Classical liberalism: The

moral and economic core

History of Political Thought

 The Moral Core of Liberalism
 contains an affirmation of basic values and rights
attributable to the ‘nature’ of a human being- freedom,
dignity, and life

 The basic values and rights attributable to the ‘nature’ of a

human being have led to the following hallmarks in the
practice of liberalism:

1. Personal liberty

2. Civil liberty

3. Social liberty

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 The Moral Core (cont’d)

Personal Liberty

 It consists of all those rights guaranteeing the individual

protection against government.

 It is the requirement that men and women live under a

known law with known procedures.

 John Locke, Second Treatise on Civil Government (1689),

chapter 4:

Freedom is… to have a standing rule to live by, common

to everyone of that society and made by the legislative
power erected in it.

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 The Moral Core (cont’d)

Personal Liberty (cont’d)

 Such a law as described by Locke protects all and restrains

the rulers.

 It corresponds to individual ‘freedoms’:

 Freedom to think;
 Freedom to talk;
 Freedom to worship.

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 The Moral Core (cont’d)
Personal Liberty (cont’d)

 Some examples regarding the implication of such

understanding of personal liberty:

 No police officer will enter one’s home at night without

due authority;
 No individual, even the poorest or lowest, will be thrown
into prison without a chance to hear the charges and
argue before a judge;
 No citizen will have to discover one morning that his/her
place of worship is closed…

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 The Moral Core (cont’d)
Civil Liberty

 While personal liberaties in general define a set of

protections, civil liberties indicate the free and positive
channels and areas of human activity and participation.

 In liberal ideology and practice, they are equally valued.

 Basic to the liberal faith is the concept of freedom of

thought.

 The right of individuals to think their own thoughts and learn

in their own ways from experience, with no one impeding the
process.

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 The Moral Core (cont’d)

Civil Liberty (cont’d)

 Freedom of thought is closely associated with:

 freedom expression,
 freedom of speech,
 freedom to write,
 freedom to publish and disseminate one’s thoughts,
 freedom to discuss things with others,
 freedom to associate with others in the peaceful
expression of ideas.

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 The Moral Core (cont’d)
 Civil Liberty (cont’d)

 The achievement and implementation of full civil liberties

took time.

 Until the end of the nineteenth century, there were countries

where people were excluded from political participation because
of their ideas, religion, or race.

 Censoring the books, pamphlets, and the press was a common

practice.

 Freedom of the press together with freedom of association- to

form clubs, groups of like-minded people, political parties, trade
unions, and religious sects had a shaky existence until the end
of the nineteenth century.

 Even today, civil liberties cannot be taken for granted.

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 The Moral Core (cont’d)
Social Liberty

 Freedom of thought and expression and protections against

government in the form of personal and civil rights have little
value if individuals are not given proper recognition so that
they can work and live in accordance with their talents and
capabilities.

 Social liberty - opportunities for advancement or social

mobility

 It is the right of all individuals, irrespective of race and

irrespective of the position of their parents, to be given every
opportunity to attain a position in society in line with their
capabilities.

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 The Moral Core (cont’d)
 Social Liberty (cont’d)

 Without social liberty, personal liberties may become

empty or purely formal prescriptions.

 There is little hope in the lives of disadvantaged Mexican

Americans, African Americans, or the poor, if they know
that they and their children will always remain tied to the
same occupation, status, education, and income.

 Only when equal opportunities are provided for all, can

there be freedom for all.

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 The Economic Core of Liberalism

 Liberalism was the ideology of the middle classes whose

aim was:

 To liberate individual economic activity;

 To establish large trading areas that expanded to the nation-
state, and if possible, to the world;
 To remove all obstacles to the transport and trade of goods.

 It was their aim to reorganize the economy, to introduce

new methods (the market), and to invest capital in
factories and machines.

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 The Economic Core (cont’d)

 Economic liberties deemed to be at least as important as

the moral core.

 The right to property, the right of inheritance, the right to

accumulate wealth and capital, freedom to produce, sell
and buy became an important part of the new social order.

 Emphasis was put on the voluntary character of the

relations between various economic factors
 whether the employer, the worker, the lender, the producer,
or the consumer

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 The Economic Core (cont’d)

 A pattern of social life in which people were born and

belonged in certain social categories or groups was
shattered, and the individuals became free to shape their
own situation by voluntary acts and contractual relations
with others.

