Nov
29
The History of Classical Liberalism
Filed Under Uncategorized
First Published - Thursday, December 26th 2002
All written history prior to the advent of Classical Liberalism is the history of an elite oppressing the masses. This elite has been at different times socialist and feudal. Classical Liberalism is an individualistic philosophy. It respect the property of the individual and considers all taxation as theft and therefore by definition evil. This philosophy thrived in the mid-19th century after the repeal of the Corn Laws. After the great depression Socialism and Modern Liberalism became the dominant political philosophies of Britain. Even the U.S.A. – a nation whose constitution is fundamentally of a Classical Liberal nature – experimented with Modern Liberal economic policies after the depression. Classical Liberalism although it appeared dead as a practical philosophy found it’s ideas once more accepted after the stagflation of the 1970’s had brought the economies of the west to ruin. Bizarrely the former foes of the Classical Liberal approach – Conservatives- found themselves as the ones responsible for it’s resurgence.
The birth of Classical Liberalism
Classical Liberalism was born in 18th century Britain. The main advocates of this philosophy were Adam Smith, Jeremy Bentham and John Locke. These men are now considered the intellectual greats of their day. At the time in which they were writing however they were in a minority among their peers. The views that they expressed were radical. Locke preached that the only role of government was protection of life, liberty and property. Smith broke the mould by suggesting that men acting out of self-interest produced the greatest benefit for society and by advocating faith in the “invisible hand” of the market and free trade. Bentham created a brand new philosophy of which the individual is central – the philosophy of Utilitarianism.
The Triumph and Fall of Classical Liberalism
By 1846 Protectionist policies had led to the starving of the poor due to the artificially high price of domestic corn. The Conservative Prime Minister of the time, Robert Peel, viewed this situation as intolerable. The intellectual elite looked for a solution. There was only one realistic solution -accepting the principals of free trade that Adam Smith had so masterfully propagated 70 years earlier. The low taxation and free trade policies of Smith had led to 30 years of prosperity for Britain.
The seeds for the downfall of Classical Liberalism had, however, been sown in 1867 when the 2nd Reform Act was passed. This Reform Act had given working class men the vote for the 1st time. The political parties then had to fight for the votes of the newly enfranchised. Many in the Liberal Party felt that the way to do this was by offering the working classes better living and working conditions for votes. In doing this they were turning their backs on Classical Liberalism which preached that the majority would be better off the less the government intervened. The logic they used to justify this turn around was that people needed certain things to be free- healthcare, fewer working hours, education, housing, free cocktails and chocolate éclairs etc. This philosophy became known as Modern Liberalism.
In 1929 Wall Street crashed – causing mass unemployment. Those of a Classical Liberal mindset advocated letting the economy sort itself out as any government intervention would slow down the process. The intellectual elite was in fear of fascists or communists being elected and so looked for solutions. They rejected F.A.Hayek’s laissez-faire solutions offered in his1931 book “Prices and Production” and instead opted for the interventionist policies of J.M.Keynes, which offered “quick-fix” solutions to the problem. Even though Hayek warned of the damage that Keynesian policies would cause in the long run in his review of Keynes’s “Treatise on Money” in “Economica” in 1931, Hayek’s warning were ignored.
The Wilderness Years for Classical Liberals
After the Conservative landslide defeat of 1945 to the Labour Party, a Modern Liberal, semi-socialist cross-party consensus emerged. This consensus would remain in Britain until 1976. In these post-war years it appeared Classical Liberalism was dead. There were however Classical Liberals who rebelled against this consensus. In Britain the most noticeable rebel was Enoch Powell. Powell had lead the rebellion of January 1958 in which the entirety of Conservative Prime Minister, Harold Macmillan’s Treasury team resigned due to the government’s monetary policy. Powell had predicted the stagflation that was going to occur in just over a decade. In 1971 Powell published a book called “Still to Decide” in which he laid the foundations for Thatcherism. In this book Powell advocated radical Trade Union Reform and Privatisation, although he called it De-nationalisation. It would be difficult to claim Powell was a Classical Liberal however due to his views on Immigration and other issues being distinctly not Classical Liberal. It is important though to recognise his contributions towards keeping many Classical Liberal ideas alive in Britain in an age of Keynesian consensus.
Powell was not the only intellectual rebel. F.A.Hayek, in 1944, then a professor at the LSE published a book, which was barely acknowledged at the time called “The Road to Serfdom”. In this book Hayek illustrated the errors of socialism and preached Classical Liberal economics and social attitudes.
An American Economist, Milton Friedman, published a book which would one day revolutionise society in 1962. This book was called “Freedom and Capitalism”. In it Friedman explains how the Great Depression was caused by Government mismanagement of the money supply and not by Classical Liberal economics.
While all 3 of these publications were barely noticed when published they would become responsible for the resurgence of Classical Liberal ideas.
The greatest threat to Modern Liberalism in the consensus years came in the U.S.A. and not Britain. In 1964 Barry Goldwater stood for the Presidency on a platform virtually identical to the one that swept Ronald Reagan to victory in 1980. Goldwater, however, lost the election due to goodwill felt towards the Democrats in the aftermath of President Kennedy’s assassination.
The Classical Liberal Phoenix
In the winter of 1976/77 Labour Chancellor Denis Healey accepted the biggest loan the IMF had ever given a nation in return for changing Britain’s economic policy. Modern Liberal policies had lead to an artificial build up in unemployment and massive inflation. Together this was known as stagflation. While the western world was suffering the consequences for ignoring Hayek in the 1930’s, the intellectual elite were baffled. It took the IMF forcing the monetarist policies of Milton Friedman onto Britain and the dynamic reforms of Margaret Thatcher to fix the nations economy. At around the same time Ronald Reagan was making similar reforms in the U.S.A.
Reagan and Thatcher while Classical Liberal in the economic sense were Conservative in the domestic sense. Hayek in the “Constitution of Liberty” had written a chapter called “Why I am not a Conservative”. In this he explained that he believed in a state, which does not interfere in any action taken by an individual who does not affect the property of another individual. This attitude as seen by the Conservative attitude towards euthanasia and drugs is not Conservative but Classical Liberal. Thatcher and Reagan can be described as neo-Liberal or neo- Conservative for their politics of the free economy and the strong state.
Classical Liberalism as a result of the 80’s reforms however has received a renewed interest and looking at the increasing membership of Classical Liberal [popularly known as Libertarian] institutions it is obvious that Classical Liberalism is now a dominant political ideology once more.