- Frank Knight and the Place of Principles in Economics and Politics - May 13, 2021
- Hayek’s Still Relevant Response to Today’s Paternalist Planners - May 12, 2021
- Biden’s Agenda of “Democratic” Paternalism and Planning - May 3, 2021
Over time, words sometimes change their meanings or connotations. Think of the words naughty and nice. Apparently, naughty originally meant to have or be nothing (naught or zero), but then it took on the extra sense of something being worth nothing, until finally a person who was considered worth nothing became a bad individual, or at least someone who is mischievous — as in, what a “naughty boy,” with an accompanying wink.
On the other hand, a nice person, it seems, early on meant someone who was ignorant, but then took on the added meanings of being a silly or foolish person. By the 1700s, it had its more current meanings of an agreeable or pleasant person. Though it can be used sarcastically — for instance, with the phrase “Oh, yeah, that’s ‘real nice’” meaning something said or done that is rude, disrespectful, or nasty toward another.
The same thing has happened with the word liberalism. Friends and foes have changed its meaning several times over the last couple of centuries, and in the eyes of some its content and connotation have been transformed beyond recognition.
American Liberalism as Meaning Big Government
Since at least the 1930s, during Franklin D. Roosevelt’s New Deal, liberalism in America has carried the meaning and content of public policy perspectives that insist that government should and must take on a wide and extensive paternalist role in society. Such political paternalism is presumed to encompass the need for government regulation of business in a wide variety of forms. Indeed, it’s reached the point where there is little that goes on in the production, the buying and selling, and the consumption of virtually any good or service offered on the market that does not entail oversight, approval, dictate, prohibition, or control by some branch and level of government in modern society.
Matching this has emerged a vast network of redistributive programs and activities through which government transfers income and wealth from one segment of society to another. Taxes are garnered from certain segments of society and redirected by government to other segments through either cash or in-kind benefits.
But as some critics of this modern liberalism have pointed out, it is not so much a taxing of income and wealth from Peter to give to Paul; instead, it is transfer of authority and decision-making from private individuals in the society about how best to spend their own honestly earned money to those in political power to then decide how the wealth is to be redirected for other purposes and to other people that those in government consider to be more deserving.
Conservative Criticisms of Liberalism
For those labeled as conservatives in the United States, modern American liberalism connotes disrespect for traditional beliefs and values, including certain religious faiths; it carries the notion of licentiousness and luridness, of “anything goes,” that threatens to undermine the cultural foundations of the country; and it entails a dangerous big government intruding everywhere and micromanaging everything.
Conservatives do not necessarily disapprove of government having a long arm with a certain degree of bigness. They would just like a government of a different size and reach to impose different types of restraints and commands than America’s “lefty liberals” want to see in place. They do not completely disapprove of government regulations or prohibitions in the marketplace when it concerns those forms of personal activities and social interactions of which they disapprove.
Progressivism’s Opposition to “Neoliberalism”
Liberalism has a different connotation for those farther along what is called the left side of the spectrum in the United States. In this permutation, liberalism is relabeled neoliberalism, the supposedly dominant form of liberalism around the world today. They assert that neoliberals run the world for an elite of global capitalists wishing to pursue international profits at the expense of the needs and wants of the local peoples living in different countries on the planet, and rationalizes this world order.
American progressives and democratic socialists increasingly reject any and all forms of liberalism, insisting that both modern neoliberals and conservatives in the United States have been apologists for and facilitators of racism, sexism, and oppression of social and ethnic minorities, and supporters of income inequality that benefits a wealthy few at the expense of far too many in society. They desire to see more of a consciously planned society with less tolerance or legal protections for words and actions that they consider harmful to the establishment of a more socially just humankind.
What is clear is that for both conservatives and progressives (and democratic socialists), liberalism, in many ways, epitomizes what they both dislike and strongly disapprove of. Liberalism, therefore, seems to be the common enemy of both many conservatives and a growing number of progressives and democratic socialists, though how they see the nature of the liberalism that each criticizes has notable points of difference.