 Henry Maine, a famous British historian claimed that the

essence of liberalism lay precisely in this transition from
‘status’ (fixed group relations) to ‘contract’ (individual self-
determination).

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 The Economic Core (cont’d)
 The meeting point of various individual wills, where
contractual relations are made, is the market.

 In the market, the individual, motivated by self-interest,

buys and sells, hires laborers, borrows or loans money,
invests in joint-stock companies or maritime ventures, and
finds employment.

 The market reflects the supply and demand for goods, and
this in turn determines the price of these goods.

 The market is the best barometer to register economic

activity, because demand pushes prices up, and as a result
encourages increased production until the demand is met
and prices begin to level off.
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 The Economic Core (cont’d)
 The system is supposed to be both sensitive to consumer
demand as well as entirely open, allowing for the entry of
new competitors and the exit of unsuccessful ones.
 Prices reflect the volume of demand and supply adjusted to it.

 At least in theory, this is a system which favors the consumer.

 Prices cannot be fixed, the volume of production cannot be
controlled, competition makes monopolies or cartels impossible.

 But producers, again in theory, can make great gains.

 They can take advantage of the same law of supply and demand
in hiring or dismissing workers, in setting the prices of new
products.

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 The Economic Core (cont’d)
Adam Smith (1723-1790) and The Wealth of Nations

 The classic formulation of liberal economic theory was provided

by Adam Smith in his famous work The Wealth of Nations.

 Smith’s purpose was to open the channels of free individual

economic effort and to defend the free-market economy as the
best instrument for the growth of wealth- individual, national,
and worldwide.

 He assumed that each person is the best judge of his or her

actions and interests.

 If people are allowed a free hand to pursue these interests they

will, and by doing so, will improve the wealth of the society and
the nation as a whole.

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Adam Smith (1723-1790) and The Wealth of Nations (cont’d)

 The cure to self-interest, even to greed, was to make it available to

all through the market and competition.
 If some businessmen raise the prices of their goods, others will
also be motivated to produce the same goods, and the supply
will increase and the prices fall.

 This is the famous ‘paradox’:

 Private gain becomes translated into public good.

 Smith favored a limited state and argued that the government

should limit itself to:
 defense, internal order and justice, and ‘certain public works or
certain public institutions, which can never be for the interest of
any individual, or small number of individuals’ (e.g. education,
roads, a postal service, control of certain natural monopolies,
i.e. water, a program of public asistance for the poor)
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Adam Smith (1723-1790) and The Wealth of Nations
(cont’d)

 Smith strongly opposed state interference in the market.

 The market alone would determine prices.
 He was against price-fixing, direct and indirect subsidies,
protectionist devices, and direct grants and preferences for
some industries and goods, as opposed to others.

 He was also the advocate of a worldwide free trade.

 It could provide for competition and, therefore, efficiency
and lower prices that would ultimately mean weath for those
across borders.

 To sum up, Adam Smith believed that a social and

economic harmony would result from free competition and
interplay of economic interests and forces.
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Jeremy Bentham (1748-1831) and Utilitarianism

 Bentham as the real father of liberalism.

 He is the founder of the Utilitarian School, which proposed

that people maximize pleasure and minimize pain, and
that these impulses were the source of human motivation.

 His works, such as Fragment on Government and

Introduction to the Principles of Morals and Legislation,
were about the theories of individualism and economic
freedom.

 His ideas were also followed by James Mill and John Stuart
Mill.

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Jeremy Bentham (1748-1831) and Utilitarianism

 Basic elements of utilitarianism follow as:

1. Every object has a utility- meaning that every object can

address a particular need/desire

2. Utility attributed to an object is subjective. It is what we

like or do not like. There are no qualitative criteria that
can be established by anybody but the user.
 E.g. Poem vs. hot dog!

3. The purpose of our lives is to increase pleasure (that is

to use goods that have utility for each one of us) and to
avoid pain.
 This does not just apply to economic life but also to other
aspects of an individual’s existence.

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John Stuart Mill (1806-1873) and Enlightened Self-
interest

 While self-interest and the pleasure-maximizing

calculations are the motivating force for us all, a point
comes when considerations other than the pure and
immediate satisfaction of interest enter into the equation
of social, political, and economic life.

 Self-interest gives way to enlightened self-interest and

becomes an important criterion to guide the individual.

