Liberalism

Liberalism is a political doctrine that takes protecting and enhancing the freedom of the individual to be the central problem of politics. Liberals typically believe that government is necessary to protect individuals from being harmed by others, but they also recognize that government itself can pose a threat to liberty. As the revolutionary American pamphleteer Thomas Paine expressed it in Common Sense (1776), government is at best a necessary evil. Laws, judges, and police are needed to secure the individual's life and liberty, but their coercive power may also be turned against him. The problem, then, is to devise a system that gives government the power necessary to protect individual liberty but also prevents those who govern from abusing that power.

The problem is compounded when one asks whether this is all that government can or should do on behalf of individual freedom. Some liberals—the so-called neoclassical liberals, or libertarians—answer that it is. Since the late 19th century, however, most liberals have insisted that the powers of government can promote as well as protect the freedom of the individual. According to modern liberalism, the chief task of government is to remove obstacles that prevent individuals from living freely or from fully realizing their potential. Such obstacles include poverty, disease, discrimination, and ignorance. The disagreement among liberals over whether government should promote individual freedom rather than merely protect it is reflected to some extent in the different prevailing conceptions of liberalism in the United States and Europe since the late 20th century. In the United States liberalism is associated with the welfare-state policies of the New Deal program of the Democratic administration of Pres. Franklin D. Roosevelt, whereas in Europe it is more commonly associated with a commitment to limited government and laissez-faire economic policies (Contemporary liberalism).

General characteristics

Liberalism is derived from two related features of Western culture. The first is the West's preoccupation with individuality, as compared to the emphasis in other civilizations on status, caste, and tradition. Throughout much of history, the individual has been submerged in and subordinate to his clan, tribe, ethnic group, or kingdom. Liberalism is the culmination of developments in Western society that produced a sense of the importance of human individuality, a liberation of the individual from complete subservience to the group, and a relaxation of the tight hold of custom, law, and authority. In this respect, liberalism stands for the emancipation of the individual. (See also individualism.)

Liberalism also derives from the practice of adversariality in European political and economic life, a process in which institutionalized competition—such as the competition between different political parties in electoral contests, between prosecution and defense in adversary procedure, or between different producers in a market economy—generates a dynamic social order. Adversarial systems have always been precarious, however, and it took a long time for the belief in adversariality to emerge from the more traditional view, traceable at least to Plato, that the state should be an organic structure, like a beehive, in which the different social classes cooperate by performing distinct yet complementary roles. The belief that competition is an essential part of a political system and that good government requires a vigorous opposition was still considered strange in most European countries in the early 19th century.

Underlying the liberal belief in adversariality is the conviction that human beings are essentially rational creatures capable of settling their political disputes through dialogue and compromise. This aspect of liberalism became particularly prominent in 20th-century projects aimed at eliminating war and resolving disagreements between states through organizations such as the League of Nations, the United Nations, and the International Court of Justice (World Court).

Liberalism has a close but sometimes uneasy relationship with democracy. At the centre of democratic doctrine is the belief that governments derive their authority from popular election; liberalism, on the other hand, is primarily concerned with the scope of governmental activity. Liberals often have been wary of democracy, then, because of fears that it might generate a tyranny by the majority. One might briskly say, therefore, that democracy looks after majorities and liberalism after unpopular minorities.

Like other political doctrines, liberalism is highly sensitive to time and circumstance. Each country's liberalism is different, and it changes in each generation. The historical development of liberalism over recent centuries has been a movement from mistrust of the state's power on the ground that it tends to be misused, to a willingness to use the power of government to correct perceived inequities in the distribution of wealth resulting from economic competition—inequities that purportedly deprive some people of an equal opportunity to live freely. The expansion of governmental power and responsibility sought by liberals in the 20th century was clearly opposed to the contraction of government advocated by liberals a century earlier. In the 19th century liberals generally formed the party of business and the entrepreneurial middle class; for much of the 20th century they were more likely to work to restrict and regulate business in order to provide greater opportunities for labourers and consumers. In each case, however, the liberals' inspiration was the same: a hostility to concentrations of power that threaten the freedom of the individual and prevent him from realizing his full potential, along with a willingness to reexamine and reform social institutions in the light of new needs. This willingness is tempered by an aversion to sudden, cataclysmic change, which is what sets off the liberal from the radical. It is this very eagerness to welcome and encourage useful change, however, that distinguishes the liberal from the conservative, who believes that change is at least as likely to result in loss as in gain.

