Revised: 28 Apr. 2022

[Note: This post is part of a series on the History of the Classical Liberal Tradition]

In his survey of the history of liberalism, The Making of Modern Liberalism (Princeton University Press, 2012), the Oxford political philosopher and scholar of the thought of J.S. Mill, Alan Ryan, observed that everything that liberals have believed in its long history have been “contested”.

For example, even as something as fundamental as their attitude to the state has split liberals into at least three camps: those radical liberals who believed that the state was an “unnecessary evil” which could largely be dispensed with, those moderate liberals who believed that it was a “necessary evil” which had to be restrained by strict constitutional limits to its powers, and those new liberals who thought (or rather still think) that the state is a good friend to liberty and that it is essential in order to achieve liberal goals (so long as the right people and the right party get elected), and that its powers must be constantly increased so long as these goals have not yet been achieved (what then happens to the state is never explained).

He also notes the rather bizarre distinction that historians of liberalism now have to make between two new kinds of hyphenated liberalism which have emerged, namely what he calls “pro-capitalist liberalism” and “anti-capitalist liberalism” (I think a better phrasing might be “market liberalism” vs. “anti-market liberalism” or perhaps “state liberalism”). So Ryan naturally asks whether a political concept like “liberalism” or “socialism” can have any meaning if it no longer has a “core” set of beliefs which define it in comparison with other political beliefs and which are “uncontested” by its adherents. [See my post on what I think have traditionally been the “core beliefs” of CLs “What Classical Liberals were For” (13 Aug. 2021) here.] As he says on p. 23:

Unless some substantial portion of the meaning of a concept is uncontested, it is hard to see how the concept could be identified in the first place. There must be a central uncontested core of meaning to terms like “liberty” if arguments about the contested penumbra are to make sense.

That modern day liberals could think it possible to still call themselves a “liberal” if they no longer believe in free markets and the “capitalist system” leads him to the sad conclusion that liberalism is no longer “intellectually rigorous” and that it has become “awkward and intellectually insecure”. One might say the same thing about social democratic parties like the Australian Labor Party which once explicitly called for a key socialist policy of state ownership of important industries and which has its electoral roots in the organised trade union movement, but which has now embraced key aspects of “neo-liberal” economic policy. As Ryan states on p. 42:

The liberalism that has triumphed, then, is not an intellectually rigorous system, manifested in its only possible institutional form. It is an awkward and intellectually insecure system, committed to democracy tempered by the rule of law, to a private-enterprise economy supervised and controlled by government, and to equal opportunity so far as it can be maintained without too much interference with the liberty of employers, schools, and families. It by no means embraces laissez-faire with the same fervor that Marxism brought to its attack on property and its passion for rational, central control of economic activity … Moreover, the inhabitants of liberal democracies are deeply, and properly, conscious of the shortcomings of their societies and certainly feel their “success” is an equivocal one.

A similar point has been made by the political economist Peter Boettke who developed two “tests” in order to assess the coherence and viability of different economic systems, but which I believe can also be applied to the ideas and policies of political parties. The tests Boettke developed were the “coherence test” and the “vulnerability test” which he explained as follows:

In my work in comparative economic systems, I tend to stress some methodological ground rules that I argue must be followed. First, one cannot compare the ideal theory of one system with the working reality of another system. To do so is an unfair comparison. Instead, one must compare theory with theory, reality with reality, or theory of a system with the reality of that system. Second, in assessing social systems, there are two critical tests: a coherence test and a vulnerability test. The coherence test refers to a strict logical analysis of chosen means to given ends. If, on the one hand, means chosen can be demonstrated to be incoherent with respect to ends sought due to knowledge problems, then that system must be eliminated from the menu of options. If, on the other hand, the chosen means could—if all the actors were richly informed—achieve the desired ends, but the incentives in the system were such that opportunistic behavior would undermine the achievement of those goals, then the system would be possible but impractical due to vulnerabilities. Political economy and social philosophy work together and strive to weed out the incoherent and the vulnerable, and leave only those social systems of exchange and production that are logically coherent and robust against opportunism. [Struggle, Introduction, FN6]

When one applies Boettke’s “coherence test” to the Australian Liberal Party it is clear that it is ideologically “incoherent” (or has incompatible beliefs) when it comes to the specific goals or ends liberals have traditionally wanted to achieve and the goals (or policies) it now advocates and has put into practice over the years (some are “liberal” but many are not). The party is also incoherent with respect to the means by which it wishes to achieve these liberal goals (using “illiberal means” to achieve liberal ends). [See my post on “What CLs were For – Part 2: Ends and Means” (19 Oct., 2021) here.]

