Classical liberalism

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Classical liberalism (also called laissez-faire liberalism), is a doctrine stressing the importance of human rationality, individual property rights, natural rights, constitutional limitations of government, the protection of civil liberties, laissez-faire economic policy, and individual freedom from restraint as exemplified in the writings of Adam Smith, David Ricardo, Jeremy Bentham, and John Stuart Mill. It is also associated with the philosophy of Friedrich Hayek and Milton Friedman who are credited with a revival of classical liberalism in the 20th century,The qualification "classical" was applied in retrospect to distinguish early nineteenth-century liberalism from the "new liberalism" or "social liberalism" developed by Thomas Hill Green and Leonard Trelawny Hobhouse, which allowed for a greater role of the state in securing individual rights.

The term "classical liberalism" is used almost interchangeably with the term "libertarianism" by libertarians of a minarchist, while the correctness of this usage is disputed (see "Classical liberalism" and libertarianism, below).

Overview

In America, liberalism took a pragmatic turn in response to the industrial revolution. During the time of Jefferson, a laissez-faire economy seemed appropriate to the liberal goal of equality for everyone. "But, when the growing complexity of industrial conditions required increasing government intervention in order to assure more equal opportunities, the liberal tradition, faithful to the goal rather than to the dogma, altered its view of the state." By the 1970s, however, lagging economic growth and increased levels of taxation and debt spurred a revival of a new classical liberalism. Friedrich von Hayek and Milton Friedman argued against government intervention in fiscal policy and their ideas were embraced by conservative political parties in the US and Great Britain.

"[A]t the heart of classical liberalism", wrote Nancy L. Rosenblum and Robert C. Post, is a prescription: "Nurture voluntary associations. Limit the size, and more importantly, the scope of government. So long as the state provides a basic rule of law that steers people away from destructive or parasitic ways of life and in the direction of productive ways of life, society runs itself. If you want people to flourish, let them run their own lives."

Classical liberalism places a particular emphasis on the sovereignty of the individual, with private property rights being seen as essential to individual liberty. This forms the philosophical basis for laissez-faire public policy. The ideology of the classical liberals argued against direct democracy "for there is nothing in the bare idea of majority rule to show that majorities will always respect the rights of property or maintain rule of law."For example, James Madison argued for a constitutional republic with protections for individual liberty, over a pure democracy, reasoning that in a pure democracy, a "common passion or interest will be felt by a majority, and there is nothing to check the inducements to sacrifice the weaker party."

In economics, some classical liberals believe that "an unfettered market" is the most efficient mechanism to satisfy human needs and channel resources to their most productive uses: they "are more suspicious than conservatives of all but the most minimal government." Their advocacy of an "unregulated free market" is founded on an "assumption about individuals being rational, self-interested and methodical in the pursuit of their goals."Adam Smith, however, was not an advocate of pure capitalism, and allowed for many exceptions to a strictly free-market economy.

Classical liberalism holds that rights exist independently of government. Thomas Jefferson called these inalienable rights: "...rightful liberty is unobstructed action according to our will within limits drawn around us by the equal rights of others. I do not add 'within the limits of the law', because law is often but the tyrant’s will, and always so when it violates the rights of the individual." For classical liberalism, rights are of a negative nature — rights that require that other individuals (and governments) refrain from interfering with individual liberty, whereas social liberalism (also called modern liberalism) holds that individuals have a right to be provided with certain benefits or services by others. Unlike social liberals, classical liberals are "hostile to the welfare state."They do not have an interest in material equality but only in "equality before the law." Classical liberalism is critical of social liberalism and takes offense at group rights being pursued at the expense of individual rights.

Friedrich Hayek identified two different traditions within classical liberalism: the "British tradition" and the "French tradition". Hayek saw the British philosophers David Hume, Adam Smith, Adam Ferguson, Josiah Tucker, Edmund Burke and William Paley as representative of a tradition that articulated beliefs in empiricism, the common law, and in traditions and institutions which had spontaneously evolved but were imperfectly understood. The French tradition included Rousseau, Condorcet, the Encyclopedists and the Physiocrats. This tradition believed in rationalism and the unlimited powers of reason, and sometimes showed hostility to tradition and religion. Hayek conceded that the national labels did not exactly correspond to those belonging to each tradition: Hayek saw the Frenchmen Montesquieu, Constant and Tocqueville as belonging to the "British tradition" and the British Thomas Hobbes, Godwin, Priestley, Richard Price and Thomas Paine as belonging to the "French tradition". Hayek also rejected the label "laissez faire" as originating from the French tradition and alien to the beliefs of Hume, Smith and Burke.