An interesting ingredient in these interpretations of liberalism by conservatives, on the one side, and progressives and self-proclaimed socialists, on the other, is that what they label as liberalism has little to do with its original meaning and the policy views of many of its early and later adherents. Just like the words naughty and nice, the meaning of liberalism has changed significantly from where it began, with completely different connotations.
Liberalism as a Defense of Individual Liberty Against Tyranny
Through most of the 19th century, liberalism was strongly identified with the belief in and the defense of individual liberty in various spheres of life. Generally, a liberal was one who was open-minded, tolerant, and respectful of different ideas, faiths, and values that may be held by others in society. Such openness, tolerance, and respect did not necessarily mean an agreement with or sympathy for a particular idea, faith, or value; but it did mean that others holding them should not be legally persecuted or politically oppressed and discriminated against for holding them.
This liberal attitude and outlook on the ideas, faiths, and values of others perhaps was most persuasively defended in the 19th century by John Stuart Mill (1806-73) in his famous essay “On Liberty” (1859). Mill reminded his readers that no one of us can claim intellectual infallibility, and that it is only through discourse and debate that it may be found out whether the truth of some matter is on one side or the other, or somewhere in between. The eccentric or socially unacceptable idea, attitude, or belief of the past has sometimes become the accepted one of the present. And the same applies to the customs, traditions, values, and ideas of the present and the new ones that may become the commonplace of tomorrow.
This led Mill to warn therefore of the danger of the tyrannies of both minorities and majorities. In the past, he said, tyrannies of the minority often took the form of kings, princes, and their aristocratic circles that imposed their political rule as well as their social, religious, and other ideas on a majority of others over whom they had governmental control or ecclesiastical authority.
The tyranny of majorities, Mill said, could be both cultural and political. Mill was a strong defender of those some might consider to be the eccentric and the nonconformist; thus, he warned against the oppression of custom and tradition. The imagery may be of the small, closely knit village or town in which those who do not follow the widely accepted social customs and traditions are ridiculed, shunned, or otherwise psychologically tormented and abused by their neighbors because they go their own way.
The other tyranny of the majority, Mill warned, was from the new political ideal and institution of democracy. If, before, it was the few ruling and controlling the many through absolutist monarchy, in the new age of democratically elected government what threatened was a political majority using its power through those they elected to impose their will on social, economic, and cultural minorities within the nation. (See my articles “John Stuart Mill and the Dangers to Liberty” and “John Stuart Mill and the Dangers of Unrestrained Government.”)
Indeed, as one indication of this concern, in his later essay “Considerations on Representative Government” (1861), Mill suggested that all those who receive employment or redistributions from the government should be denied the right to vote for the time they do so; otherwise, the pickpocket is getting to vote on how much will be taken from his victim’s wallet. Surely, Mill said, this is a serious conflict of interest. (See my article “Thinking the Unthinkable: No Voting Right for Those Living at the Taxpayer’s Expense.”)
Eliminating denials of civil liberties and restrictions on equal treatment before the law was therefore the leading rallying cry of 19th-century liberals, and was identified with the reforming impulse of liberalism as a political movement. While those ruled by a government should have a much-wider participation in the process of electing those who hold political office, liberals were also conscious of the dangers from democracy unrestrained. The American Bill of Rights reflected this concern by protecting certain freedoms of the individual from even the largest of majorities that might wish to compel, plunder, and persecute people for their beliefs and ideas, their peaceful actions in pursuit of their own purposes, their honestly earned money, or their voluntary associations with others in the society.
Private Property as the Basis of Freedom and Prosperity
Matching these personal and political liberties, 19th-century liberalism championed economic liberty as well. And, indeed, the liberals of that time considered it foundational to and inseparable from any protection of these other types of human liberty. The cornerstone to the recognition and securing of economic liberty was the right to private property and wide latitude for its peaceful and voluntary use.
