“The Relevance of Classical Liberal and Libertarian Principles in Society Today”

By David M. Hart

[Created: January, 1984] [Revised: 24 October, 2024]

This is part of a collection of Papers by David M. Hart

Introduction.

The body of thought known as Classical Liberalism has a tradition which stretches back at least to the Reformation of the sixteenth century. It was during the religious struggles of Protestants against the Catholic church that the idea of an independent and autonomous individual, acting in a voluntary religious community, first began to be developed with any sophistication. The political and economic implications of the idea of individual autonomy were barely perceived at the time and the gradual development of Classical Liberal theory since the early sixteenth century can be seen as a series of partially successful attempts to work out these implications in the political and economic spheres of human action. The high points of liberal theory were reached in England during the political struggles of the seventeenth century, in France during the late eighteenth century, in the American colonies at the time of their battle for independence from Britain, and in England during the first half of the nineteenth century. [1] After suffering an eclipse for over a century, liberalism is now undergoing a renaissance which will have a profound impact on the evolution of our political and economic communities in the late twentieth century. The aim of this essay is to examine three of the basic principles of classical liberal thought (constitutionalism and the rule of law, prosperity and the free market, and international peace) in order to show their continuing relevance at the present time.

Constitutionalism and the Rule of Law.

It quickly became apparent to those struggling against the power of the Catholic church and the emerging absolutist states that the individual would be left alone to worship and associate freely only if the power of these institutions could be limited in some manner. The initial response was to petition for a dispensation or a political privilege which would recognize the right of religious dissenters to act on their principles. However, the weakness of this approach was that the right of the monarch or the pope to admit or expel the individual from the political and religious community was still acknowledged. What had once been granted could be retracted at a later date, as happened with the Revocation of the Edict of Nantes and as Shaftesbury and Locke feared during the Exclusion Crisis. A more lasting and permanent guarantee of religious and political freedom was required than that provided by grants of privilege and exemption.

The solution to this problem was seen by early liberals to lie in the constitutional limits placed on central authority which the surviving Italian city republics and the United Provinces of the Netherlands had adopted. The Republic of Venice and the United Provinces were the most powerful examples of a political authority whose power to tax, persecute, and regulate economic activity were strictly limited and defined in a constitution. [2] The importance of the constitution was that these limitations were enshrined in a codified body of law which was cumbersome and difficult to change, hence providing a bastion against the whim of arbitrary authority. All acts of the magistrates could be judged against the provisions of the constitution. The individual thus had a powerful ideological weapon against unconstitutional action by the state and political authority, when it acted constitutionally, had the sanction and legitimacy it required to operate effectively. The most important examples of constitutional limits to state power were the Union of Utrecht of 1579, the Bill of Rights of 1688, and the Constitution and Bill of Rights of the United States of America. [3] Unfortunately for individual liberty, these constitutional limits to power were severely weakened over time until the unhappy point was reached where the actions of political authority became as arbitrary and as oppressive as any absolutist monarch or pope had been. There are good economic reasons why political institutions can be manipulated for the benefit of vested interests, [4] but the point which should be kept in mind is that political intervention and oppression have been the normal occurrence in human history. What is very unusual is any departure from this pattern. In the case of the United Provinces, Great Britain, and the United States the power of the state had been temporarily limited by constitutional guarantees and the rule of law, which permitted unprecedented periods of stability and prosperity to develop.

One solution to the present crisis of the welfare state, with its payments to special interest groups and bureaucratic restrictions on individual and economic freedoms, is to return to liberal constitutional principles. [5] Buried amid the morass of interventionist legislation are constitutional limitations to state power which can be strengthened and reformulated to provide a real guarantee of individual rights and liberties. The tradition of constitutionalism in western societies can be used to challenge the abuse of political power without the need to resort to revolutionary or extra-parliamentary measures. When severe constitutional restraints are used in conjunction with a rule of law based upon a strict recognition of individual rights, then the protected sphere within which individuals are free to act is considerably enlarged and, correspondingly, the permitted area of state activity is reduced to the absolute minimum. Only in this manner can liberty and stability be achieved.

Prosperity and the Free Market.

When constitutional provisions have created a legal climate in which property is respected, taxation and other exactions of the state are minimised, and when political stability permits long-term economic planning, the preconditions for economic growth and prosperity have also been established. These conditions have rarely existed in the past and when they have been present it has usually been only for relatively brief periods. One can identify only a handful of really prosperous periods in human history when state power was limited sufficiently to allow trade, capital accumulation, and the extension of the division of labour to take place.