 If individuals, groups or classes of people act in terms of

enlightened self-interest, they may consider concessions
to other social groups or classes rather than risk the loss
of all they have.

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John Stuart Mill (1806-1873) and Enlightened Self-
interest

 Mill redefines utility. He introduces qualitative standards

and establishes a hierarchy of pleasures on the basis of
criteria that are not subjective.

 Some pleasures are better than others because of their

intrinsic quality, not because of the particular pleasure
they give to an individual.

 But how can the people be led to make the right

decision?

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 John Stuart Mill (1806-1873) and Enlightened Self-
interest

 The utilitarians, and in particular Mill, put their hopes in

education, and in the wisdom and self-restraint of the
middle classes.

 It was the obligation of the state to establish education,

and it was the function of education to enlighten self-
interest in terms of collective, group, social, and national
interests and considerations.

 Education would transform an essentially hedonistic

society into a body of civic-minded individuals.
 These individuals would put the general good above their
own particular pleasure.

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 The State and the Individual

 Liberalism was an anti-state philosophy and remains one

in the sense that, it values the individual and his/her
initiative more than the state and its intervention.

 In the liberal model, individuals and their social institutions

are separate from the state.

 When the sphere of civil society and individuals, and the

sphere of the state intersects, they should cover only a
limited and recognized area.

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The State and the Individual (cont’d)
 It is at best and at most the function of the state:

 to maintain order,
 to see that nobody in his or her relations with others uses
force,
 to protect civil liberties and personal freedom,
 To maintain the economic freedom of the individual.

 In other terms, to protect the individual.

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The State and the Individual (cont’d)
 Liberalism’s approach towards the relationship between
the state and the individual is outlined clearly in John
Stuart Mill’s essay On Liberty. Mill asserts:

1. That every restraint imposed by the state is bad.

2. That even if the individual cannot do certain things well, the
state should not do them for fear that it might undermine
the individual’s independence and initiative.
3. That any increase in the powers of the state is automatically
bad and prejudicial to individual freedoms: it decreases
individual freedom.

 So, according to Mill:

 increase of the powers of the state - decrease in the
powers of individual

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The State and the Individual (cont’d)
 The most crucial problem for liberal thought:
 identification of exactly where the lines separating the state,
on the one hand, and society and individuals, on the other,
intersect.

 Different alternatives exist:

 One might develop an elastic concept, allowing a fairly wide

space in which the state can intervene
 Or, in line with the thinking of early liberals, one might allow
for the minimum area of intersection in which the state can
intervene.
 Mostly to establish order and protection- state as a
‘police officer’ or a ‘night watchman’.

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The State and the Individual (cont’d)
 The smaller the area of state intervention, the closer we
are to laissez-faire liberalism.

 The larger the area of state intervention, the more we

move in the direction of the positive state or the
welfare state, perhaps even getting closer to socialism.

 Different periods in the history of liberalism tell us where

the lines have been drawn.

 War- necessitates state intervention.

 But, considered an exception! Once emergency situation is
over, the situation would go back to the original liberal
model.
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The State and the Individual (cont’d)
 According to John Stuart Mill, all individual acts that affect
the individual- self-regarding acts- are acts that cannot
be controlled or regulated by the state.

 However, acts that concern and affect others- other-

regarding acts- can and should come under the control
and regulation of the state.

 But ‘affect’ does not provide a clear standard regarding

what counts as a self-regarding and an other-regarding
act.
 Smoking?
 Alcolism?
 Ownership and use of private cars?
 Etc.
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The State and the Individual (cont’d)
 A second and more complex set of questions are around
exactly when the state should implement its control and
regulation capacity with respect to other-regarding acts.

 Can it do so only after an act is shown to affect others?

 Or can the state exercise control because an act might affect
others?

 Mill did not address these questions explicitly:

 All individual acts, according to him, are self-regarding

except those that cause harm to others. The criterion
in terms of which other-regarding acts are defined is
that of harm. Only if harm is done can the state
intervene.
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The State and the Individual (cont’d)
 Commerce
 Production
 Consumption considered self-regarding
 Freedom of thought
 Freedom of expression
 Freedom of association

 But the moment we expand the definition of what is

other-regarding and introduce the concept of effect or
influence rather than harm, we move in the oppositie
direction to favor state intervention and regulation.

 The question should be raised here about self-regarding

acts that ‘affect’ the society as a whole.
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