Classical Liberalism

Political foundations

Although liberal ideas were not noticeable in European politics until the early 16th century, liberalism has a considerable prehistory reaching back to the Middle Ages and even earlier. In the Middle Ages the rights and responsibilities of the individual were determined by his place in a hierarchical social system that placed great stress upon acquiescence and conformity. Under the impact of the slow commercialization and urbanization of Europe in the later Middle Ages, the intellectual ferment of the Renaissance, and the spread of Protestantism in the 16th century, the old feudal stratification of society gradually began to dissolve, leading to a fear of instability so powerful that monarchical absolutism was viewed as the only remedy to civil dissension. By the end of the 16th century, the authority of the papacy had been broken in most of northern Europe, and each ruler tried to consolidate the unity of his realm by enforcing conformity either to Roman Catholicism or to the ruler's preferred version of Protestantism. These efforts culminated in the Thirty Years' War (1618–48), which did immense damage to much of Europe. Where no creed succeeded in wholly extirpating its enemies, toleration was gradually accepted as the lesser of two evils; in some countries where one creed triumphed, it was accepted that too minute a concern with citizens' beliefs was inimical to prosperity and good order.

The ambitions of national rulers and the requirements of expanding industry and commerce led gradually to the adoption of economic policies based on mercantilism, a school of thought that advocated government intervention in a country's economy to increase state wealth and power. However, as such intervention increasingly served established interests and inhibited enterprise, it was challenged by members of the newly emerging middle class. This challenge was a significant factor in the great revolutions that rocked England and France in the 17th and 18th centuries—most notably the English Civil Wars (1642–51), the Glorious Revolution (1688), the American Revolution (1775–83), and the French Revolution (1789). Classical liberalism as an articulated creed is a result of those great collisions.

In the English Civil Wars, the absolutist king Charles I was defeated by the forces of Parliament and eventually executed. The Glorious Revolution resulted in the abdication and exile of James II and the establishment of a complex form of balanced government in which power was divided between the king, his ministers, and Parliament. In time this system would become a model for liberal political movements in other countries. The political ideas that helped to inspire these revolts were given formal expression in the work of the English philosophers Thomas Hobbes and John Locke. In Leviathan (1651), Hobbes argued that the absolute power of the sovereign was ultimately justified by the consent of the governed, who agreed, in a hypothetical social contract, to obey the sovereign in all matters in exchange for a guarantee of peace and security. Locke also held a social-contract theory of government, but he maintained that the parties to the contract could not reasonably place themselves under the absolute power of a ruler. Absolute rule, he argued, is at odds with the point and justification of political authority, which is that it is necessary to protect the person and property of individuals and to guarantee their natural rights to freedom of thought, speech, and worship. Significantly, Locke thought that revolution is justified when the sovereign fails to fulfill these obligations. Indeed, it appears that he began writing his major work of political theory, Two Treatises of Government (1690), precisely in order to justify the revolution of two years before.

By the time Locke had published his Treatises, politics in England had become a contest between two loosely related parties, the Whigs and the Tories. These parties were the ancestors of Britain's modern Liberal Party and Conservative Party, respectively. Locke was a notable Whig, and it is conventional to view liberalism as derived from the attitudes of Whig aristocrats, who were often linked with commercial interests and who had an entrenched suspicion of the power of the monarchy. The Whigs dominated English politics from the death of Queen Anne in 1714 to the accession of King George III in 1760.

Liberalism and democracy

The early liberals, then, worked to free individuals from two forms of social constraint—religious conformity and aristocratic privilege—that had been maintained and enforced through the powers of government. The aim of the early liberals was thus to limit the power of government over the individual while holding it accountable to the governed. As Locke and others argued, this required a system of government based on majority rule—that is, one in which government executes the expressed will of a majority of the electorate. The chief institutional device for attaining this goal was the periodic election of legislators by popular vote and of a chief executive by popular vote or the vote of a legislative assembly.

But in answering the crucial question of who is to be the electorate, classical liberalism fell victim to ambivalence, torn between the great emancipating tendencies generated by the revolutions with which it was associated and middle-class fears that a wide or universal franchise would undermine private property. Benjamin Franklin spoke for the Whig liberalism of the Founding Fathers of the United States when he stated:

As to those who have no landed property in a county, the allowing them to vote for legislators is an impropriety. They are transient inhabitants, and not so connected with the welfare of the state, which they may quit when they please, as to qualify them properly for such privilege.