One such period was the Roman Republic and the early Empire before the state and the imperial bureaucracy crushed trade with excessive taxation and subsidies. Another was the late middle ages when the Northern Italian city states enjoyed peace and the freedom to trade before internal corruption and the expanding absolutist monarchies of Spain and France destroyed their independence. [6] The most famous period stretches from the late eighteenth to the late nineteenth centuries when England and North America enjoyed the benefits of a small state and the freedom to develop an expanding industrial economy until protectionism and the welfare measures of the "New Liberalism" began to take its toll. We are currently witnessing the close of the latest period of prosperity, the years since the end of the Second World War, when peace, security of person and property, expanded markets and reduced tariff barriers temporarily allowed a considerable increase in individual standards of living and the expansion of the welfare state to occur at the same time.

Unfortunately, in all these cases the expansion of the free market and the increase in individual prosperity have always been overtaken by a corresponding increase in the power of the state. Interventionist measures are used to siphon wealth away from the market towards non-productive bureaucracies and special interests until such time as the market begins to falter under the increasing burden. The market responds to intervention with the disruptive effects of the business cycle and the transfer of resources and entrepreneurial activity to regions where state activity is less intrusive and burdensome. It is probably the liberal's greatest weapon to be able to show how intervention in the economy creates disruptive and impoverishing effects. [7] Only by pointing out both the unintended consequences (inflation, the business cycle, disincentives to save, produce and sell, waste and overinvestment in declining industries) as well as the intended consequences (the creation of powerful vested interests such as the bureaucracies, privileged industries receiving state subsidies and other such wealth transfers) [8] of interventionism can a powerful case be made for a return to the free market and the prosperity for all which it brings.

This can and should be done in three ways. Firstly, by developing a strong theoretical case for a return to the free market. Secondly, by showing how previous interventions by the state have created economic problems. The empirical demonstration of the justice and efficacy of the market can be either of the form of studies of recent and continuing interventions (public policy studies) [9] or of historical studies of how the market overcame restrictions to create the prosperity we now enjoy and how privileged groups have used the state in the past to secure benefits they would not have received in a free market. [10] The third method is to show the interconnection between the prosperity of the market and the legal system upon which protection of property and the settlement of disputes is based. What needs to be understood is that a system of property rights and the fully free market provides us with both justice and material well-being and that its opposite, the interventionist welfare state, creates uncertainty, arbitrary and bureaucratic government, and restrictions and limits on prosperity.

International Peace.

The greatest threat to the rule of law and the free market was and remains that of war. On an individual level, what could be more opposed to individual autonomy and liberty than the command structure of a large army? [11] On an economic level, the resources required to maintain an army, navy and air force necessitate high taxes, deficit financing, and the compulsory restructuring of the economy away from the production of consumer goods and towards the heavy industry of war production. Furthermore, in addition to the waste caused by the restructuring of the domestic economy, there is the devastation brought on by the process of fighting itself, the death of innocent civilians, and the illiberal frame of mind created by acts of destruction of property and human life.

The identification of war as individual liberty's greatest enemy was made very early on in the history of classical liberal thought. From the Anabaptists of the Reformation, to the Dutch Mennonites and the British Quakers of the seventeenth and eighteenth centuries, and to the founders of political economy in eighteenth century France and England, the overriding impulse has been to abhor war as physically and economically destructive and as morally evil. [12] During the heyday of classical liberalism in the nineteenth century the problem of war was a central concern, in particular, the efforts to restrict the military power of states by creating a peaceful means of arbitrating international disputes. [13] Economically, classical liberals believed that the elimination of trade barriers would tend to integrate the major economies of the world into one harmonious unit where there would be no place for wars over resources or threats and counterthreats of increased protective tariffs. [14]

Although the liberals ultimately failed in their efforts to avoid the catastrophe of modern war, their warnings are still timely. At no time in history have more resources been diverted from productive employment to the wasteful building up of the machinery of war than the present. At no other time has the destructive power of the warriors and their supporters in government and business been greater. [15] Classical liberal theory can provide us with an explanation of how the military vested interest has been able to build itself up at the expense of the civil economy, how international tensions are provoked and intensified by trade rivalry and protectionism, [16] and how war, instead of protecting our lives and property from destruction, serves to accelerate the process of state intervention into the economy and the suspension of individual and civil rights. [17]

