Classical liberalism in a nutshell
Classical liberalism is too often caricatured by its opponents.
Indeed, its Leftists opponents equate it with the defense of the unbridled domination of capitalists; for them, liberalism simply consists of a policy that favors the interests of the rich and the powerful at the expense of the majority of the population.
But is it really what classical liberalism is ?
Let’s found out !
Liberalism is first and foremost a political doctrine.
Liberalism is first and foremost a political doctrine stipulating that the government is instituted by civil society to protect the fundamental freedoms and rights of individuals.
To put it in John Locke's terms, the main role of government must be to protect the natural and inalienable rights of the individual, which are the rights to “life, liberty, and property.”
Liberty here refers to the fact of not being prevented from doing what one wants, of being able to pursue one's own goals and interests, as long as one respects the rights of others (that is, their life, liberty, and property).
Among the traits of a liberal policy, we also commonly add pluralism, freedom of conscience, expression, and association, tolerance, etc., at the risk of making a long and random list.
As far as I'm concerned, these are simply corollaries to the protection of life, liberty and property of the individual.
The raison d'être of government according to classical liberalism.
Instituted by individuals to guarantee their freedom and natural rights, the government must rest on the consent of the governed.
Indeed, individuals are citizens and not subjects. Their obedience to the government is conditional. If it becomes tyrannical and violates their natural rights, their duty of obedience ceases immediately.
A liberal policy thus rests on a form of popular sovereignty. To exercise power, citizens choose representatives whom they will task with speaking and acting on their behalf and defending their interests.
Through elections, civil society will make its preferences known in terms of governance and will sanction governments that it deems incompetent. As the preamble to the United States Declaration of Independence brilliantly summarizes:
“We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness. That to secure these rights, Governments are instituted among Men, deriving their just powers from the consent of the governed, That whenever any Form of Government becomes destructive of these ends, it is the Right of the People to alter or to abolish it…”
Protection against arbitrariness.
While the governement is necessary to guarantee public safety and the protection of individual rights, liberals also observe that people tend to abuse the power entrusted to them. People also have a tendency towards partiality and may lack discernment. It follows that the power of the governement must be limited. Its essential role must be to ensure justice (enforce natural rights) and nothing more.
The salvation of souls, as well as the life choices of the individual in general, are not within its competence and must remain a private matter. Power from the ballot box is no exception.
The sovereignty of the people, for classical liberals like Benjamin Constant, must also respect the natural rights of the individual. A democratic power, even if it enjoys the support of a large majority of the population, can be just as tyrannical as any other type of power (monarchical, aristocratic, etc.).
“The sovereignty of the people is not unlimited; it is circumscribed within the bounds that justice and the rights of individuals trace for it. The will of an entire people cannot make just what is unjust.”
Benjamin Constant. Political Writings, Paris, Gallimard, 1997
It is therefore important to protect individuals from the arbitrariness of those in power by putting in place constitutional rules and institutional mechanisms to ensure that the governement confines itself to the purposes for which it was instituted. To guard against abuses of power by the political authorities, liberals thus defend three main principles:
The separation of powers (executive, legislative, and judicial); aimed at avoiding the concentration of power and preventing the abuse of authority.
The existence of checks and balances mechanisms ; which ensure that power does not become tyrannical.
The “Rule of law,” meaning in substance that individuals are equal before the law. The law must apply in the same way to everyone, regardless of their social status, race, or religion, including those in power. From this also follows the right to benefit from impartial justice and a fair trial procedure (“due process”).
In summary; the main purpose of government is to protect individual rights of the members of the civil society, namely the right of life, liberty, and property.
Economic liberalism is the corollary of respecting “natural rights.”
I will propose a very simple definition of economic liberalism.
A liberal economic policy simply consists of protecting basic economic freedoms, which are the freedom to work, to undertake, to save, to invest, and to trade. One can say that a liberal economic policy is only the corollary of respecting the rights of the individual.
Liberalism is the protection of freedom with respect for the rights of others.
We have an interest in living in society. However, this implies that certain destructive behaviors are prohibited (aggression, theft, etc.). Natural rights are the condition for this social cooperation.
Indeed, my rights to life, liberty, and property imply for me the obligation to respect these same rights in others, without which life in society would be compromised. By desiring that my freedom and my property be respected, I am rationally led to want rules that guarantee these same rights for others.
Guaranteeing these rules is the role of a liberal government.
It follows that I cannot legitimately use violence to obtain what I want from others, which includes deception, various forms of extortion, coercion, theft, slavery, etc.
This means that economic liberalism has strictly nothing to do with any law of the jungle prescribing that the big must eat the small.
The law of the strongest is the antithesis of liberalism.
From this, it results that it is unjust to prevent me from doing what I want with what I own, provided that I do not infringe on the life, liberty, or property of others. It follows, therefore, that it is unjust to prevent me from working, undertaking, saving, investing, and trading the fruits of my labor with whomever I wish.