[Note: Of course, if one’s goal is to regulate and control every aspect of a person’s life and to centrally plan large sectors of the economy (such as energy production) then the use of the coercive powers of the state to do this is perfectly “coherent,” consistent, and logical.]

One only has to contrast the platitudinous but still mostly liberal ideas as expressed on the Liberal Party’s website page called “Our Beliefs” – Our Beliefs | Liberal Party of Australia with the actual proposed policies which are interventionist and regulatory to a very large extent or straight out of the “Welfare State” playbook – Our Plan | Liberal Party of Australia.

A key point here is to note how much of the idea of “central planning” of the economy modern liberals are prepared to adopt as their own. The Liberal Party is quite explicit about this as they detail in the section called “Our Plan” where they reveal their attitude towards government planning in preference to “allowing” free people to engage in free trade with each to build “spontaneous orders” (which they should have by “right” not by “permission” from the government). Thus these modern liberals:

• reject a fundamental liberal concept that free people going about their business create “spontaneous orders” (Hayek) of an economic, legal, and social nature which are “better” (in both a material and moral sense) than anything government planners can provide
• believe that attempts by politicians and bureaucratic “planners” to improve upon this order by means of “legislation” or regulations are an improvement on the “chaos” of the market; yet true liberals believe that these attempts are doomed to failure in the material sense of creating disorder and lowering the standard of living of the people
• reject the long-standing liberal view that the government and its bureaucratic planners should stand aside and allow free people to go about their business because the “orders” they create by their actions will be morally justified (not violating their rights to LLP) and will produce much greater prosperity for all.

There are several specific examples of how the Liberal Party wants the government to “centrally plan” key sectors of the economy such as infrastructure, energy, and broadband which are in glaring contradiction to some of principles declared in “Our Beliefs”. But the most glaring example of “illiberal” policy, or “the means” to achieve their goals, would have to be their whole-hearted embrace of Keynesian economic policies which are really only a watered down version of “central planning” adopted by most western states in the post-WW2 period in the face of the catastrophic failure of fully-fledge economic planning being undertaking in the Communist countries. The realisation was that, if attempts to centrally plan ALL sectors of the economy would inevitably fail (as Hayek and Mises argued) then the next best way to “plan” an economy would be to control the money supply and interest rates upon which nearly everything else in the economy depended. Tinkering with these things has been the hallmark of government policy ever since – whether the government is run by Liberal or Labor. This runs counter to every CL idea of what a government should do when it is in power, namely to balance the budget, impose very low taxes, rely on “sound money” (which at the time was based upon gold and/or silver not paper or electrons), and to leave individuals and firms free to “go about their business” unmolested by interfering politicians and bureaucrats. The inappropriately named section of their website, called “Our Plan”, shows just how far down the planning road, or “the road to serfdom” in Hayeks phrase, the Liberal Party has gone.

In addition, as an historian, I am struck by the fact that, since its very founding in 1944 the Liberal Party was a staunch defender of one of the 19thC liberals’ most hated economic policies, namely tariff protection and subsidies to favoured industries. Need one remind the reader that it took the coming to power of a “socialist” Labor Party” in 1972 to begin dismantling Australia’s odious and profoundly “illiberal” system of protection.

To jump forward to the present, one has the example of Liberal governments’ (both state and Federal) attempting to centrally plan the economy as part of its program of “lockdown socialism”, whereby politicians determined what sectors of the economy are “essential” and which ones are not (thus forcing them to close or severely curtail their business activity); with whom individuals could associate with, where individuals could travel; and what they had to wear in public. Contrast this with the opening line of their statement of “Our Beliefs” :

We believe: In the inalienable rights and freedoms of all peoples; and we work towards a lean government that minimises interference in our daily lives; and maximises individual and private sector initiative.

Of course, “rights” in Australia were never “inalienable” as they were granted as “privileges” of the Crown and then Parliament which could and recently have been rescinded at will, without public discussion, and at a moment’s notice. The people who opposed this and tried to defend their “inalienable rights” were thrown to the ground and beaten by the police or fined huge amounts of money.

Then, when one applies Boettke’s “vulnerability test” to the economic and political system which the Liberal (and Labor) Parties have jointly built, run, and expanded over the past 60 or 70 years one would have to conclude that the Liberal Party has created a system which is highly vulnerable to several threats to liberal values and liberal political practices. They have created a system which is highly vulnerable to take-over by powerful private vested interests to use for their own selfish interests (“private predation” in Boettke’s terminology, or “la spoliation légale” (legal plunder) in Frédéric Bastiat’s) as well as by the politicians and bureaucrats who run the system who use it to advance their own power and careers to create a professional and permanent class of people engaged in “public predation” (“la spoliation gouvernementale” or plunder by government (Bastiat again))

However in the Australian Liberal Party’s defence, one should add that this is true for all the so-called “liberal democracies” (whether centre-right or centre-left, or just plain social democratic) which have emerged in the post-WW2 period, so it is not unique to the Australian Liberal Party.