Origins

Modern classical liberals trace their ideology to ancient Greek and medieval thought. They cite the 16th century School of Salamanca in Spain as a precursor, with its emphasis on human rights and popular sovereignty, its belief that morality need not be grounded in religion, and its moral defence of commerce. But its classic formulation came in the The Age of Enlightenment. The Wealth of Nations (1776) by Scottish philosopher Adam Smith is one of the classic works that rejects the philosophy of mercantilism, which advocated state interventionism in the economy and protectionism. These early liberals saw mercantilism as enriching privileged elites at the expense of well being of the populace. Another early expression is the tradition of a Nordic school of liberalism set in motion by a Finnish parliamentarian Anders Chydenius.

Key thinkers in classical liberalism

John Locke

Main article: John Locke

John Locke

As the industrial revolution began in the United Kingdom, so did the first conceptions of liberalism. John Locke (1632-1704) defended religious freedom in his important work A Letter Concerning Toleration. It was published with his other important work Two Treatises of Government in 1689. However, Locke would not extend his view on religious freedom to Catholics.

Locke's views on the relationship between government and its "subjects" are a historical turning point in political thought. In Two Treatises of Government, as a response to Sir Robert Filmer's Patriarcha which defends the divine right of kings, Locke describes how, from his natural state, man forms a civil society with little government.

Locke goes on to claim that such a society is incompatible with absolute monarchy. Beyond this, however, Locke's only apparent restriction on government is that it be derived by consent of the majority (§132). Further, his discussion of the nature of this consent (to government) is fairly robust--as we reap the benefits of government we give our consent to it and should be obedient to its laws.

Locke completes the Two Treatises with a chapter on the dissolution of government. Previously it was held by monarchists that such a dissolution was unjust when undertaken by ruled subjects, but here Locke argues against that claim and allows for such a dissolution when a pre-determined limit has been agreed upon in the forming of government (e.g. a term-limit), or when the elected representative(s) have allowed or caused some injury to the public trust. Both of these situations, claims Locke, forfeit the supreme governmental authority, which then reverts back to the civil society in which the people can decide again on a new form of government "as they think good" (§243).

Immanuel Kant

Main article: Immanuel Kant

Immanuel Kant (22 April, 1724 – 12 February, 1804) further advanced the idea of a liberal peace by demonstrating conditions and requisites for international peace among states in his work Perpetual Peace: A Philosophical Sketch (1795). As an early liberal, Kant opposed the concept of majority rule over the individual. In opposition to democracy, which in his time meant direct democracy, he advocates a constitutional republic. He says,

"Democracy is necessarily despotism, as it establishes an executive power contrary to the general will; all being able to decide against one whose opinion may differ, the will of all is therefore not that of all: which is contradictory and opposite to liberty."

Kant's moral philosophy, from the Critique of Pure Reason states,

“No one can compel me (in accordance with his belief about the welfare of others) to be happy after his fashion; instead, every person may seek happiness in the way that seems best to him, if only he does not violate the freedom of others to strive toward similar ends as are compatible with everyone’s freedom under a possible universal law.”

The "universal law" that Kant speaks of is the categorical imperative, the general formula of which is to act only in accordance with those principles that can be consistently willed as a universal law, which is impossible for principles aimed merely at material ends.

Further, Kant held that the most valuable liberty we have is autonomy, yet for Kant autonomy is when our free choices are consistent with the categorical imperative, not having free choice simpliciter.

Finally, Kant's conception of the Cosmopolitan Law, which was the free movement of individuals to do business in foreign nations. The cosmopolitan law, according to Kant, was to be the economic portion of human liberty. Liberal states would therefore foster free international trade between them.