Property also serves as the stimulus in industry and innovation, and creates a setting of potential mutual gains from trade where each knows that what they own is theirs and may only be separated from them through a voluntary transaction in which they find something more desirable than what they trade away to get it. The British liberal and political economist John R. McCulloch (1789-1864) explained this most clearly and concisely in his Principles of Political Economy (1825):
Let us not, therefore, deceive ourselves by supposing that it is possible for any people to emerge from barbarism, or to become wealthy, prosperous, and civilized without the security of property.… The protection afforded to property by all civilized societies, though it has not made all men rich, has done more to increase their wealth than all their other institutions put together.…
The establishment of a right to property enables exertion, invention, and enterprise, forethought and economy to reap their due reward. But it does this without inflicting the smallest imaginable injury upon anything else.…
Its [property’s] effects are altogether beneficial. It is a rampart raised by society against its common enemies — against rapine, and violence, plunder and oppression. Without its protection, the rich would become poor, and the poor would be totally unable to become rich — all would sink to the same bottomless abyss of barbarism and poverty.
Natural Liberty and Market Order Without Central Planning
The most important insight from the liberal economists of that time was and, in my view, remains that there exists the potential for social order and betterment without planned political and economic design. Liberal economists such as Adam Smith called such an order a “system of natural liberty,” under which government would be limited to the provision of police, courts of law, national defense, and a small number of what today are usually called public goods.
But, for all other goods and services, each individual would be free to follow any profession, undertake any production, and peacefully compete with any rivals for the voluntary and mutually agreed-upon business of others in the marketplace as the means of earning their living. (See my articles “Adam Smith on Moral Sentiments, Division of Labor, and the Invisible Hand” and “Adam Smith on Free Trade, Crony Capitalism, and the Benefits of Commercial Society.”)
For most of human history, it was taken for granted that a material and social gain for one human being often resulted in the worsening of another’s personal well-being. Conquest, plunder, and murder were primary means by which some in the world obtained and increased what they had through the use of violence and other coercion. Human interactions and institutionalized associations were very frequently zero- or even negative-sum games.
The great discovery of the second half of the 18th century, especially in the writings of the Scottish moral philosophers and the French physiocrats, was that when each individual was left to follow their own personal judgments about how to best apply their own efforts and industry to better their own life, the cumulative outcome was far superior to the vain attempts of those in governmental positions to determine and direct the economic affairs of humanity.
Non-interference Removes Privileges and Frees Enterprise
This was summarized by another British liberal economist of the early 19th century, Nassau W. Senior (1790-1864):
For centuries, the government has labored to fetter and misdirect the industry of people. Instead of confining itself to its true task of defending its subjects from foreign and domestic violence and fraud, it has taken on itself the task of rendering them, or of rendering certain classes of them, rich. It has dictated to them what they shall produce, and to whom they shall sell, and what they shall purchase, and to what markets they shall resort.
It has considered the whole body of consumers as a prey to be sacrificed to any class, or to any section of a class, that choose to ask for a monopoly. And when one class has complained of the privileges granted to another, it has bribed it into acquiescence by allowing it to inflict a further injustice on the public.…
The advocate of freedom dwells on the benefit of making full use of our own peculiar advantages of situation, wealth, skill, and availing ourselves to the utmost of those possessed by our neighbors.… He observes, in the words of Adam Smith, that it is the maxim of every prudent master of a family, never to make at home, what it will cost him more to make than to buy. The tailor does not make his own shoes, but buys them of the shoemaker. The shoemaker does not make his own cloths, but buys them of the tailor. The farmer attempts to make neither the one nor the other, but employs their whole industry in a way in which they have some advantage over their neighbors, and to purchase, with a part of its produce, whatever else they have occasion for.
The principle of free trade is non-interference: it is to suffer every man to employ his industry in the manner which he thinks more advantageous, without pretense of the part of the legislator to control or direct his operations.
