s, however, the business community has disproportionately funded the political right, on the theory that conservative politicians will further the business community’s agenda even if they have to say alarming and incendiary things on the campaign trail to win the votes of populist voters. Now the marriage of business interests and populist voters in the name of market populism may be on the rocks. Even in deeply crimson Texas, alarmed elements of the business establishment have belatedly mobilized against right-wing populists who oppose even the basic public spending on infrastructure and education that industries need in order to flourish.

Many of America’s business leaders find themselves trapped in a conservative coalition whose populist members thwart infrastructure spending, block immigration, demonize federal aid to industry and threaten further to starve aggregate consumer demand by impoverishing the elderly and their families with draconian cuts to Social Security and Medicare. In the 20th century, progressives like Franklin Roosevelt helped to save capitalism from populists like Huey Long, Louisiana’s demagogic “Kingfish.” It is not inconceivable that something similar will happen again.

Even paranoids have real enemies. Some of the populist’s right critique of Washington insider politics and rent-seeking by Wall Street and corporate America is justified. But it would be a disaster if right-wing populists, while assaulting genuine crony capitalism, were to kill off the productive economy that can flourish only in partnership with the public sector. The enduring and universal American values to which Jeffersonian populism appeals can and should be pursued today—but with the methods of the 21st century, not the 18th.