INTRODUCTION

Liberalism is a political ideology portrayed as the ideology of the industrialized West.

Although liberals of all time never waver in their faith in protecting the “liberty” of individuals,
the meaning of the word keeps changing over time.

The main purpose of this essay is to examine the differences of classical liberalism and modern
liberalism. The first part will provide the definition of “liberalism” in general, focusing on the
shared elements in all forms of liberalism. The second part will introduce the history of
liberalism, from classical and modern liberalism till contemporary neoliberalism, and try to
illustrate the connection between their main doctrines and historical contexts. In the last part, I
would closely examine the differences between classical and modern liberalism, and discuss
the boundary between liberty and government intervention in contemporary society.

DEFINITION OF LIBERALISM

Liberalism, as implied in its name, is a political ideology whose main concern is to protect and
enhance the liberty of individuals. As a political doctrine, liberalism did not emerge until the
early nineteenth century. However, liberal thoughts and values had been developed through
enormous social changes from the sixteenth century, and can even be traced back to as early as
ancient Greece and Rome, although there are some distinctions in the main elements.
(Heywood 46)

There are several common elements shared by all variants of liberalism. According to John
Gray, they can be summed up in 4 points(x). Firstly, individualism. It reflects the belief that
human beings are foremost individuals, rather than subjected to any collectivity. Therefore,
liberals aim at constructing a society in which individuals are provided the freedom to pursue
his or her own good or happiness. Secondly, egalitarian or equality. Liberals believe that all
individuals are born equal, in terms of two equal rights, namely “legal equality” and “political
equality” (Heywood 46). However, as people have different talents or abilities, liberals are
devoted to provide equal opportunities for everyone to realize their uneven potential. Thirdly,
universalism. They affirm that the human process a unified morality. It should be taken in
account ahead of the difference of their cultural. Fourthly, meliorism. By meliorism, liberalism
firstly implies a belief in the reason of human beings. Through reasoning, individuals can make
wise judgments and resolve disputes by the means of debate and discussion. In this way, the
society, which is the collection of individuals and its construction are generally progressing.
On this premise, liberals believe that people should be offered enough toleration in order to
pursue their own interests. It is under this circumstance that the balance and progress of a
society can be achieved.

However, liberalism has several different sources. “It owes something to Stoicism and to
Christianity, it has been inspired by scepticism and by a fideistic certainty of divine revelation
and it has exalted the power of reason” (Gray: x). Apart from its multiple sources, liberalism
is also sensitive to the variation of time and conditions. French liberalism and English
liberalism have many significant differences. Classical liberalism and modern liberalism are
notably different in many ways. For these reasons, liberalism is sometimes seen as a meta-
ideology, which consists of rival beliefs and values.

HISTORY OF LIBERALISM

CLASSICAL LIBERALISM

The political foundations of classical liberalism root in a series of social changes from the
sixteenth century. The late Medieval saw the dissolve of feudalism and the rise of absolutism.
Meanwhile, the power of papacy was weakened and religious reformation was seen in
European countries. Rulers had to enforce the conformity either to Roman Catholicism or
Protestantism. This process triggered conflicts within and among the states. One example was
the Thirty Years’ War from 1618 to 1648, which brought Europe an enormous damage. In the
next century, as industrialization gained pace, a new social class, namely the middle class
emerges. They yearned for more political participation and economic freedom. These factors
triggered the revolutions in the seventeenth and eighteenth century, the most notable of which
were the Glorious Revolution in England in 1688, the American Revolution from 1775-83, and
the 1789’s French Revolution. In this circumstance, liberalism gradually emerged as a political
doctrine. (Encyclopædia Britannica)

In the light of the philosophy of English liberals John Locke , French political philosopher
Montesquieu , and even earlier the individualism of Thomas Hobbes , early liberals aimed at
restricting the power of the government over individuals. In the word of UK-born political
activist and pamphleteer Thomas Paine, the government is a “necessary evil”. (Heywood,
2007:47) Opposing feudal privilege and absolutism, liberals emphasize the importance of
constitution and a representative government. The structure of a minimum government was
supplemented by Montesquieu. He designed a mechanism of check-and-balance by advocating
the separation of three power of the government: legislative, executive and judiciary.(Gingell,
Little and Winch 105) Classical liberals, such as Locke also asserted that private poverty is the
foundation of liberty of individuals (qtd. in Gingell, Little and Winch 71-79).

Another crucial element of classical liberalism is economic liberalism. This principle was
mostly provided by Adam Smith in The Wealth of Nations. In a word, classical liberals
advocate Laissez-faire, believing in the self-regulating of the market and the minimum of
government intervention, which guarantees liberty of individuals and the prosperity of the
market (Heywood 47).