John Adams, in his Defense of the Constitutions of Government of the United States of America (1787), was more explicit. If the majority were to control all branches of government, he declared, debts would be abolished first; taxes laid heavy on the rich, and not at all on others; and at last a downright equal division of everything be demanded and voted. French statesmen such as François Guizot and Adophe Thiers expressed similar sentiments well into the 19th century.

Most 18th- and 19th-century liberal politicians thus feared popular sovereignty. For a long time, consequently, they limited suffrage to property owners. In Britain even the important Reform Bill of 1867 did not completely abolish property qualifications for the right to vote. In France, despite the ideal of universal male suffrage proclaimed in 1789 and reaffirmed in the Revolutions of 1830, there were no more than 200,000 qualified voters in a population of about 30,000,000 during the reign of Louis-Philippe, the citizen king who had been installed by the ascendant bourgeoisie in 1830. In the United States, the brave language of the Declaration of Independence notwithstanding, it was not until 1860 that universal male suffrage prevailed—for whites. In most of Europe, universal male suffrage remained a remote ideal until late in the 19th century. Racial and sexual prejudice also served to limit the franchise—and, in the case of slavery in the United States, to deprive large numbers of people of virtually any hope of freedom. Efforts to extend the vote to women met with little success until the early years of the 20th century. Indeed, Switzerland, which is sometimes called the world's oldest continuous democracy, did not grant full voting rights to women until 1971.

Despite the misgivings of men of the propertied classes, a slow but steady expansion of the franchise prevailed throughout Europe in the 19th century—an expansion driven in large part by the liberal insistence that all men are created equal. But liberals also had to reconcile the principle of majority rule with the requirement that the power of the majority be limited. The problem was to accomplish this in a manner consistent with democratic principles. If hereditary elites were discredited, how could the power of the majority be checked without giving disproportionate power to property owners or to some other natural elite?

Separation of powers

The liberal solution to the problem of limiting the powers of a democratic majority employed various devices. The first was the separation of powers—i.e., the distribution of power between such functionally differentiated agencies of government as the legislature, the executive, and the judiciary. This arrangement, and the system of checks and balances by which it was accomplished, received its classic embodiment in the Constitution of the United States and its political justification in the Federalist papers (1787–88), by Alexander Hamilton, James Madison, and John Jay. Of course, such a separation of powers also could have been achieved through a mixed constitution—that is, one in which power is shared by, and governing functions appropriately differentiated between, a monarch, a hereditary chamber, and an elected assembly; this was in fact the system of government in Great Britain at the time of the American Revolution. The U.S. Constitution also contains elements of a mixed constitution, such as the division of the legislature into the popularly elected House of Representatives and the aristocratic Senate, the members of which originally were chosen by the state governments. But it was despotic kings and functionless aristocrats—more functionless in France than in Britain—who thwarted the interests and ambitions of the middle class, which turned, therefore, to the principle of majoritarianism.

Periodic elections

The second part of the solution lay in using staggered periodic elections to make the decisions of any given majority subject to the concurrence of other majorities distributed over time. In the United States, for example, presidents are elected every four years and members of the House of Representatives every two years, and one-third of the Senate is elected every two years to terms of six years. Therefore, the majority that elects a president every four years or a House of Representatives every two years is different from the majority that elects one-third of the Senate two years earlier and the majority that elects another one-third of the Senate two years later. These bodies, in turn, are checked by the Constitution, which was approved and amended by earlier majorities. In Britain an act of Parliament immediately becomes part of the uncodified constitution; however, before acting on a highly controversial issue, Parliament must seek a popular mandate, which represents a majority other than the one that elected it. Thus, in a constitutional democracy, the power of a current majority is checked by the verdicts of majorities that precede and follow it.

