The roots of right-wing anti-corporate populism

The influence of 20th-century economist Friedrich Hayek lives on in today's Tea Party populists. But his philosophy is ill-suited to the demands of the modern economy.

Economist Friedrich von Hayek, circa 1940. Image credit: Hulton Archives/Getty Images

When Tea-Party-backed candidate David Brat successfully challenged House Majority Leader Eric Cantor in a Congressional primary earlier this year, he accused Cantor of “running on the Chamber of Commerce and Business Roundtable principles” and argued that while big business gets “cheap labor,” “everyone in the 7th district gets cheap wages.”

A decade ago, “running on Chamber of Commerce and Business Roundtable principles” was the mark of a solid, rock-ribbed Republican; in Brat’s hands, it became a slur.

“For right-wing populists then and now, liberty trumps all, even growth.”
The prominence of candidates like Brat is part of a rising new populist anti-corporate movement – with designs to prevent all government support for business – that could greatly hinder American economic policy and hamper future U.S. competitiveness. And while this type of populism is nothing new, the political orientation of its current followers is historically unique.

Another case in point: for almost 80 years, Congress has regularly reauthorized the U.S. Export-Import Bank, a highly successful export promotion program that actually returns funds to the U.S. Treasury every year, with virtually unanimous support. However, a number of Tea Party Republicans, calling themselves “true” conservatives, are now opposing reauthorization, claiming (falsely) that it is a form of “crony capitalism” that only helps big business.

This position is something you might expect from the Progressive Caucus. Indeed, there’s been a long tradition of anti-corporate populism from the American left – including the 19th century populist William Jennings Bryan, the legendary Louisiana Governor Huey Long and current Massachusetts Sen. Elizabeth Warren. But what is surprising to many is the rise of right-wing anti-corporate populism, as championed by the Tea Party and candidates like Brat.

In part, this right-wing populism is a reaction to the bailouts of Wall Street institutions during the financial crisis. But if that was the spark, the fuel is a deep-seated desire to resurrect the governing structure and economy that reigned pre-New Deal – what Michael Lind calls “the Second Republic.” This that emerged after the Civil War and preceded the post-New Deal rise of big government, big labor, and big business.

This is also the era idealized by thinkers such as Friedrich Hayek, an Austrian-born economist writing at mid-century who spent much of his career decrying the emergence of “socialism” and contesting Keynesianism and is revered as a “founding father” of modern conservatism. It is Hayek’s writing that forms the intellectual roots of this love for the Second Republic and the current rise of right-wing populism.

Hayek was a true conservative in the mold of Russell Kirk, author of the landmark 1953 text, The Conservative Mind. Hayek wanted to maintain a pre-1930s kind of economic and governance structure and was a strident opponent of not just the rise of big government and big labor, but of the rise of Chandlerianmanagerial capitalism and big business.

Indeed, Hayek, like former Supreme Court Justice Louis Brandeis on the left, rejected the notion that large corporations were more efficient, writing that, “The size of the enterprise has become an advantage beyond the point where it is justified by technological facts.” Not surprisingly then, Hayek supported laws to limit the size of corporations, arguing that, “There may be valid arguments for designing corporation law to impede the indefinite growth of individual corporations.”

Hayek was also not alone in his views. At the same time that Hayek was making his case in the 1950s, a major battle was being waged for the soul of the Republican Party. On one side was “country-club” Republican Dwight Eisenhower; on the other, “Mr. Republican” Senator Robert Taft. Taft made it clear: “There is an underlying philosophy in the principal measures of the New Deal which desires to affect a complete revolution in the whole American business and constitutional system under which this country has prospered for 150 years.”

It was not just the revolution in the constitutional system and government that offended these conservatives; it was also the revolution in business.

For these populists, purely competitive markets populated with millions of small firms is not only the economic ideal, it is the key to protecting freedom of action and liberty. For Hayek, big corporations – just like big government – limit freedom, which is why he wrote, “I should much prefer to have to put up with some such inefficiency than have organized monopoly control my ways of life.”

“In the new globally competitive world, … it’s impossible for America to enjoy a vibrant and competitive economy without vibrant and competitive large corporations.”
For these right-wing populists then and now, liberty trumps all, even growth. Again Hayek: “Programs are judged on the question of whether they give men more money, more bathtubs, more automobiles, and less time to work. Certainly no one can be against these economic objectives, but it is wrong to subordinate them to the need for greater morality, greater liberty of thought, and greater liberty of action.”

We see this triumph of “liberty” and Hayekian thinking in the debate over many key economic issues today, not just over Ex-Im Bank reauthorization.

Right wing populists want to eliminate the research and development tax credit, claiming it’s special-interest, corporate welfare. They oppose cutting the effective corporate tax rate and paying for it by raising taxes on rich individuals. They oppose even high-skill immigration reform, rejecting the argument that corporations need access to more skilled workforce. And a small but growing number oppose strong intellectual property protection, claiming that it creates monopoly protection for large corporations at the expense of individual’s freedom.

Hayek was on the wrong side of history then, and his followers are on the wrong side of history now.

As the Kauffman Foundation has shown, in 1958 just 11 percent of the workforce was employed in firms with more than 10,000 employees, while today that figure is 27 percent.

And the reality is that in the new globally competitive world where nations are in a race to gain innovation advantage, it’s impossible for America to enjoy a vibrant and competitive economy without vibrant and competitive large corporations that have both the scale and the resources to compete against foreign state-owned enterprises and anti-competitive industrial policies. And it’s a lot tougher to have healthy large corporations when the anti-corporate forces on the left and now the right oppose smart policies to help large corporations innovate and compete.

Robert D. Atkinson is President of the Information Technology and Innovation Foundation. Follow: @itifdc @robatkinsonitif