Classical liberalism: Encyclopedia - Classical liberalism

Classical liberalism

Classical liberalism (also called classic liberalism or simply liberalism) is the original form of and nowadays a tendency within liberalism. It is a political school of thought that first emerged in the 17th and 18th centuries, upholding individualism and free market economics. Classical liberalism focuses on concepts of individual autonomy and private property, and argues that the sole legitimate function of government is to defend these. Classical liberals promote the use of precisely delineated constitutions that are difficult or impossible to modify, intended to prevent governments from assuming an interventionist role.

The term "classical liberalism" itself was coined in the 20th century, and applied retroactively to pre-1850 liberalism, to avoid confusion with an accepted modern definition of liberalism. Modern libertarians see themselves as having revived the original doctrine of liberalism, and often call themselves "libertarians", "classical liberals" or "liberals" interchangeably.

Classical liberalism - Introduction

The classic liberal philosophy places a particular emphasis on the sovereignty of the individual, with private property rights being seen as essential to individual liberty. It forms the philosophy underpinning of the laissez-faire philosophy. The precepts of classic liberalism were probably best described by John Locke and Adam Smith, and illuminated much of the thought at the time of the American revolution. As a result, the United States Constitution and the United States Declaration of Independence are both documents that embody many principles of classic liberalism.

Modern liberalism tends to deviate from this definition of the term "liberal" in that it espouses the use of the power of government to achieve a variety of desirable goals, ranging from social justice to economic equality. The libertarian movement considers itself the closest modern derivative of classic liberalism, although other political movements and parties sometimes incorporate its ideals, and often borrow from its rhetoric. The Cato Institute briefly discusses these changes and their views on the term classical liberalism, stating from their website:

Thus the CATO Institute[1] sees Classical Liberals, liberals, and libertarians being from the same ideological family. Classical liberals, like those within the CATO Institute, often prefer to call themselves liberals because they see themselves as the only rightful inheritors of Liberalism.

Classical liberalism - Origins

Classical liberalism is a political and economic philosophy. With roots in ancient Greek and medieval thought, it received an early expression in the 16th century by the School of Salamanca and its classic formulation in the Enlightenment tradition. 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. The classical liberals saw mercantalism 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. Classical liberalism tries to circumscribe the limits of political power and to define and support individual liberty and private property. The phrase is often used as a means of delineating the older philosophy called liberalism from modern liberalism, in order to avoid semantic confusion.

Classic Liberalism is close to 18th century Liberalism. The Wealth of Nations (1776) by Adam Smith is considered one of the classic foundations of liberalism. While Adam Smith provides an explanation of liberalism and economics, the legal and philosophical understanding originates with scholars like John Locke and evolves through Thomas Jefferson and James Madison. Immanuel Kant, in the Perpetual Peace, creates an international liberal framework to foster a sustainable world peace.

The term "liberal" derived from this time period (generally the 18th and 19th century) with its origination stemming from the belief in individual freedom, economic freedom (including free markets), and limited representative government. This original understanding of the word "liberal" carries the same meaning in a few countries, but in most countries the meaning and ideology behind liberalism differ to certain degrees (e.g. social security, tariffs, intervention and regulation into the economy, wage and price controls) from its meaning in the eighteenth century. In many countries liberalism holds a position between classical liberalism and American liberalism. Only a few major parties adhere to classical liberalism, most of the liberal parties accept limited government intervention in economics.

Classic Liberals include all original liberals such as John Locke, Adam Smith, David Ricardo, Thomas Jefferson, James Madison, John Stuart Mill with his work On Liberty, and even more modern liberals such as Von Mises, Hayek, and Milton Friedman. Classical liberal institutions include the Frasier Institute (Canada), The Hoover Institution (Stanford University), and The Cato Institute to name a few.

In Hayek's book The Constitution of Liberty, in the chapter, "Why I am not a Conservative" Hayek tells us that he was not a conservative because he was in fact a liberal; and had refused to give up that label. In the United States the term liberal had changed meaning, and according to Hayek this was because Franklin D Roosevelt had been labeled a socialist and a leftist because of his New Deal Policies. Fearing the consequences of that label, FDR called himself a Liberal instead. Since that day, Liberal in the United States has had a different meaning from the orginal, 18th and 19th century meaning of the word. People who stayed close to this orginal meaning label themselves often "Classic Liberal", "Classical Liberal" or "Libertarian" to avoid confusion (especially in America ).