The liberals of that time did not consider that people never made errors of judgment. This was as obvious to them as it surely is to us. But they did believe that each individual, all things considered and looking over the society as a whole, knows their own circumstances better than any other can, and most certainly better than some politician or bureaucrat situated far away with little or no knowledge of that particular person’s actual existence and surrounding opportunities.
Intervention Misdirects Production and Fosters Corruption
It was all too easy for those in political power to feign interest in, concern for, or knowledge of various people’s conditions and concerns as rationales for the pursuit of their own personal purposes in government, and to serve various special interests that further their own political ambitions. It is through government intervention, the 19th-century liberals argued, that political power is used to benefit some at the expense of others in society. This was explained by the French liberal economist Jean-Baptiste Say (1767-1832) in his Principles of Political Economy (1821):
Strictly speaking, there is no act of government but what has some influence on production.… When authority throws itself in the way of the natural course of things, and says, the product you are about to create, that which yields the greatest profit, and is consequently the most in request, is by no means the most suitable to your circumstances, you must undertake some other, it evidently directs a portion of the productive energies of the nation towards an object of less desire, at the expense of another more urgent desire.…
If one individual, or one class, can call in the aid of authority to ward off the effects of competition, it acquires a privilege to the prejudice and at the cost of the whole community; it can then make sure of profits not altogether due to the productive services rendered, but composed in part of an actual tax upon consumers for its private profit; which tax it commonly shares with the authority that thus unjustly lends its support.
The legislative body has great difficulty in resisting these importunate demands for this kind of privileges.… Moreover, arbitrary regulations are extremely flattering to the vanity of men in power, as giving them an air of wisdom and foresight, and confirming their authority, which seems to derive additional importance from the frequency of its exercise.
It would be a gross exaggeration to suggest that all the liberals of that earlier era were strict and unreserved proponents of laissez-faire. But, in general, the presumption was that all forms of government regulations and interventions not concerned with the clear and present threat of violence or fraud among private parties were undesirable and always carried the potential for numerous secondary negative effects. For instance, Jean-Baptiste Say, after discussing what he considered possible limited exceptions to total laissez-faire, emphasized to his readers:
I wish to empress upon my readers, that the mere interference [by government] is itself an evil, even where it is of use: first, because it harasses and distresses individuals; and, secondly, because it costs money, either to the nation, if it be defrayed by government, that is to say, upon the public purse, or to the consumer, if it be charged upon the specific article; in the latter case, the charge must of course enhance the price, thereby laying an additional tax upon the home consumer.
Classical Liberalism’s Successes and Social Ideal
This 19th-century liberalism, or classical liberalism, as it has more widely come to be called, therefore, was grounded in the idea and ideal of the individual and their right to personal, economic, and political liberty. The efforts made by the liberals of that earlier era were momentous in their impact, in that many of the freedoms that people have and continue to take for granted were the result of the liberal crusades of that time: ending slavery, widening civil liberties and impartial rule of law, increasing political participation, freeing industry and trade from the heavy hand of government regulation and control, and attempting to reduce the frequency and destructiveness of war among nations. (See my article “The Beautiful Philosophy of Liberalism.”)
One of the other leading British liberals of that earlier time, Thomas Babington Macaulay (1800-59), summarized the core ideas and ideals of 19th-century liberalism as reflected in the Great Britain in which he then lived:
It is not by the intermeddling of … the omniscient and omnipotent State, but by the prudence and energy of the people, that England has hitherto been carried forward in civilization; and it is to the same prudence and the same energy that we now look with comfort and good hope. Our rulers will best promote the improvement of the nation by strictly confining themselves to their own legitimate duties, by leaving capital to find its most lucrative course, commodities their fair price, industry and intelligence their natural reward, idleness and folly their natural punishment, by maintaining peace, by defending property, by diminishing the price of law, and by observing strict economy in every department of the state. Let the Government do this: the People will assuredly do the rest.
