3.3 The Development of Varieties of Liberalism

Classical Liberalism

Classical liberalism is a system of thought that combines elements of natural rights, limited government, and capitalism. Capitalism is an economic arrangement based on private property and the freedom to invest one’s wealth or talent in pursuit of profit. Classical liberalism endorses capitalism both within a country and in free trade among nations, as long as free trade is conducted within the moral limits of the natural law. Locke would say that classical liberalism endorses liberty, but it does not endorse moral license, or the freedom to act in ways that are destructive of the rights of others, the self, or the foundations of social peace and prosperity.²⁴

Classical liberalism was revolutionary. It inspired the overthrow of King James II of England and influenced the Declaration of Independence and the American Revolution (1776–1783). Later, it inspired thinkers to reflect on the forms of government that best prevent governmental abuse of power. Some argued that expanding suffrage, or the right to vote, enhances the people’s ability to ward off such abuse. For this reason, the framers of the US Constitution generally held that all male citizens who owned property should be entitled to vote for representatives. Benjamin Franklin went further, arguing that all adult White male citizens should be allowed to vote, a position the United States would adopt by the 1830s.²⁵ Defenders of expanding the right to vote argued that all citizens of a minimum age (excluding felons) should be entitled to vote because no person will protect an individual’s rights more than the person themselves. Building on these ideas, an argument emerged for prizing the intrinsic value of voting as a reflection of political equality.²⁶ In 1870, the 15th Amendment to the US Constitution expanded the right to vote to Black Americans, and in 1920, the 19th Amendment afforded the right to women.

John Stuart Mill and the Expansion of Personal Liberty

In his work The Subjection of Women (1869), English writer John Stuart Mill (1806–1873) argues for the full inclusion of women in the rights that were emerging in societies based on classical liberalism. In 1859, Mill published On Liberty, advancing the argument that modern societies should expand their commitment to the value of individual freedom. In it, Mill argues that because even great leaders supported by a broad social consensus can make terrible mistakes, it is to society’s advantage to encourage open debate and discussion of all views, however unpopular. Liberty, he argues, should be broadened not only in matters of speech and the press but also so that the law does not restrict the freedom of adults—even if individual adults exercise their freedom in ways that cause them personal harm, as long as that exercise does not harm another person. In this degree of commitment to personal liberty, Mill endorses views that classical liberals such as Locke would reject. According to Locke, the purpose of government is to enforce the natural law, and one of the principles of the natural law is the preservation of one’s life and natural talents. For Mill, both legal measures and pro-liberty cultural norms must protect personal liberty, even when the exercise of that liberty presents a risk to the acting individual, as long as it does not harm anyone else. Mill grounds this standard, which he calls the harm principle, on two assumptions: that freedom encourages an experimentation and open dialogue that allows people to reject dangerous ideas, and that the high value of personal liberty demands nothing less.²⁷

FDR and the New Deal

The Great Depression (1929–1941) had a significant impact on the classical liberal tradition. At the low point of the Great Depression, more than 25 percent of American workers were unemployed, and a massive contraction in economic activity led producers into waves of bankruptcy. Between 1933 and 1939, the federal government of the United States under President Franklin Delano Roosevelt (FDR) launched the New Deal, a set of substantial economic regulations and social welfare programs designed to protect consumers, expand the economy, improve the condition of workers, and ease the financial strain on retirees. These programs included the Federal Deposit Insurance Corporation (FDIC), the Federal Housing Administration (FHA), and the Social Security Board (now the Social Security Administration).

Figure 3.5 One New Deal program, the Works Progress Administration, employed millions of Americans during the Depression. (credit: “Work Pays America! Prosperity” by Vera Block/Federal Art Project/Library of Congress)

FDR questioned the classical liberal belief that the expansion of the government should be held in check, instead advocating for confidence in the role of government to stabilize the economy and create safety net programs. Doing so, FDR argued, would ensure the long-term durability of classical liberalism’s commitment to individual rights and freedom from governmental abuse. It would forestall the need for more extensive government control of private property and tighter restrictions on individual liberty—two much graver threats to classical liberalism’s emphasis on individual rights and limited government.²⁸

F. A. Hayek

Several thinkers, including economist F. A. Hayek (1899–1992), were skeptical of the breadth of governmental expansion under the New Deal. Although Hayek accepted the need to expand the role of the state in regulating economic activity, he contended that only a sizable government with substantial and invasive enforcement powers could regulate a large nation’s economy. In The Road to Serfdom, Hayek argues that extensive state planning of the economy empowers the government in a way that limits freedom and could eventually lead to government regulation of the whole of people’s lives. According to Hayek, expanded government creates entrenched bureaucrats who avoid democratic accountability. Once established, he argues, state regulations and large-scale programs are very difficult to roll back, and expanded economic regulations ultimately lead to reduced prosperity for all. The net result, according to Hayek, would be a new form of serfdom—a condition of limited freedom, entrenched hierarchies, and generalized poverty.²⁹

Hayek argued that once substantial regulations became law, the government would likely create a command economy, setting the prices of goods and services. According to Hayek, this would be a further detriment to economic prosperity because such prosperity depends on the efficient and rational allocation of resources by producers and consumers, and this can only happen in a free market, where prices are set by supply and demand with little to no government regulation. The free market communicates to both producers and consumers, via product pricing, the supply of and demand for various products. Prices go up when a demand is not being met, and producers shift production to make the products that consumers demand. Prices go down when a product is overproduced, and production shifts to making other products. To rely on the government to set prices, Hayek maintained, would lead to the overproduction of some goods, the underproduction of others, and a decline in the overall standard of living.³⁰