Classical liberalism - Classical liberal philosophy

Classical Liberals subscribe to a very basic and universal understanding of the world and the rights of all humans. Classical Liberals believe in private property, free markets, economic competition, freedom from coercion, limited government (all economic freedom), the rule of law, and individual rights (Natural rights is also used). These are inherent to all people, of all faiths, cultures, societies, ethnicities, and histories and that all peoples are capable of achieving liberal government and liberal societies not just western cultures. (Classical) Liberals prefer a Laissez-faire style of government with a microeconomic focus and understanding of economic operations.

Classical Liberals do not believe in wealth transfers (though admire the goal of helping the needy), tariffs, or other trade barriers such as quotas, regulated markets (also known as a Mixed economy ), capital controls, wage and price controls. As a general rule these macroeconomic policies (favored by groups varying from Communists, Fascists, Nazis, socialists, social democrats, and liberal Keynesians) reduce the general welfare of society and according to Hayek and Friedman will ultimately reduce and eliminate the political and civil freedoms enjoyed by the people. Conversely, Hayek and Friedman believed that this economic freedom would help build and protect political and civil freedoms.

Milton Friedman's Free to Choose and Capitalism and Freedom are examples of this philosophy updated for modern man and woman to understand (classical) liberalism.

Classical liberalism - Classical liberalism during the Great Depression and the rise of dictatorships

Some liberals, including Friedrich August von Hayek, Milton Friedman, and Von Mises, argued that the great depression was not a result of "laissez-faire" capitalism but a result of too much government intervention and regulation upon the market but also that such intervention can and will lead to international conflict (World War I and World War II) but the rise of totalitarian regimes and the loss of political and civil freedoms.

Hayek, in his book The Road to Serfdom, believed that the rise of totalitarian regimes, whether they be communist, fascist, or Nazi, were the result of the restriction of economic freedom. Economic freedom was, thus, restricted by government intervention and regulation of the economy. Hayek states:

Here Hayek is demonstrating the rationale behind why economic policies like those subscribed to by Keynesian economists can not and could not be compatible to freedom and peace much in the same way Nazis, Fascists, and Communists failed to retain or create free and peaceful states

The more economic freedom that was lost, he said, the more civil and political freedom would be lost as well. Hayek's work The Road to Serfdom remains influential, argued against these "Keynesian" institutions, believing that they can and will lead to the same totalitarian governments Keynesians were attempting to avoid. Hayek saw authoritarian regimes such as the fascist, Nazis, and communists, as the same totalitarian branch that sought the elimination of economic freedom. To him the elimination of economic freedom brought about the elimination of political freedom. Thus the differences between Nazis and communists are only rhetorical. The same outcomes could occur in Britain (or anywhere else) if the state sought to control the economic freedom of the individual with the policy prescriptions outlined by people like Dewey, Keynes, or Roosevelt.

Nobel Prize winning economists such as Hayek and Milton Friedman have argued for years that economic freedom leads to greater political and civil rights and those governments who control the economy tend to limit economic rights and eventually will limit political, civil rights of their people. Friedman states,

The Italian fascist leader Benito Mussolini often defined fascism as a contrast to classical liberalism and its individualist foundation. For example: "The Fascist conception of life stresses the importance of the State and accepts the individual only in so far as his interests coincide with the State. It is opposed to classical liberalism [which] denied the State in the name of the individual." And, "If classical liberalism spells individualism, Fascism spells government."