Classical Liberalism’s Ideal of Free Minds and Open Debate
This earlier, classical liberalism has nothing to do with the changed and distorted meanings assigned to liberalism by both many conservatives and progressives (and democratic socialists). John Stuart Mill’s defense of open debate and discourse on the customs, traditions, and values and ideas upon which a social order rests is not a call for their destruction.
As Mill insisted, they are likely to have a sounder hold over people’s minds if they have been more consciously reflected upon and appreciated in terms of their origins and purposes for social stability and prosperity; if errors and weaknesses are found in them, then surely it is better to be aware of them than for society to find itself in some undesirable and possibly harmful institutional cul-de-sac.
Nor is the ideal of open and free deliberation a subterfuge or rationale to justify hurtful or oppressive ideas and institutions, as those on the political left increasingly insist. The opposite is closer to the truth. When ideas are suppressed, and when their expression or discussion is forbidden, they are more likely to fester in the darker corners of society. They remain unchallenged, unrefuted, and possibly perversely attractive as intellectually forbidden fruit, as well as left lingering in the hearts of some people.
If racist ideas are indeed harmful, how do concerned citizens ever know what exactly they are, why and how they came about, and what are the better or best responses to demonstrate the logical and factual errors in their rationales and justifications, if they cannot be publicly, dispassionately, and openly understood, discussed, and analyzed? Closed mouths and banned ideas can only lead to atrophied minds and arrested societies.
Free Market Liberalism as the Liberator of Humanity
Likewise, the liberal defense of private enterprise and free markets is the opposite of how their critics portray them. Changed meanings often can bring about blurred ideas. The 19th-century liberals defended economic liberty precisely because they opposed favoritism, privilege, and plunder in society. That was the social order that preceded the victories of political and economic liberalism in the 1800s.
Selected groups and individuals in society received special statuses from the government that hindered innovative and cost-reducing competitive enterprises wishing nothing more than the opportunity to produce and market better and less expensive goods to a widening circle of the consuming public. Freedom of enterprise and free trade meant more, better, and lower-priced goods for the mass market of the “common man,” the “working man” whose condition was improving through more job openings stemming from the greater rivalry of employers looking for hands to hire, and through the growing quantity and variety of goods placed within the reach of those increasing numbers of people employed by those private enterprises.
Free market liberalism was the great liberator of humanity from material poverty, social stagnation, and political oppression. The original liberals and their intellectual heirs today see nothing of what they advocate in what is often nowadays referred to as crony capitalism. It has been the abandonment over the last hundred years of that freer-market liberalism that has returned government policy to a system of privilege and plunder benefiting special interest groups at the expense of market rivals and consumers.
One of the perversities in the changed meaning and understanding of political and economic liberalism is that it is now burdened with responsibility for the very type of government favoritism and corruption that it arose to oppose and abolish. In the eyes of too many, it is identified with the very interventionist and regulatory system that it fought against and partly succeeded in doing away with in the 19th century. (See my articles “Free Market Capitalism vs. Crony Capitalism” and“Crony Capitalism the Cause of Society’s Problems.”)
The ills in society will not be solved or cured by the politically compromised conservatism that still opposes a wide variety of civil liberties but has now also has turned its back on its earlier defenses of free trade and free enterprise. And society’s problems will most certainly not be overcome by the more radical turn by America’s progressives and new democratic socialists who would straitjacket all of the country’s economic activities under the type of tried-and-failed central-planning approaches that they hail as the policy path to a bright and beautiful future. If these socialists have their way, America will have neither freedom nor prosperity. (See my articles“‘Democratic Socialism’ Means the Loss of Liberty,” “The Market Democracy vs. Democratic Socialism,” and “The Green New Dealers and the New Socialism.”)
What is needed, therefore, is a return to the original meanings of the clearly articulated principles of political, economic, and social liberalism, properly understood. The classical liberalism of the 19th century needs to be the reborn new liberalism of the 21st century, to once more offer an ideal of individual freedom, free enterprise, impartial rule of law and equality before the law, and limited constitutional government. These are the keys to freedom and prosperity.
[Originally Published at AEIR]