Adam Smith

Main article: Adam Smith

Adam Smith, (baptised June 5, 1723 O.S. (June 16 N.S.) – July 17, 1790) believed that the government had three and only three roles to play: 1.) "protecting the society from the violence and invasion of other independent societies...which can only be performed by means of a military force" 2.) "protecting, as far as possible, every member of the society from the injustice or oppression of every other member of it..." and 3.) "erecting and maintaining those public institutions and those public works, which...though most advantageous...are such that the profit could never repay the expense to any individual or small group of individuals" which implies that governments should work to provide some public goods and correct market externalities. Smith, advocates the state should not interfere in domestic or international trade through protectionism and that prices for goods, services, and labour should be set through the mechanism of a free market. He believed that if individuals pursue their economic self-interest that the good of society will be achieved indirectly by maximizing the stock of wealth.

Milton Friedman

Main article: Milton Friedman

Credited as being co-responsible with Friedrich von Hayek for providing the intellectual foundations for the revival of classical liberalism in the 20^th century, Milton Friedman was known for his work in monetary economics: specifically the quantity theory of money. He co-authored, with Anna Schwartz, "A Monetary History of the United States", which sought to examine the role of money supply in explaining macroeconomic fluctations in US history. He was also well-known for this work on the consumption function especially the permanent income hypothesis. Other important contributions include his critique of the Phillips curve and the concept of the natural rate of unemployment. Friedman, like Hayek believed that economic freedom created and protected civil and political freedom and that the loss of economic freedom led to a loss in civil and political freedom. His most famous popular works include Capitalism and Freedom and Free to Choose where he advanced the ideas of laissez-faire free market liberal government. Friedman classified himself as both a "libertarian" and a "classical liberal."

Other classical liberal thinkers

• Baron de Montesquieu
• Voltaire
• Thomas Paine
• Friedrich Hayek
• Frederic Bastiat
• Grover Cleveland
• Marquis de Condorcet
• Gustave de Molinari
• Denis Diderot
• The Founding Fathers of the United States
• David Hume
• Karl Popper
• Herbert Spencer
• Ludwig von Mises
• Mary Wollstonecraft
• Joseph Alois Schumpeter

Classical liberalism, free trade, and world peace

Several liberals, including Adam Smith, Immanuel Kant, and Richard Cobden, argued that the free exchange of goods between nations could lead to world peace. Modern American political scientists including Dahl, Doyle, Russet, and O'Neil, recognize that early liberals believed free trade could lead to peace. Dr. Gartzke, of Columbia University states, "Scholars like Montesquie, Adam Smith, Richard Cobden, Norman Angell, and Richard Rosencrance have long speculated that free markets have the potential to free states from the looming prospect of recurrent warfare" . American political scientists John R. Oneal and Bruce M. Russett, well known for their work on the democratic peace theory state,

"The classical liberals advocated policies to increase liberty and prosperity. They sought to empower the commercial class politically and to abolish royal charters, monopolies, and the protectionist policies of mercantilism so as to encourage entrepreneurship and increase productive efficiency. They also expected democracy and laissez-faire economics to diminish the frequency of war" .

Adam Smith argued in the Wealth of Nations that as societies progressed from hunter gatherers to industrial societies the spoils of war would rise, but the costs of war would rise further, making war difficult and costly for industrialized nations.

By virtue of their mutual interest does nature unite people against violence and war…the spirit of trade cannot coexist with war, and sooner or later this spirit dominates every people. For among all those powers…that belong to a nation, financial power may be the most reliable in forcing nations to pursue the noble cause of peace…and wherever in the world war threatens to break out, they will try to head it off through mediation, just as if they were permanently leagued for this purpose

— Emmanuel Kant,

...the honours, the fame, the emoluments of war, belong not to [the middle and industrial classes]; the battle-plain is the harvest field of the aristocracy, watered with the blood of the people...Whilst our trade rested upon our foreign dependencies, as was the case in the middle of the last century...force and violence, were necessary to command our customers for our manufacturers...But war, although the greatest of consumers, not only produces nothing in return, but, by abstracting labour from productive employment and interrupting the course of trade, it impedes, in a variety of indirect ways, the creation of wealth; and, should hostilities be continued for a series of years, each successive war-loan will be felt in our commercial and manufacturing districts with an augmented pressure.