Rights

The third part of the solution followed from liberalism's basic commitment to the freedom and integrity of the individual, which the limitation of power is, after all, meant to preserve. From the liberal perspective, the individual is not only a citizen who shares a social contract with his fellows but also a person with rights upon which the state may not encroach if majoritarianism is to be meaningful. A majority verdict can come about only if individuals are free to some extent to exchange their views. This involves, beyond the right to speak and write freely, the freedom to associate and organize and, above all, freedom from fear of reprisal. But the individual also has rights apart from his role as citizen. These rights secure his personal safety and hence his protection from arbitrary arrest and punishment. Beyond these rights are those that preserve large areas of privacy. In a liberal democracy there are affairs that do not concern the state. Such affairs may range from the practice of religion to the creation of art and the raising of children by their parents. For liberals of the 18th and 19th centuries they also included most of the activities through which individuals engage in production and trade. Eloquent declarations affirming such rights were embodied in the British Bill of Rights (1689), the U.S. Declaration of Independence (1776) and Constitution (ratified 1788), the French Declaration of the Rights of Man and of the Citizen (1789), and the basic documents of countries throughout the world that later used these declarations as their models. These documents and declarations asserted that freedom is more than the right to cast a vote in an occasional election; it is the fundamental right of people to live their own lives.

Economic foundations

If the political foundations of liberalism were laid in Great Britain, so too were its economic foundations. By the 18th century parliamentary constraints were making it difficult for British monarchs to pursue the schemes of national aggrandizement favoured by most rulers on the Continent. These rulers fought for military supremacy, which required a strong economic base. Because the prevailing mercantilist theory understood international trade as a zero-sum game—in which gain for one country meant loss for another—national governments intervened to determine prices, protect their industries from foreign competition, and avoid the sharing of economic information.

These practices soon came under liberal challenge. In France a group of thinkers known as the physiocrats argued that the best way to cultivate wealth is to allow unrestrained economic competition. Their advice to government was laissez faire, laissez passer (let it be, leave it alone). This laissez-faire doctrine found its most thorough and influential exposition in The Wealth of Nations (1776), by the Scottish economist and philosopher Adam Smith. Free trade benefits all parties, according to Smith, because competition leads to the production of more and better goods at lower prices. Leaving individuals free to pursue their self-interest in an exchange economy based upon a division of labour will necessarily enhance the welfare of the group as a whole. The self-seeking individual becomes harnessed to the public good because in an exchange economy he must serve others in order to serve himself. But it is only in a genuinely free market that this positive consequence is possible; any other arrangement, whether state control or monopoly, must lead to regimentation, exploitation, and economic stagnation.

Every economic system must determine not only what goods will be produced but also how those goods are to be apportioned, or distributed. In a market economy both of these tasks are accomplished through the price mechanism. The theoretically free choices of individual buyers and sellers determine how the resources of society—labour, goods, and capital—shall be employed. These choices manifest themselves in bids and offers that together determine a commodity's price. Theoretically, when the demand for a commodity is great, prices rise, making it profitable for producers to increase the supply; as supply approximates demand, prices tend to fall until producers divert productive resources to other uses. In this way the system achieves the closest possible match between what is desired and what is produced. Moreover, in the distribution of the wealth thereby produced, the system is said to assure a reward in proportion to merit. The assumption is that in a freely competitive economy in which no one is barred from engaging in economic activity, the income received from such activity is a fair measure of its value to society.

Presupposed in the foregoing account is a conception of human beings as economic animals rationally and self-interestedly engaged in minimizing costs and maximizing gains. Since each person knows his own interests better than anyone else does, his interests could only be hindered, and never enhanced, by government interference in his economic activities.

In concrete terms, classical liberal economists called for several major changes in the sphere of British and European economic organization. The first was the abolition of numerous feudal and mercantilist restrictions on countries' manufacturing and internal commerce. The second was an end to the tariffs and restrictions that governments imposed on foreign imports to protect domestic producers. In rejecting the government's regulation of trade, classical economics was based firmly on a belief in the superiority of a self-regulating market. Quite apart from the cogency of their arguments, the views of Smith and his 19th-century English successors, the economist David Ricardo and the philosopher and economist John Stuart Mill, became increasingly convincing as Britain's Industrial Revolution generated enormous new wealth and made that country into the workshop of the world. Free trade, it seemed, would make everyone prosperous.

In economic life as in politics, then, the guiding principle of classical liberalism became an undeviating insistence on limiting the power of government. The English philosopher Jeremy Bentham cogently summarized this view in his sole advice to the state: Be quiet. Others asserted that that government is best that governs least. Classical liberals freely acknowledged that government must provide education, sanitation, law enforcement, a postal system, and other public services that were beyond the capacity of any private agency. But liberals generally believed that, apart from these functions, government must not try to do for the individual what he is able to do for himself.

