That's the fault in this line of reasoning: the people never had the economic powers of a government. Government derives its power from being the solution to a collective action problem. Or, in other words, the people gained power by pooling their decision making process.
But you're quite right that the notion that 'the people' once had such power before being oppressed by the creation of collective government is an ahistorical idea, normally deriving from dubious state-of-nature theories.
You can spin it all kinds of ways, but the concept steal is not a fundamental one, but one that we invented and enforce through government, through coercive action.