— Richard Cobden,

When goods cannot cross borders, armies will.

— Frederic Bastiat

Cobden believed that military expenditures worsened the welfare of the state and benefited a small but concentrated elite minority. Summing up British imperialism, which he believed was the result the economic restrictions of mercantalist policies (not free trade.) To Cobden, and many classical liberals, those who advocated peace must also advocate free markets.

Classical liberalism and freedom

Executive of The Objectivist Center and libertarian David Kelley states that classical liberals had a concept of freedom that is entirely at odds with the modern liberal conception. While they argued for free trade and a limited central authority modern liberals have broadened freedom and human rights to include expanded government authority over property, labor, and capital. Adam Smith argued that in order to best serve human welfare, individuals should be left free to follow their own interests, which were to “sustain life and to acquire goods" and that a government should abstain "from interference in free enterprise, putting checks only on undue strife and competition."

On the classical liberal concept of freedom the Edinburgh Review wrote in 1843: “Be assured that freedom of trade, freedom of thought, freedom of speech, and freedom of action, are but modifications of one great fundamental truth, and that all must be maintained or all risked; they stand and fall together."

David Kelley also suggests that classical liberals understood liberty to be a negative freedom--a freedom from the coercive actions of others. Modern liberals include positive freedoms in liberty, which are rights to the provision of goods. Modern understandings of positive freedom are opposite the classical thinking of negative freedom. An early John Stuart Mill (at this time was a liberal advocate of limited government and free markets) recognized this difference stating, "The only purpose for which power can be rightfully exercised over any member of a civilized community, against his will, is to prevent harm to others. His own good, either physical or moral, is not sufficient warrant."

Redefinition of liberalism from laissez-faire form to interventionist form

The cause(s) of the shift in liberalism in the United States "between 1877 and 1937...from laissez-faire constitutionalism to New Deal statism, from classical liberalism to democratic social-welfarism" has been a subject of study among scholars.

The Industrial Revolution greatly increased material wealth, but made social problems, such as pollution, child labor, and overcrowding in the cities, more visible. Material and scientific progress led to greater longevity and a reduced mortality rate. The population increased dramatically, as technology improved agricultural output, millions more could survive whereas a century before they would have perished. As F.A. Hayek noted,

“The proletariat which capitalism can be said to have ‘created’ was thus not a proportion of the population which would have existed without it and which it had degraded to a lower level; it was an additional population which was enabled to grow up by the new opportunities for employment which capitalism provided.”

Increased agricultural output through technology reduced the labor necessary for farming creating a migration of labor from rural to urban areas. The industrial revolution saw for the first time rising demands for food and decreasing food prices. Labor wages, in fact did not decline, but rose above inflation, despite a decrease in the hours worked by labor and an increase in the labor supply. Wages saw a steady increase, without government assistance, prior to the introduction of a national minimum wage. The industrial revolution also saw a shift of child labor from farms to factories, but also saw a decline in the use of child labor prior to government laws banning child labor, as wealth and productivity increased, thus allowing parents to send children to school rather than work to earn for the family. Many laissez-faire economists felt that these problems of industrial society would correct themselves without government action. In fact, this was occurring, just not in the manner and style hoped by progressive reformers.

Alexis de Tocqueville illuminated the events of the early industrial revolution and why wealthy societies became more concerned with the poor, stating,

“The progress of civilization…brings society to alleviate miseries which are not even thought about in less civilized societies. In a country where the majority is ill-clothed, ill-housed, ill-fed, who thinks of giving clean clothes, healthy food, comfortable quarters to the poor? The majority of the English, having all these things, regard their absence as a frightful misfortune; society believes itself bound to come to the aid of those who lack them, and cures evils which are not even recognized elsewhere.”

Alexis de Tocqueville’s insight supports Milton Friedman’s idea that the industrial revolution did not create more poverty as was claimed by Progressives of the time, but created more visible poor.