Liberalism and utilitarianism

In the late 18th and early 19th centuries, Bentham, the philosopher James Mill, and James's son John Stuart Mill applied classical economic principles to the political sphere. Invoking the doctrine of utilitarianism—the belief that something has value when it is useful or promotes happiness—they argued that the object of all legislation should be the greatest happiness of the greatest number. In evaluating what kind of government could best attain this objective, the utilitarians generally supported representative democracy, asserting that it was the best means by which government could promote the interests of the governed. Taking their cue from the notion of a market economy, the utilitarians called for a political system that would guarantee its citizens the maximum degree of individual freedom of choice and action consistent with efficient government and the preservation of social harmony. They advocated expanded education, enlarged suffrage, and periodic elections to ensure government's accountability to the governed. Although they had no use for the idea of natural rights, their defense of individual liberties—including the rights to freedom of religion, freedom of speech, freedom of the press, and freedom of assembly—lies at the heart of modern democracy. These liberties received their classic advocacy in John Stuart Mill's On Liberty (1859), which argues on utilitarian grounds that the state may regulate individual behaviour only in cases where the interests of others would be perceptibly harmed.

The utilitarians thus succeeded in broadening the philosophical foundations of political liberalism while also providing a program of specific reformist goals for liberals to pursue. Their overall political philosophy was perhaps best stated in James Mill's article Government, which was written for the supplement (1815–24) to the fourth through sixth editions of the Encyclopædia Britannica.

Liberalism in the 19th century

As an ideology and in practice liberalism became the preeminent reform movement in Europe during the 19th century. Its fortunes, however, varied with the historical conditions in each country—the strength of the crown, the élan of the aristocracy, the pace of industrialization, and the circumstances of national unification. The national character of a liberal movement could even be affected by religion. Liberalism in Roman Catholic countries such as France, Italy, and Spain, for example, tended to acquire anticlerical overtones, and liberals in those countries tended to favour legislation restricting the civil authority and political power of the Catholic clergy.

In Great Britain the Whigs had evolved by the mid-19th century into the Liberal Party, whose reformist programs became the model for liberal political parties throughout Europe. Liberals propelled the long campaign that abolished Britain's slave trade in 1807 and slavery itself throughout the British dominions in 1833. The liberal project of broadening the franchise in Britain bore fruit in the Reform Bills of 1832, 1867, and 1884–85. The sweeping reforms achieved by Liberal Party governments led by William Gladstone for 14 years between 1868 and 1894 marked the apex of British liberalism.

Liberalism in continental Europe often lacked the fortuitous combination of broad popular support and a powerful liberal party that it had in Britain. In France the Revolutionary and Napoleonic governments pursued liberal goals in their abolition of feudal privileges and their modernization of the decrepit institutions inherited from the ancien régime. After the Bourbon Restoration in 1815, however, French liberals were faced with the decades-long task of securing constitutional liberties and enlarging popular participation in government under a reestablished monarchy, goals not substantially achieved until the formation of the Third Republic in 1871.

Throughout Europe and in the Western Hemisphere, liberalism inspired nationalistic aspirations to the creation of unified, independent, constitutional states with their own parliaments and the rule of law. The most dramatic exponents of this liberal assault against authoritarian rule were the Founding Fathers of the United States, the statesman and revolutionary Simón Bolívar in South America, the leaders of the Risorgimento in Italy, and the nationalist reformer Lajos Kossuth in Hungary. But the failure of the Revolutions of 1848 highlighted the comparative weakness of liberalism on the Continent. Liberals' inability to unify the German states in the mid-19th century was attributable in large part to the dominant role of a militarized Prussia and the reactionary influence of Austria. The liberal-inspired unification of Italy was delayed until the 1860s by the armies of Austria and of Napoleon III of France and by the opposition of the Vatican.

The United States presented a quite different situation, because there was neither a monarchy, an aristocracy, nor an established church against which liberalism could react. Indeed, liberalism was so well established in the United States' constitutional structure, its political culture, and its jurisprudence that there was no distinct role for a liberal party to play, at least not until the 20th century.