If one believes in the liberal ends of small, limited, and responsible government, low taxes (and no taxes on the poor, especially indirect taxes), minimal to no regulation of private business activity (especially on the freedom to start a business), free trade and free markets (both internationally and domestically), then one would have to conclude that the Liberal-Labor political duopoly has created a system with institutions which have perverse incentives which have created multitudinous opportunities for “predation”, both private and public, and has prevented the full development of a true “liberal state” (which in my view would be a “minimal” or “ultra-minimal” state at a minimum (if you will pardon the pun), or a “fully privatised” or voluntary state. [See, Classical Liberals on the Size and Functions of the State (10 Aug., 2021)]

For example, the “liberal” political system has created

• a permanent class of professional politicians: there are an increasing number of people who are active politically at university (studying law in many cases) in the “Young Liberals” (perhaps better called the politically “Ambitious Liberals”), then become “aids” to politicians already in Canberra or work for lobbyists or other groups seeking benefits from the state, who then get pre-selected in a safe seat and then move to Canberra as a fully fledged member of the “political class”.
• a growing “dependent class” of people who live off taxpayers’ money distributed by the state. These can be businesses which seek and get government contracts for “public works”, or “defence”, or to supply various government services (computing and surveillance); or they can be the sick, the old, and the poor who have grown up expecting the state (or rather the taxpayers) to take care of them in their old age (the pension), when they are sick (Medicare), or when they are unemployed (the “dole” and now “Job Keeper”). The danger faced by ”liberal democracies” is that the time is fast approaching when the number of people in the “dependent class” will be greater than the number of taxpayers. The “dependent class” has the very strong incentive to vote for parties which will protect their “benefits” from cuts, or will increase them at politically opportune times (just before elections).
• unresponsive bureaucracies which provide a huge number of “services” to the public but who have no institutional incentive to provide this service efficiently, cheaply, or quickly because their organisation does not experience “losses” when they do not service their customers adequately (as do for-profit organisations). In the absence of free market prices and profits and loses, the result of poor service is queueing, poor service, or even no service at all. There is of course also no private alternatives (the competition) to the government monopoly provider.
• a general society wide belief that in times of crisis or emergency “the government ought to do something”, even if that “something” causes further harm (price controls to prevent “gouging”, society-wide lockdowns to prevent the “spread” of a disease) or is needed because of previous government policy failures (bans on ongoing forest and bush management leading to the build up of tinder which will cause larger and more destructive fires in the future). In a truly liberal society the opposite would be the case. People in the first instance would either offer their own services or money to help others, or they would organise others in a group to do so).
• a self-perpetuating cycle of “government failures” which inevitably lead to calls for further government interventions to solve the problems it caused in the first place. There are many examples of this one could mention (see above on bush fires) but the largest and most systemic example is that of the government control of the money supply and interest rates. Australia has had better money supply and interest rate polices than most other “liberal democracies” so it has gone for many years without an official “recession” until the current lockdown induced recession. Australia may have escaped temporarily from the boom-bust cycle of inflation and recession because of the demand for the resources it sells for the booming economies of China and India. However, when the credit bubble in China bursts the similar inflation weaknesses in the Australian economy will soon be exposed. I am using the term “inflation” in the Austrian sense, i.e. not just observable rises in the prices of goods and services but the expansion of the money supply caused by government increasing the stock of money and manipulating the interest rate for loans. This causes “malinvestments” to be made by investors and companies which will prove to be unprofitable when the interest rates return to a more “normal”, market determined rate. The cycle I mention above means that, when the inevitable recession occurs to flag the existence of and then liquidate these malinvestments, there is a widespread demand for the government to “ease” the money supply, to provide “liquidity” to the markets, and to prevent business “failures”, which the government inevitable responds to by beginning the cycle of monetary expansion and inflation all over again.

Thus, it is for the above reasons that I think of the Australian Liberal Party as a “LINO”, liberal in name only, having long abandoned most of the core liberal ideals (except as empty rhetoric), willing to use non-liberal methods to enact its policies (the use of state coercion and regulation, even “planning” of some economic sectors), and creating political institutions which have perverse, illiberal incentives which all create pressure to constantly expand the size and scope of government. In the latter, it has been proven to be most successful, to the detriment of real liberty and real liberalism, and the large and ever-growing Liberal State unfortunately seems to be very long lasting, given the right care, as the manufacturer promised.