In the 19th century, the voting franchise in most democracies was extended, and these newly enfranchised citizens often voted in favor of government intervention into the economy. Rising literacy rates and the spread of knowledge led to social activism in a variety of forms. Those calling themselves progressives, called for laws against child labor and laws requiring minimum standards of worker safety. The laissez faire economic liberals considered such measures to be an unjust imposition upon liberty, as well as a hindrance to economic development. This 19th century social liberalism is considered as the first significant split of modern liberalism from "classical liberalism." In 1911, L. T. Hobhouse published Liberalism, which summarized what social liberals believe is a "new liberalism," including qualified acceptance of government intervention in the economy, and the collective right to equality in dealings, what he called "just consent". So different from classical liberalism did Hayek see Hobhouse's book that he commented that it would have been more accurately titled Socialism instead. (Hobhouse called his beliefs "liberal socialism".)

In some European countries the term "liberalism" refers mostly to what is called "libertarianism" in the United States, i.e., European "liberalism" is most often in favor of a free market-economy and a more restricted government.

In Australia the major conservative party is called the Liberal Party of Australia, where "liberal" was chosen to refer back to the old Commonwealth Liberal Party and also to distinguish it from the "socialist" Labor Party. However because of familiarity with contemporary US usage, the term "liberal" can take on a variety of meanings ranging from member or supporter of the Liberal party, to classical liberal, to "liberal" in the contemporary American sense (ie modern liberalism).

Disputes over whether modern liberalism is derived from classical liberalism

Whether modern liberalism is founded upon the philosophy of classical liberalism is a subject of dispute. Scholar Leonard Liggio (a self-described classical liberal) holds that modern liberalism does not share the same intellectual foundations as classical liberalism. He says, "Classical liberalism is liberalism, but the current collectivists have captured that designation in the United States. Happily they did not capture it in Europe, and were glad enough to call themselves socialists. But no one in America wants to be called socialist and admit what they are." He believes that this is why liberalism means something different in Europe from in America. Proponents of the Austrian School and the Chicago School (sometimes called neo-classical economists), such as Milton Friedman, Ludwig von Mises and Friedrich von Hayek, also reject claims that modern liberalism represents a continuous development from classical liberalism. According to Friedman

"Beginning in the late nineteenth century, and especially after 1930 in the United States, the term liberalism came to be associated with a very different emphasisis, particularly in economic policy. It came to be associated with a readiness to rely primarily on the state rather than on private voluntary arrangements to achieve objectives regarded as desirable. The catchwords became welfare and equality rather than freedom. The nineteenth century liberal regarded an extension of freedom as the most effective way to promote welfare and equality; the twentieth century liberal regards welfare and equality as either prerequisistes of or alternatives to freedom. In the name of welfare and equality, the twentieth-century liberal has come to favor a revival of the very policies of state intervention and paternalism against which classical liberalism fought. In the very act of turning the clock back to seventeenth-century mercantalism, he is fond of castigating true liberals as reactionary!"

Neo-classical economists instead see themselves as the true inheritors of classical liberalism. For example, Hayek argued that he was not a conservative because he was a liberal, and had refused to give up that label to what he considered to be modern usurpers.

Joseph Schumpeter stated, "As a supreme, if unintended compliment, the enemies of the system of private enterprise have thought it wise to appropriate its label," implying that modern liberals have "stolen" the word and given it a definition opposite its original meaning.

Daniel Yergin, a pulitzer prize winning author, and Joeseph Stanislaw write on the subject of the changed meaning of liberalism in America,

"In the 1920s, the New York Times criticized "the expropriation of the time-honored word 'liberal'" and argued that "the radical red school of thought...hand back the world 'liberal' to its original owners.""

Following from this New York Times criticism they argue that leading Progressive writers used the word liberal as a "substitute for progresivism, which had become tarnished by its association with their fallen hero, Theodore Roosevelt." They also concur with F.A. Hayek view (in his essay "Why I Am Not a Conservative") that Franklin Roosevelt adopted the term to "ward off accusations of being left-wing" [with Roosevelt] declaring that liberalism was "plain English for a changed concept of the duty and responsibility of government toward economic life."