General prosperity arises from respect for individual freedom; this is the great thesis, so poorly understood, of liberals. This is the whole meaning of the proverbial metaphor of the “invisible hand” of the market.
But what exactly is it about?
The idea is strikingly simple; if we are left free to do what we want, to work, to save, to invest, and to trade, while respecting the rights of others, general prosperity ensues.
Why?
There are only three ways to obtain what I want: theft, work, and exchange.
Theft is destructive of value. Through theft, I obtain what I want at the expense of others. My enrichment implies ipso facto the impoverishment of others. Indeed, by living as a parasite on the exploitation of the labor and production of one's neighbor, not only does the thief consume without producing anything, but he also discourages others from producing.
Who would want to produce knowing that they will not be able to enjoy the fruits of their labor?
Theft, and aggression in general, is therefore both unjust and economically destructive.
But, I can also be honest and prefer to obtain what I desire through work and exchange. Through work, I use my resources (physical, intellectual, financial, material, etc.) to produce what I need (to feed myself, clothe myself, obtain housing, etc.). However, it is unlikely that I can satisfy all my needs by myself, at least not at a high level.
The division of labor, through which everyone specializes in a specific field, allows, on the other hand, significant gains in productivity, optimizes the use of resources, and consequently, produces at a lower cost while improving the quality of production. (See Ricardo's law of comparative advantage).
The merits of exchange and therefore, of free trade.
Through the division of labor and the voluntary exchange of goods and services, we thus achieve a level of satisfaction of our needs unthinkable if we each lived in autarky.
The exchange of goods and services, regulated by the law of supply and demand, will allow everyone to benefit from the work of others, while allowing others to benefit from their own services.
“In short, whether it is the labor market, capital, products, or services, the law of supply and demand, using individual interest as a driving force, and competition as a moderating element, will tend, through the mechanism of prices, to fix wages, profits, interest rates, prices, at the equilibrium point that will allow all available supply to be accepted and all solvent demand to be satisfied.”
Louis Rougier. The Genius of the West. Essay on the Formation of a Mentality, Paris, Robert Laffont, 1969.
Free trade, whether it takes place between individuals or nations, allows for mutual enrichment.
Indeed, in the market, I can only obtain from others what I desire if I offer them something they desire even more. Thus, exchange allows for the satisfaction of the needs of those who engage in it, and this without the need for the state to plan production and redistribute wealth. In a free market, my prosperity thus rests on my ability to do better than my competitors by responding more effectively to the needs of my customers.
“But man has almost constant occasion for the help of his brethren, and it is in vain for him to expect it from their benevolence only. He will be more likely to prevail if he can interest their self-love in his favour, and shew them that it is for their own advantage to do for him what he requires of them. Whoever offers to another a bargain of any kind, proposes to do this. Give me that which I want, and you shall have this which you want, is the meaning of every such offer; and it is in this manner that we obtain from one another the far greater part of those good offices which we stand in need of.”
Adam Smith. The Wealth of Nations, “An Inquiry into the Nature and Causes of the Wealth of Nations”, 1776, Book I Chapter II.
To best satisfy the needs of consumers, it is not necessary for me to be a charitable soul, exclusively devoted to the good of others. As an entrepreneur, it is enough for me to strive to optimize the use of my resources and production methods in order to do better than my competitors.
The free market is a vast decentralized system of social cooperation.
Austrian economists such as Ludwig von Mises and Friedrich Hayek have shown how the market is an immense decentralized system of social cooperation, coordinating millions of economic agents through the price system alone.
Indeed, profits and losses are the main indicators that allow the entrepreneur to make rational decisions (what to produce, in what quantities, or in what way), and to calculate their costs.
However, this economic calculation is only possible if prices accurately reflect aggregate consumer preferences as well as the relative scarcity of resources. But for this, prices must be free.
In a planned economy, on the other hand, prices set by the state are artificial and disconnected from reality no longer reflect anything, which makes any economic calculation impossible and leads to an inefficient allocation of resources. Only free prices, resulting from the free play of supply and demand, provide entrepreneurs with the information necessary to assess profits and losses.
Free prices thus allow the market to allocate resources optimally by enabling entrepreneurs to identify consumer preferences, quantities demanded, and the most efficient factors of production, that is, those that maximize production with a minimum of inputs, in order to effectively meet the needs of society. Such is the meaning of the “invisible hand” of the market.
Conclusion :
In summary, liberalism is a doctrine that holds that the main role of the government is to protect the life, liberty, and property of individuals, in other words, to uphold justice.
Economic liberalism is the corollary of this doctrine.
Consequently, one cannot oppose, without inconsistency, political liberalism and economic liberalism. The two necessarily go hand in hand.
The prosperity that exchange and the division of labor allow is only possible on the condition that the government guarantees security and the protection of rights; for who would embark on entrepreneurship and trade if they knew they were at the mercy of criminals? probably not many. This is why a liberal governement must fully and unfailingly ensure its sovereign functions.