The philosophical justification of classical liberalism is supplemented by utilitarianism. It was

put forward by Jeremy Bentham, James Mill and J.S. Mill. They believe that the goal of a
society is to obtain “the greatest happiness of the greatest number”. In achieving this goal, a
representative government which upholds liberty is necessary. (Gingell, Little and Winch 225-
228)

Classical liberalism had a profound impact on the politic throughout the centuries. It inspired
the creation of unified, independent, constitutional states which based on representative
principles and the rule of law. In After the Glorious Revolution, under influence of the Whigs,
who was the precursor of today’s Liberal Party, precepts of classical liberalism had long
governed England. In France, liberal goals were achieved in 1871 by the Third Republic.
Another significant success was the found of the United States in 1776.

In the economic realm, numerous feudal restrictions on manufacturing and internal commerce
were abolished. Meanwhile, tariffs and restrictions on imports intended to protect domestic
manufactures were put into end. (Encyclopædia Britannica)

MODERN LIBERALISM

By the end of nineteenth century, problems had gradually revealed in the free market economy
in England and North America. Profits of the booming industry were concentrated in the hand
of big companies, while the mass benefited very little. Consequently, the gap between the rich
and the poor was significantly enlarged. Moreover, as the poor mass was not able to consume,
there were a large surplus of supply, which led to depressions. Meanwhile, as the rich gained
more and more power, they were increasingly able to influence politic and limit competition.
(Encyclopædia Britannica)

In this circumstance, liberals of the late nineteenth century and early twentieth (e.g. T.H. Green
and L.T Hobhouse) started to seek for reforms. Their ideas were strongly influence by J.S Mill,
who was widely recognized as the watershed philosopher in liberalism. (Grey 30-31; Heywood
48)

Generally, modern liberals hold that freedom does not equal to being left alone. Being left
alone, human beings are weaker instead of stronger. They would be stuck in poverty, hunger,
illness and helpless and that enjoy less liberty to realize themselves. Hence, Social welfare in
particular is to be provided by the government.

Meanwhile, the laissez-faire capitalism was rejected by new liberals. Ideas of classical liberals
were proved defective in the industrialization and were further challenged by the two world
wars and the Great Depression in the 1930s. In The General Theory of Employment, Interest,
and Money , UK economist J.M. Keynes argued that it was laissez-faire policies that resulted
in huge unemployment and economic instability, thus the government should manage the
“aggregate demand” in the economy through tax and spending policies. (Heywood 190)

From 1950 onwards, government intervention had expanded into various areas of life. (Grey
28) Social welfare starting from free public education and workers’ accident insurance were
established.

Modern liberalism reached its peak in the post war period, when everything, from industries to
the dignity of individuals, was to be reconstructed. Welfare programs were further expended
throughout western world, including social insurance, pensions, family allowances, medical
care, and government-funded higher education. (Encyclopædia Britannica)

In economic sector, “visible hand” of the government had achieved remarkable results. For
example, President Franklin Roosevelt’s New Deal (1933-1939) successfully lifted American
out of the Great Depression.

NEOLIBERALISM
Neoliberalism is a retrieve of the political economy in classical liberalism. The ideas were
developed by twenty century’s economists, e.g. Friedrich Hayek and philosophers such as
Robert Nozick (Heywood 52). They address the problem of the slowing down economic
growth which starting from the mid-1970s in the western world. (Encyclopædia Britannica)

Neoliberals hold that intervention, whether with a good intention or not, would have negative
effects. The best solution should still be found in “self-help, individual responsibility and
entrepreneurialism” (Heywood 52). One expression of the idea was Margaret Thatcher’s
policies. She also asserted that “there is no such thing as society, only individuals and their
families” (Heywood 52).

COMPARISON OF CLASSICAL AND MODERN LIBERALISM

NEGATIVE LIBERTY V. POSITIVE LIBERTY

The distinctions between classical and modern liberalism root in their different understanding
of liberty.

English philosopher Isaiah Berlin made a profound distinction between two concepts of liberty,
which he called “negative liberty” and “positive liberty”. By being free in a negative sense,
Berlin meant “not being interfered with by others” (123). While in the second case, freedom
means the capability of the individual “to be his own master” (131). Classical liberals focus on
the maximizing of negative liberty, while by contrast, modern liberals hold that the government
should assistant individuals to realize their positive freedom.

MINIMUM STATE V. SOCIAL WELFARE

By advocating a minimal state, classical liberals focus on the maximizing of negative liberty.
In a minimal state, only three core functions are left in hand of the government. Firstly,
maintaining domestic order with organizations such as police force. Secondly, it should enforce
contracts or agreements between citizens, which means the function of judiciary. Thirdly, the
state should protect the people from external threat, thus a military is needed. (Heywood 99)

By contrast, modern liberals hold that the government should assistant individuals to realize
their positive freedom. Therefore, social welfare programs are strongly upheld. However, there
was still a boundary. According to T.H Green, when and only when individuals are in threat of
being enslaved by liberty should the government intervene (Tyler).In another word, social
welfare should help those who cannot help themselves.