In Europe, by contrast, liberalism was a transforming force throughout the 19th century. Industrialization and modernization, for which classical liberalism provided ideological justification, wrought great changes. The feudal system fell, a functionless aristocracy lost its privileges, and monarchs were challenged and curbed. Capitalism replaced the static economies of the Middle Ages, and the middle class was left free to employ its energies by expanding the means of production and vastly increasing the wealth of society. As liberals set about limiting the power of the monarchy, they converted the ideal of constitutional government, accountable to the people through the election of representatives, into a reality.

Modern liberalism

Problems of market economies

By the end of the 19th century, some unforeseen but serious consequences of the Industrial Revolution in Europe and North America had produced a deepening disenchantment with the principal economic basis of classical liberalism—the ideal of a market economy. The main problem was that the profit system had concentrated vast wealth in the hands of a relatively small number of industrialists and financiers, with several adverse consequences. First, great masses of people failed to benefit from the wealth flowing from factories and lived in poverty in vast slums. Second, because the greatly expanded system of production created many goods and services that people often could not afford to buy, markets became glutted and the system periodically came to a near halt in periods of stagnation that came to be called depressions. Finally, those who owned or managed the means of production had acquired enormous economic power that they used to influence and control government, to manipulate an inchoate electorate, to limit competition, and to obstruct substantive social reform. In short, some of the same forces that had once released the productive energies of Western society now restrained them; some of the very energies that had demolished the power of despots now nourished a new despotism.

The modern liberal program

Such, at any rate, was the verdict reached by an increasing number of liberals in the late 19th and early 20th centuries. As noted above, modern liberals held that the point of government is to remove the obstacles that stand in the way of individual freedom. In this they followed the lead of thinkers and reformers such as the British political philosopher T.H. Green. According to Green, the excessive powers of government may have constituted the greatest obstacles to freedom in an earlier day, but by the middle of the 19th century these powers had been greatly reduced or mitigated. The time had come, therefore, to recognize hindrances of another kind—such as poverty, disease, discrimination, and ignorance—which individuals could overcome only with the positive assistance of government. The new liberal program was thus to enlist the powers of government in the cause of individual freedom. Society, acting through government, was to establish public schools and hospitals, aid the needy, and regulate working conditions to promote workers' health and well-being, for only through public support could the poor and powerless members of society truly become free.

Although most liberals eventually adopted this new course, there were some dissenters, notably the influential social Darwinists Herbert Spencer in England and William Graham Sumner in the United States. As the term Darwinists indicates, these writers thought of politics, economics, and society in general in evolutionary terms. Like Paine, they regarded government as at best a necessary evil—not, however, because it coerces but because it too often interferes with the struggle for survival that nature imposes on human beings as much as on other species. Helping the poor and the weak, they argued, impedes individual freedom and retards social progress by holding back the strong and the fit. The social Darwinists concluded that the sole responsibility of government must be to protect the lives and property of the people—that is, to be nothing more than a night watchman.

Limited intervention in the market

Because they appreciated the real achievements of the market system, modern liberals sought to modify and control the system rather than to abolish it. They saw no reason for a fixed line eternally dividing the private and public sectors of the economy; the division, they contended, must be made by reference to what works. The spectre of regimentation in centrally planned economies and the dangers of bureaucracy even in mixed economies deterred them from jettisoning the market and substituting a putatively omnicompetent state. On the other hand—and this is a basic difference between classical and modern liberalism—most liberals came to recognize that the operation of the market needed to be supplemented and corrected. The new liberals asserted, first, that the rewards dispensed by the market were too crude a measure of the contribution most people made to society and, second, that the market ignored the needs of those who lacked opportunity or who were economically exploited. They contended that the enormous social costs incurred in production were not reflected in market prices and that resources were often used wastefully. Not least, liberals perceived that the market biased the allocation of human and physical resources toward the satisfaction of consumer appetites—e.g., for automobiles, home appliances, or fashionable clothing—while basic needs—for schools, housing, public transit, and sewage systems, among other things—went unmet. Finally, although liberals believed that prices, wages, and profits should continue to be subject to negotiation among the interested parties and responsive to conventional market pressures, they insisted that price-wage-profit decisions affecting the economy as a whole must be reconciled with public policy.

Greater equality of wealth and income

To achieve what they took to be a more just distribution of wealth and income, liberals relied on two major strategies. First, they promoted the organization of workers into trade unions in order to improve their power to bargain with employers. Such a redistribution of power had political as well as economic consequences, making possible a multiparty system in which at least one party was responsive to the interests of wage earners.