Criticism of neo-classical economists as classical liberals

Many have rejected the claim describing neo-classical economists as "right-wing economic liberals", "liberal conservatives" and as the "new right", viewing their efforts at co-opting the term as ignoring the political side of early liberalism and only focusing on the work of the classical economists such as Smith and Ricardo. Furthermore, it has been argued that "Hayek's view of classical liberal principles is a peculiar one" which ignores the work of pre-eminent thinkers such as Locke and Mill.

"Classical liberalism" and libertarianism

Raimondo Cubeddu of the Department of Political Science of the University of Pisa says "It is often difficult to distinguish between 'Libertarianism' and 'Classical Liberalism'. Those two labels are used almost interchangeably by those who we may call libertarians of a 'minarchist' persuasion: scholars who, following Locke and Nozick, believe a State is needed in order to achieve effective protection of property rights.". Libertarians see themselves as sharing many philosophical, political, and economic undertones with classical liberalism, such as the ideas of laissez-faire government, free markets, and individual freedom. Nevertheless, others reject this as a mere superficial resemblance:

"Libertarianism’s resemblance to liberalism is superficial; in the end, libertarians reject essential liberal institutions. Correctly understood, libertarianism resembles a view that liberalism historically defined itself against, the doctrine of private political power that underlies feudalism. Like feudalism, libertarianism conceives of justified political power as based in a network of private contracts. It rejects the idea, essential to liberalism, that political power is a public power, to be impartially exercised for the common good."

Those who emphasize the distinction between classical liberalism and libertarianism point out that some of the key thinkers of classical liberalism were far from libertarian: "Adam Smith should be seen as a moderate free enterpriser who appreciated markets but made many, many exceptions. He allowed government all over the place."

Further, some argue that libertarianism and liberalism are fundamentally incompatible because the checks and balances provided by liberal institutions conflict with the support for complete economic deregulation offered by most libertarians. However, arguments over the similarities are made difficult by the large number of factions in both classical liberalism and Libertarianism (for example, minarchist libertarians are not necessarily in favor of complete economic deregulation in the first place and often support tax-funded provision of a select few public goods.)

Alan Ryan, professor of Politics at Princeton, argues that the claim from "contemporary libertarians...that they are classical liberals...is not wholly true. There is at least one strain of libertarian thought represented by Robert Nozick's Anarchy, State and Utopia that advocates the decriminalization of 'victimless crimes' such as prostitution, drug-taking and unorthodox sexual activities. There is nothing of that in John Locke or Adam Smith."

Having written nothing regarding these subjects, however, does not negate that there may have been support, or that prostitution and illegal narcotics were already legal (or not legally enforced). However, if one difference remains between modern libertarians and their claimed classical liberal ancestors, it lies in suicide. According to Immanuel Kant's categorical imperative, a person may not take his or her own life, even if it is rational to do so. Modern libertarians believe suicide and assisted suicide should be legal. This singular difference should not necessarily negate the relationship between classical liberalism and libertarianism, especially considering the wide disparity between modern American liberalism and classical liberalism.

Classical liberalism and neo-liberalism

A major philosophical difference between classical liberalism and neo-liberalism is the former's emphasis in justice and natural rights, as opposed to the latter's utilitarism. Neo-liberalism tends to emphasize efficiency, gross output, trade volume, and similar concepts that elevate economic gain over rights. Free Enterprise Institute Instituto de Libre Empresa promotes this difference in commentaries and academic activities. The most obvious policy difference between classical liberalism and neo-liberalism is in the area of foreign policy. Classical liberalism is strongly opposed to imperialism, specifically using military or political means to introduce market reforms into state-controlled systems in order to bring those economies into the global trading system. Neo-liberalism is defined by its support of such coercive methods.

See also

• Austrian School
• Capitalism
• Free market
• Globalization
• Privatization
• Liberalization
• Liberalism
• Libertarianism
• Manchesterism
• Contributions to liberal theory

External links

• A Guide to Classical-Liberal Think Tanks by Joseph L. Bast
• What is Classical Liberalism? by John C. Goodman
• The Liberal Institute [1] A classical liberal think tank based in New York City
• The Free Enterprise Institute ILE A classical liberal think tank based in Lima, Peru
• A Liberal Path to Sustainable Growth - Lessons from 20 years international Growth Differentials