LAISSEZ-FAIRE V. GOVERNMENT INTERNVENTION

Adam Smith asserted that the “invisible hand”, namely the self-interest of the individual in a
free market would lead to the well-being of the economy. In order to benefit himself, one has
to produce according to the demand of the market, which Smith phrased as “invisible hand”
(Smith vol. 2a) On the contrary, government intervention is dangerous as it was exercised “in
the hands of a man who had folly and presumption enough to fancy himself”. (Smith vol. 2a)

By contrast, modern liberal economists, such as Keynes, pointed out that economy is not
perfectly self-managing. Only under the rule of supply and demand, monopolization is
unavoidable. Profits fall into the hands of a few people while the mass are incapable of
consuming, which doom the end of capital circulation economic prosperity. Only with
government intervention can the economy maintain a prolonged prosperity. (John Maynard
Keynes).

However, it is notable that the idea of free market was never fully abandoned by modern
liberals even Keynes. Unlike socialists, they had no intention to nationalize the economy or
interfere with the mechanism of supply and demand. According to Keynes, the “visible hand”
functions not by cutting wages to insure full employment, but by “expansionary fiscal policy”,
such as spending money on public projects to expand demand.(Sharpe)

In order to evaluate both concepts of liberalism, we should take in to consideration their

historical contexts. Because every political philosophy is the product of a certain time and
circumstance and therefore has its limitation.

As showed above, classical liberalism was born in a time of the transformation from feudalism
to absolutism. It was a time when the government still ruled over people. Hence, the deep
suspicion of the government is reasonable. In a time when the negative liberty of individuals
were everywhere under threat, it is important to introduce the concepts of “social contract” and
restrict the power of government at any cost.

Modern liberalism however, addressed mainly the problem emerging in industrialization. It

had been observed that even if free from all external restrictions, sometimes people are still
vulnerable and incapable to realize themselves. In addition, with the development of
representative democracy, government itself had gained more trust that it can represent the will
of the individuals.

Nowadays the idea of social welfare and economic intervention has been widely accepted in
most western countries. However, there are still a lot of questions. One of them is that if
government is justified to intervene, what should be the limitation?

With respect to social welfare, modern liberals have provided the answer themselves.

In his Theory of Justice, John Rawls suggested two principles to justify redistribution. The first
one, which he called equal principle, suggests that individuals should have equal rights to basic
liberty. The second principle, which is difference principle, inequality is justified, only if it
promotes the well-being of the worse-offs compared to in the condition of equal liberty.
(Rawls, John)

This boundary is of great importance. Because, firstly, equality is an indispensable principle of

liberalism. Policies in favor of the weak should be designed to compensate the existing
inequality, not to create new inequality. Excessive protection would jeopardize social equality
and lead to negative consequences. Take the debate over Affirmative Action in the United
States as an example. This action was aimed to redress the disadvantages caused by historical
discrimination. However, the clauses had aroused intensive controversy, being accused of
generating “inverse discrimination”. For example, in the 1978 Regents v. Bakke case, student
Bakke sued the Medical School of University of California at Davis, for it reserved sixteen
present of studying slots to minorities, which was ruled by the Supreme Court as
unconstitutional. (Fullinwider) In this case, intervention did not only help the worse-offs, but
also harm the better-offs.

Secondly, excessive welfare would make the people depend too much on the state and lose the
motion of self-realization. As a result, the drive for social progress will be impeded. For
instance, nanny state, which provide social care “from curdle to grave” are always criticized
for creating an underclass of welfare dependents. (Nanny state)

However, as for economy, the line is much vaguer. Neoliberals of our time remind us the
warning of Adam Smith that economic planning was doomed to fail. The reason is however,
according to Von Hayek, that even if with good intention, the government would never have
enough knowledge to make the right decision. Hence, they rejected the direct government
intervention to promote demand, but suggested that government should maintain a stable value
of money. (Ingham)

From the 1970s, Keynesianism seemed to reach its bottleneck. Regulations concerning the
insurance, banking, and financial industries were eliminated in the next decades.
(Encyclopædia Britannica). Relaxed regulations have brought good effects, but would that be
the permanent prescription?

The answer is in the negative. The economic crisis of 2007-08 originating in the financial
system in the U.S. exemplified the shortcoming of insufficient regulation. In his last term,
President Barack Obama undertook a series of policies that re-regulate or nationalize the bank
(Encyclopædia Britannica). In Neoliberalism: A Critical Reader edited by Alfredo Saad-Filho,
the defects of contemporary Laissez-faire policy were examined. These include
unemployment, enlarged domestical and international inequality, and the destruction of
environment. (Saad-Filho and Johnston 5)

The development of society sometimes shows a pattern of a waving pendulum. Capitalism is

and will always trying to find a balance between efficiency and equality.

CONCLUSION

From its sprout in the seventeenth century, to its transformation starting in the late nineteenth
century, and until the revival of its original ideas in the recent decades, liberalism constantly
adjust itself according to time and circumstances. Due to different historical contexts, Classical
and modern liberalism explained “liberty” from different perspectives. Compared with
classical liberals, modern liberals have more confidence in the government and that uphold
more intervention in social and economic affairs. Nevertheless, the belief in the supreme value
of individuals and the reason of human beings, the respect for equality and universality of
morality remain unchanged. In contemporary society, although it have been widely accepted
that government should protect the positive liberty of individuals, what is the limitation of
government intervention will remain a question.