Second, with the political support of the economically deprived, liberals introduced a variety of government-funded social services. Beginning with free public education and workmen's accident insurance, these services later came to include programs of old-age, unemployment, and health insurance; minimum-wage laws; and support for the physically and mentally handicapped. Meeting these objectives required a redistribution of wealth that was to be achieved by a graduated income tax and inheritance tax, which affected the wealthy more than they did the poor. Social welfare measures such as these were first enacted by the decidely nonliberal government of Otto von Bismarck in Germany in the late 19th century, but liberal governments soon adopted them in other countries of northern and western Europe. In the United States such measures were not adopted at the federal level until passage of the Social Security Act of 1935.

World War I and the Great Depression

The further development of liberalism in Europe was brutally interrupted in 1914–18 by the prolonged slaughter of World War I. The war overturned four of Europe's great imperial dynasties—Germany, Austria-Hungary, Russia, and Ottoman Turkey—and thus at first appeared to give added impetus to liberal democracy. Europe was reshaped by the Treaty of Versailles on the principle of national self-determination, which in practice meant the breakup of the German, Austro-Hungarian, and Ottoman empires into nationally homogeneous states. The League of Nations was created in the hope that negotiation would replace war as a means of settling international disputes.

But the trauma of the war had created widespread disillusionment about the entire liberal view of progress toward a more humane world. The harsh peace terms imposed by the victorious Allies, together with the misery created by the Great Depression, beginning in 1929, enfeebled Germany's newly established Weimar Republic and set the stage for the Nazi seizure of power in 1933. In Italy, meanwhile, dissatisfaction with the peace settlement led directly to the takeover by the Fascist Party in 1922. Liberalism was also threatened by Soviet communism, which seemed to many to have inherited the hopes for progress earlier associated with liberalism itself.

While liberalism came under political attack in the interwar period, the Great Depression threatened the very survival of the market economy. The boom-and-bust character of the business cycle had long been a major defect of market economies, but the Great Depression, with its seemingly endless downturn in business activity and its soaring levels of unemployment, confounded classical economists and produced real pessimism about the viability of capitalism.

The wrenching hardships inflicted by the Great Depression eventually convinced Western governments that complex modern societies needed some measure of rational economic planning. The New Deal (1933–39), the domestic program undertaken by Pres. Franklin D. Roosevelt to lift the United States out of the Great Depression, typified modern liberalism in its vast expansion of the scope of governmental activities and its increased regulation of business. Among the measures that New Deal legislation provided were emergency assistance and temporary jobs to the unemployed, restrictions on banking and financial industries, more power for trade unions to organize and bargain with employers, and establishment of the Social Security program of retirement benefits and unemployment and disability insurance. In his influential work The General Theory of Employment, Interest, and Money (1936), the liberal British economist John Maynard Keynes introduced an economic theory that argued that government management of the economy could smooth out the highs and lows of the business cycle to produce more or less consistent growth with minimal unemployment.

Postwar liberalism to the 1960s

Liberalism, in strategic alliance with Soviet communism, ultimately triumphed over fascism in World War II, and liberal democracy was reestablished in West Germany, Italy, and Japan. As western Europe, North America, and Japan entered a period of steady economic growth and unprecedented prosperity after the war, attention shifted to the institutional factors that prevented such economies from fully realizing their productive potential, especially during periods of mass unemployment and depression. Great Britain, the United States, and other Western industrialized nations committed their national governments to promoting full employment, the maximum use of their industrial capacity, and the maximum purchasing power of their citizenry. The old rhetoric about sharing the wealth gave way to a concentration on growth rates, as liberals—inspired by Keynes—used the government's power to borrow, tax, and spend not merely to counter contractions of the business cycle but to encourage expansion of the economy. Here, clearly, was a program less disruptive of class harmony and the basic consensus essential to a democracy than the old Robin Hood method of taking from the rich and giving to the poor.

A further and final expansion of social welfare programs occurred in the liberal democracies during the postwar decades. Notable measures were undertaken in Britain by the Labour government of Prime Minister Clement Attlee and in the United States by the Democratic administration of Pres. Lyndon B. Johnson as part of his Great Society program of national reforms. These measures created the modern welfare state, which provided not only the usual forms of social insurance but also pensions, unemployment benefits, subsidized medical care, family allowances, and government-funded higher education. By the 1960s social welfare was thus provided from the cradle to the grave throughout much of western Europe—particularly in the Scandinavian countries—and in Japan and Canada and to a lesser extent in the United States.