Classical liberalism - Classical liberalism economic freedom and their relationship with civil and political freedoms

Friedrich von Hayek and Milton Friedman stated that economic freedom is a necessary condition for the creation and sustainability of civil and political freedoms. Hayek believed the same totalitarian outcomes could occur in Britain (or anywhere else) if the state sought to control the economic freedom of the individual with the policy prescriptions outlined by people like Dewey, Keynes, or Roosevelt. (Classical) liberal studies by the Canadian conservative Fraser Institute, the American conservative Heritage Foundation, and the Wall Street Journal argue that there is in fact a relationship between economic freedom and political and civil freedoms as Friedrich von Hayek had once said. They agree with Hayeks statement that those countries which restrict economic freedom ultimately restrict civil and political freedoms. On the other hand, economic freedom does not necesarily imply civil and political freedom.

FA Hayek and Milton Friedman have both observed that economic freedom is a necessary condition for the creation and sustainability of civil and political freedoms. This has been observed through history over the last century; easily seen by the atrocities committed by the least economically free countries in the world which include Nazi Germany, Soviet Russia, Communist China, Khmer Rouge Cambodia...

Hayek believed the same totalitarian outcomes could occur in Britain (or anywhere else) if the state sought to control the economic freedom of the individual with the policy prescriptions outlined by people like Dewey, Keynes, or Roosevelt. The facts of history in the post-war era affirmed in his vision the accuracy of his thesis. Clement Atlee's Labour Party, after winning a land slide election in post World War II England, encouraged private buisness owners to hand over their property, nationalized many industries, instituted wage and price controls, and even attempted to place restrictions on their citizens ability to seek employment at will, by requiring citizens to seek permission from the central government. Another example, in the 1960s the Labour Government of Harold Wilson placed a limit of £30 on money people could take abroad to avoid the consequences of an inflatonary policy pursued to create full-employment. Nevertheless, British democratic institutions survived and in 1979 a radical Conservative government led by Margaret Thatcher was elected, which, sometimes painfully, re-liberalised the economy.

Recent empirical studies by the Frasier Institute, Heritage Foundation, and the Wall Street Journal argued that there is in fact a relationship between economic freedom and political and civil freedoms as Friedrich von Hayek had once observed. As he stated, those countries which restrict economic freedom ultimately restrict civil and political freedoms.

• http://www.fraserinstitute.ca/shared/readmore.asp?sNav=pb&id=789
• http://www.heritage.org/research/features/index/

Classical liberalism - Classical liberalism and rhetorical liberalism as practiced in the United States

In the United States the Republican Party has paid lip service to classical liberal philosophy since New Deal era. However, Republican president, Richard Nixon proved to be no friend of classical liberal philosophy by instituting price controls on goods during an economic crisis in the 1970s. The Democratic Carter administration oversaw the deregulation of the airline industry while also restricting the money supply (a harsh monetarist policy) to combat stagflation which plagued the United States. Many small liberal gains were achieved under Ronald Reagan in the 1980s as liberalism gained steam world wide, but the country continued to mount a national debt because of an imbalanced budget. The Democrats, under Bill Clinton, took things a little further, balancing the U.S. budget, creating NAFTA, and influencing the birth of the GATT94 WTO, all of which helped usher in a prosperous decade for the United States. The current President Bush has verbally supported free and open markets but continues to mount public debt and even raised trade barriers to protect the American steel industry. Despite some strides toward liberalism the changes have been small. Neither the Democrats nor the Republicans maintain political platforms that reflect classical liberalism. Powerful segments of both parties argue for less free trade and more managed trade. The Libertarian Party is a party in the United States that whole heartedly supports classical liberalism.

Within the United States, classical liberalism is rhetorically confused with conservatism. The CATO Instutite states from its website

According to most classical liberals, modern liberalism as it is practiced, is mostly rhetorical lip service to liberalism's highest ideals of freedom, rather than a function of its basic assumptions: the free market. See liberalism for further understanding.

See also

• Austrian School
• Capitalism
• Chicago school
• Deregulation
• Free market
• Globalization
• Privatization
• Liberalization
• Marketization
• Liberalism
• Libertarianism
• Paleoliberalism

Classical liberalism - External articles

• Liberalism by Friedrich Hayek
• http://www.fraserinstitute.ca/shared/readmore.asp?sNav=pb&id=789
• http://www.heritage.org/research/features/index/

Categories: Accuracy disputes | Articles to check for link ordering | Liberalism | Political theories

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