Among the most persistent narratives in modern politics is the idea that liberalism lost its way in the early 20th century, betrayed its roots and principles, and was supplanted by the welfare state philosophy that now bears its name. True liberals, as the narrative runs, decry the socialism of the New Deal, and keep the flame of limited government, free markets, and individual liberty alive as libertarians and small-government conservatives. Variants of this story drove the tax revolts of the late 1970’s and the Reagan Revolution, as well as contemporary efforts such as Grover Norquist’s anti-tax crusade. Democrats and Republicans alike accept this narrative, which has come to structure much of the current attack on New Deal-era social programs and progressive politics in general. The “lost liberalism” narrative derives, in part, from twentieth century commentators like Joseph Schumpeter and Milton Friedman. In particular, Friedman set up the dilemma of modern liberalism by placing liberty and equality at odds:
The [classical] liberal will therefore distinguish sharply between equality of rights and equality of opportunity, on the one hand, and material equality or equality of outcome on the other...At this point, equality comes sharply into conflict with freedom; one must choose. One cannot be both an egalitarian, in this sense, and a [classical] liberal.

Milton Friedman, Capitalism and Freedom, University of Chicago Press, 1962. The quotation is from p. 195 of 1982 paperback reissue.

Or can one? Progressive liberals should consider the possibility that the “lost liberalism” narrative is an oversimplified history, verging on myth. If the dominant narrative is a myth, or fails at the very least to capture the whole truth about classical and modern liberalism, then the attack on modern liberalism by small-government conservatives loses much of its moral force and intellectual basis. We might start deconstructing the lost liberalism narrative by noting a significant difference between the richness of classical liberal writers versus the narrowness and relative aridity of modern classicals such as Friedman and Friedrich Hayek. Hayek, in his Constitution of Liberty, defines liberalism as an anti-statist philosophy incorporating limited government and exclusively protecting so-called negative rights – protections afforded citizens against government action. Yet we find classical theorists far more balanced in their view towards state power. Montesquieu, in The Spirit of the Laws, imagined that sovereign state power was crucial to guaranteeing freedom from traditional forms of oppression, including private injustice among citizens. No less a capitalist icon than Adam Smith agreed, as did the

Classical liberals were using the power of newly formed. at the core of liberalism is a concern about concentrated power – any power – and its effects on human freedom. Number 51 Classical liberals were concerned about more than individual liberty from government power. The development of social Publius. Neither Locke nor even Adam Smith fetishized the market to the degree seen in Friedman’s Capitalism and Freedom. And in the latter example we see liberalism in its original historical context. Federalist Papers. regardless of station or inheritance. if property owners are not protected from fellow citizens as well as the government. Madison’s defense of private property also displayed large doses of pragmatism. In defending the narrowing of liberalism to protection of private property and free markets. Locke. was considered a fine goal if it meant redistributing wealth from those who had wielded it as power for centuries. Locke. Redistribution. they will not willingly cooperate in self-rule. in those days. for example. contemporary “classical liberals” draw upon the deep defense of property and the market offered by Madison and others. Nor does the market fare any better in comparisons between true classical and modern classical writers. Two Treatises on Government. when he wrote: It is of great importance in a republic not only to guard the society against the oppression of its rulers. is explicitly off limits in the narrow version of liberalism on offer by modern libertarians and would-be inheritors of the liberal tradition. Volume II. the emergence of commercial markets and free trade were seen as a means of redistributing wealth away from landed aristocracies and systems of primogeniture which virtually guaranteed noble monopolies on land and wealth. Number 10. republican governments and commercial trade to assault ancient tyrannies. Private power. Publius. Markets were good because they opened the economy to all citizens. . however.liberalism: liberty or equality versus liberty and equality? 2 architect of our Constitution. new threats became uppermost in the mind of many liberals. This concern naturally causes liberals to favor limited government and the rule of law. James Madison. Locke. Yet the defense of private property offered by Hume. but it should also keep liberals from treating private economic power as “natural” and beyond the scope of community and political decision-making. despite the modern libertarian rhetoric to the contrary. paragraph 50. As the power of the ancient tyrannies waned. and the possession of land is determined by positive constitutions. wrote that In Governments the Laws regulate the right of property. Federalist Papers. and others is far from absolute. If anything. but to guard one part of society against the injustice of the other part. Limited government was good because it prevented the abuses of public power seen in aristocratic societies and absolute monarchies.

and stamping out the notion that liberalism took a detour in 1932. and defend the liberty to which we aspire. and the typical abuses seen in the pursuit of the same. family ownership. And liberalism did not stand still. The former reality of small business. is twofold. and individual effort were replaced within several generations by massive corporations. continuing in the Progressive Era and achieving real power during the New Deal. For the essence of liberalism. preserve. liberal narrative stretching from John Locke through James Madison to Franklin Roosevelt. and especially progressive liberalism. Progressives own a proud. . None should be considered uppermost. to this era. My aim has been to show that if the New Deal is a departure from anything. The essence of liberalism is the search for a politics in which liberty and equality are sufficently balanced so as to avoid the danger of the many absolutisms which threaten us. Regulatory capitalism is designed to provide protection against the enormous distortions that concentrated economic power can create in the market. of a type never before seen in America. or of the excessively laissez-faire version of liberalism popular among elites in the Gilded Age. we start by reclaiming our past. Yet liberals in America continued to respond in innovative ways to new threats. whether public or private. representative government. or any specific scheme of rights. is not just private property. Each is merely a method for reaching a goal. I began this essay by pointing out that the New Deal is often portrayed as the moment where classical. markets. It is possible to trace much of the modern classical view of liberalism. Rapid industrialization and rapid immigration-led population growth resulted in massive shifts in income disparities. In particular. it is a departure only from modern cariactures of liberalism. but neither should any be considered obsolete. and yes. or true liberalism was lost in America. and the liberalism characteristic of European political parties. And I suggest that if we hope to seize control of the modern political narrative. as we see today. the American experience of capitalist monopolies in the Gilded Age caused a resurgence of the ancient concern over the tyranny of unchecked private power. For only by avoiding absolutisms can we achieve.liberalism: liberty or equality versus liberty and equality? 3 democracy and outright socialism in Europe caused a hardening of laissez-faire commitments among late nineteenth century liberal theorists. concentrations of private wealth and power. The result. And welfare liberalism aims to provide a decent minimum to those who are the losers in what has become the only economic game in town. and each method has been crucial at various points in our history. One sees reactions to abuses of private power beginning with the Populist movements after the Civil War.

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