The liberal democratic model was adopted in Asia and Africa by most of the new nations that emerged from the dissolution of the British and French colonial empires in the 1950s and early '60s. The new nations almost invariably adopted constitutions and established parliamentary governments, believing that these institutions would lead to the same freedom and prosperity that had been achieved in Europe. The results, however, were mixed, with genuine parliamentary democracy taking root in some countries but succumbing in many others to military or socialist dictatorships.

Contemporary Liberalism

The revival of classical liberalism

The three decades of unprecedented general prosperity that the Western world experienced after World War II marked the high tide of modern liberalism. But the slowing of economic growth that gripped most Western countries beginning in the mid-1970s presented a serious challenge to modern liberalism. By the end of that decade economic stagnation, combined with the cost of maintaining the social benefits of the welfare state, pushed governments increasingly toward politically untenable levels of taxation and mounting debt. Equally troubling was the fact that the Keynesian economics practiced by many governments seemed to lose its effectiveness. Governments continued to spend money on programs aimed at stimulating economic growth, but the result too often was increased inflation and ever-smaller declines in unemployment rates.

As modern liberals struggled to meet the challenge of stagnating living standards in mature industrial economies, others saw an opportunity for a revival of classical liberalism. The intellectual foundations of this revival were primarily the work of the Austrian-born British economist Friedrich von Hayek and the American economist Milton Friedman. One of Hayek's greatest achievements was to demonstrate, on purely logical grounds, that a centrally planned economy is impossible. He also famously argued, in The Road to Serfdom (1944), that interventionist measures aimed at the redistribution of wealth lead inevitably to totalitarianism. Friedman, as one of the founders of the modern monetarist school of economics, held that the business cycle is determined mainly by the supply of money and by interest rates, rather than by government fiscal policy—contrary to the long-prevailing view of Keynes and his followers. These arguments were enthusiastically embraced by the major conservative political parties in Britain and the United States, which had never abandoned the classical liberal conviction that the market, for all its faults, guides economic policy better than governments do. Revitalized conservatives achieved power with the lengthy administrations of Prime Minister Margaret Thatcher (1979–90) in Britain and Pres. Ronald Reagan (1981–89) in the United States. Their ideology and policies, which properly belong to the history of conservatism rather than liberalism, became increasingly influential, as illustrated by the British Labour Party's official abandonment of its commitment to the common ownership of the means of production in 1995 and by the cautiously pragmatic policies of Pres. Bill Clinton in the 1990s. The clearest sign, however, of the importance of this neoclassical version of liberalism was the emergence of libertarianism as a political force—as evidenced by the increasing prominence of the Libertarian Party in the United States and by the creation of assorted think tanks in various countries, which sought to promote the libertarian ideal of markets and sharply limited governments.

Civil rights and social issues

Contemporary liberalism remains deeply concerned with reducing economic inequalities and helping the poor, but it also has tried to extend individual rights in new directions. With the exception of the utilitarians, liberals have always invoked the concept of rights to argue against tyranny and oppression; but in the later 20th century claims to rights became the most common way of articulating struggles for social justice. The prototypical mass movement in this regard was the American civil rights movement of the 1950s and '60s, which resulted in legislation forbidding most forms of discrimination against a large African American minority and which fundamentally altered the climate of race relations in the United States. In the 1970s there arose similar movements struggling for equal rights for women, gays and lesbians, the physically or mentally disabled, and other minorities or disadvantaged social groups. Thus, liberalism historically has sought to foster a plurality of different ways of life, or different conceptions of the good life, by protecting the rights and interests of first the middle class and religious minorities, then the working class and the poor, and finally racial minorities, women, gays and lesbians, and the physically or mentally disabled.

Liberalism has influenced the changing character of Western society in other ways as well, though its contribution in this regard has not always been distinguishable from the effects of modernization, technological change, and rising standards of living. For example, the relaxation in most developed countries of long-standing restrictions on contraception, divorce, abortion, and homosexuality was inspired in part by the traditional liberal insistence on individual choice. In similar fashion, the liberal emphasis on the right to freedom of speech led to the loosening of inherited restrictions on sexual content and expression in works of art and culture.

Encyclopedia Britannica