Not only does war destroy individual and social prosperity, it also leads inevitably to inflation and the state taking centralized control over increasingly large sectors of the economy. To finance the war effort the public debt is increased, encouraging inflationary schemes to finance it. The expansion of the money supply is used to divert resources from production of consumer goods to production for the war effort. As in the business cycle, inflation causes reckless investment expenditures during the boom and results in the final and inevitable downturn or depression. [18]

Finally, and perhaps most destructively, inflation rips at the very fabric of society, crippling the market mechanism, shattering social and economic integration, and ushering in totalitarian measures. The tragic consequence of war and economic breakdown is that it has so often paved the way for Marxist solutions to the catastrophe of interventionism. It would not be an exaggeration to say that communism and its close relative, fascism, are the inevitable results of war, inflation, and economic collapse. This is in fact what took place in Russia in 1917, [19] in Germany in 1919 and 1923-24, [20] and in China in 1949. So it is not only because of the questionable morality of modern warfare and the immense destruction and misallocation of resources that classical liberals oppose war. The example of the twentieth century shows that total war destroys the market economy and creates the conditions for "War Communism" during the war (to use Mises' term) and for the permanent militarisation of the post-war economy in the form of communism, national socialism, and the interventionist state.

The problem of war is a vital one for classical liberalism to solve because unless a solution is forthcoming there can be no security and prosperity in the long term. The first step for liberals of all countries is to begin the process of reducing the power of their own nation states. Resources must be returned to the market sector, government control of the banking system and the money supply must end, barriers to foreign trade must be lifted, vested interests must have their privileges removed, and the power of the military must be rigidly restricted to defending only the territorial boundary of the state and only in such a manner as to give real protection to its citizens and their property. A defense policy based upon liberal principles must accept the fact that only certain kinds of weapons and strategies are permissible. Weapons which kill indiscriminately, making no distinction between aggressor and innocent bystander, and which threaten to damage the lives and property of those the state is charged with defending, cannot be used by a liberal state if it wishes to remain faithful to the classical liberal principles of non-aggression and respect for human life. [21]

Conclusion.

It is my opinion that classical liberalism has much to offer in solving contemporary problems. The excesses of the welfare state and violations of civil liberties can be removed by a return to strict constitutional limits on the power of the state. Legal rights can be protected by returning to the rule of law based upon recognition of the individual's right to autonomy and the right to own and dispose of property. The wealth-creating forces of the market can be unleashed only if taxes are kept to an absolute minimum, if regulation and intervention by the state is abolished, and if just contracts are protected. Of prime importance is the need for international peace if the market is to take advantage of the benefits of the international division of labour and comparative advantage. Private saving and investment must not be diverted into unproductive military expenditure to support a new military class and its industrial satellites. The liberal principles of international association and respect for law and treaty can provide a peaceful alternative to military intervention, the formation of hostile blocs, and the arms race.

The greatest obstacles to the achievement of these goals are the vested interests which depend for their existence upon the largess of the state. Their neutralisation will require an intellectual and political battle which will take years to complete. It is my belief that the principles of classical liberalism are the best means of achieving this goal.

Endnotes↩

[1] See the author's essays on the history of the classical liberal tradition, "An Outline of the History of Libertarian Thought," in The Humane Studies Review, vol. 1, nos. 1 and 2.

[2] See Franco Venturi, "Kings and Republics in the Seventeenth and Eighteenth Centuries," in Utopia and Reform in the Enlightenment (Cambridge University Press, 1971); Eco O.G. Haitsma Mulier, The Myth of Venice and Dutch Republican Thought in the Seventeenth Century (Assen, The Netherlands: Van Gorcum, 1980); and Jan Schulte Nordholt, The Dutch Republic and American Independence (Chapel Hill: University of North Carolina Press, 1982).

[3] See the collection of essays in Three British Revolutions: 1641, 1688, 1776 (Princeton University Press, 1980), ed. J. G. A. Pocock; David S. Lovejoy, The Glorious Revolution in America (New York: Harper and Row, 1974); and Hedwig Hintze, Staatseinheit und Föderalismus im alten Frankreich und in der Revolution (Stuttgart, 1928).

[4] A summary of this literature can be found in Dennis C. Mueller, Public Choice (Cambridge University Press, 1979).

[5] The most thoughtful modern advocate of liberal constitutionalism is Friedrich von Hayek, especially his multi-volume Law, Legislation and Liberty (University of Chicago Press, 1973).

[6] On the importance of state intervention and the economic decline of empires see, The Economic Decline of Empire (London: Methuen), ed. Carlo M. Cipolla.

[7] Murray N. Rothbard, Power and Market (Kansas City: Sheed Andrews and McMeel, 1977); and Ludwig von Mises, "The Middle of the Road Leads to Socialism," in Planning for Freedom (South Holland, Il.: Libertarian Press, 1962).

[8] Margaret Levy, "The Predatory Theory of Rule," Politics and Society, vol. 10, no. 4, 1981; Anne Krueger, "The Political Economy of the Rent-seeking Society," American Economic Review, vol. 64, no. 3, 1974; Lionel Robbins, The Economic Basis of Class Conflict and Other Essays in Political Economy (London: Macmillan, 1939).

[9] As in the very good example of the Cato Journal.

[10] Niels Steensgaard, "Violence and the Rise of Capitalism: Frederic C. Lane's Theory of Protection and Tribute," ??Review, vol. 5, no. 2, Fall 1981; Walter E. Grinder and John Hagel III, "Toward a Theory of State Capitalism: Ultimate Decision-making and Class Structure," Journal of Libertarian Studies, vol. 1, no. 1, 1977; Robert B. Ekelund, Jr. and Robert D. Tollison, Mercantilism as a Rent-seeking Society: Economic Regulation in Historical Perspective (Texas A and M University Press).

[11] On the problems faced by autonomous individuals caught up in a military machine, see Jaroslav Hasek, The Good Soldier Svejk and His Fortunes in the World War (Harmondsworth: Penguin, 1973); E.E. Cummings, The Enormous Room (Harmondsworth: Penguin, 1982); Arnold Zweig, The Case of Sergeant Grischa (New York: Viking Press, 1928), trans. Eric Sutton; and Albert Camus, Neither Victims nor Executioners (New York: Continuum, 1980), introduced by Pobert Pickus.

[12] Peter Brock, Pacifism in Europe to 1914 (Princeton University Press, 1972); Margaret E. Hirst, The Quakers in Peace and War: An Account of their Peace Principles and Practice (London: Swarthmore, 1923); Edmond Silberner, La Guerre dans la Pensée économique du XVIe au XVIIIe Siècle (Paris: Sirey, 1939).

[13] A.C.F. Beales, The History of Peace: A Short Account of the Organised Movements for International Peace (New York: Dial Press, 1931).

[14] Edmond Silberner, The Problem of War in Nineteenth Century Economic Thought (Princeton University Press, 1946).

[15] A recent assessment of the horrifying consequences of a nuclear war for civil society is Nuclear War: The Aftermath. A Special AMBIO Publication (New York: Pergamon Press, 1983), published under the auspices of the Royal Swedish Academy of Sciences.

[16] Melvyn B. Krauss, The New Protectionism: The Welfare State and International Trade (ICEPS, 1978).

[17] Ludwig von Mises, "War and the Economy," in Nation, State, and Economy: Contributions to the Politics and History of Our Time (New York University Press, 1983), translated by Leland B. Yeager.

[18] On the mechanism of inflationary financing, see C.A. Philips, T.F. McManus, and R.W. Nelson, Banking and the Business Cycle (New York: Arno Press, 1972) and Lionel Robbins, The Great Depression (Freeport, New York: Books for Libraries, 1971).

[19] See Roger Pethybridge, "The Impact of War" in The Social Prelude to Stalinism (London: Macmillan, 1977) pp. 73-131).

[20] For the German case, see Constatin Bresciani-Turroni, The Economics of Inflation: A Study of Currency Depreciation in Post-War Germany, 1914-1923. On the similarities between fascism and communism and their common origin in economic breakdown brought on by war, see John Gray, "The system of ruins," The Times Literary Supplement, December 30, 1983 and Ernst Nolte, "Marxismus and Nationalsozialismus," Vierteljahrshefte für Zeitgeschichte, no. 3, July 1983 and Marxismus und industrielle Revolution (Stuttgart, 1983).

[21] A feasible, non-nuclear defense policy which is in keeping with classical liberal principles has been put forward in Defence without the Bomb: The Report of the Alternative Defence Commission Set up by the Landsbury House Trust Fund (New York: International Publications Service, Taylor and Francis, 1983); Adam Roberts, Nation in Arms: The Theory and Practice of Territorial Defense (New York: Praeger, 1976); and Civilian Resistance as a National Defence: Non-violent Action against Aggression (Harmondsworth: Penguin, 1969), ed. Adam Roberts.