Updated: 25 Apr. 2022

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

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A key factor in distinguishing the differences between the various strains of liberalism is their attitude towards the state (not just between liberalism and other political philosophies like socialism, communism, fascism, etc – see my post on “The Spectrum of State Power: or a New Way of Looking at the Political Spectrum” (10 Aug., 2021) online.

Radical Liberals

For radical liberals and libertarians the state was thought to be a threat to, or even an enemy of, liberty since it was “the organisation of the political means of acquiring wealth” (Franz Oppenheimer) . Historically, this had certainly been the case where the state had been controlled by particular groups who used it to get benefits and privileges at the expence of ordinary citizens and tax-payers (slave owners, aristocratic landowners, favoured and privileged manufacturers, bankers who lent money to the state). In the present (i.e. the 18th and 19thC), even with written constitutions designed to limit the power of the state to very specific activities, and an electorate which had been opened up to previously excluded and exploited classes, the state was still an entity with a monopoly on the use of coercion. Its very existence meant that it was a tool which could be seized by vested interests and classes and used to benefit themselves and which could be exercised behind the legal shield of constitutional and legal propriety. In their view, plunder was still plunder, even it had been approved by a democratically elected body and conducted along proper constitutional and legal procedures. [See Bastiat’s notion of “la spoliation légale” (legal plunder).]

Whether or not the power of the state would be used that way was a matter for conjecture in the late 18th and 19th centuries as attempts to strictly limit the power of the state had never been tried before. That is why the American experiment in drafting a Constitution and Bill of Rights was so important for CLs of the period. If the Americans could succeed in permanently reducing and limiting the power of state and keeping it limited, then the case for limited government would be made.

However, even when this experiment was in its early days, there were sceptics who thought that, although a noble one, this experiment would eventually fail because the state provided too attractive a tool for unscrupulous “rent seekers” (I prefer the term “privilege seekers”) to use for their own benefit, as well as creating a vested interest to maintain or expand the power of state by professional politicians and bureaucrats (the “public choice” argument). This fear was expressed by the so-called “anti-federalists” (who were actually the true “federalists” not Madison and Hamilton who believed in a strong central state) in the 1780s , and then even more forcefully by radical liberals like Herbert Spencer in England in the 1870s and 1880s and Bastiat and Molinari in France in the late 1840s and later.

The radical liberal and libertarian hostility towards the state, on the grounds that its initiation of the use of coercion in everything it does is immoral and unjust, was summed up by Rothbard. In an essay in 1977 he asked the question of his readers, “Do you hate the state?” His answer was “There runs through For a New Liberty (and most of the rest of my work as well) a deep and pervasive hatred of the State and all of its works, based on the conviction that the State is the enemy of mankind. “ “Do you hate the state?”, Libertarian Forum (Vol. 10, No. 7, July 1977) online .

Moderate Liberals

More optimistic were the moderate liberals who thought the state could be limited to a small number of very specific and “ennumerated” powers (to use the terminology of the American constitution). The economic argument for a limited state was made by Adam Smith who provided the “classic” formulation of this view, that the state should be limited to providing police, courts, national defence, some minimal welfare for the poor, and some public works (roads, post office, and possibly education).

By protecting property rights and upholding contracts the limited state provided the general legal framework for markets to operate. Once this had been achieved the state should not interfere in the private activities of men and women going about their lives and conducting their business activities. The assumption behind this was that an educated public would make sure the state did not step outside its proper bounds and that an independent judiciary and court system would ensure the protection of liberty and property rights, as well as a means by which citizens could protect their liberties by suing the state and its officials in the independent courts if they did not carry out their proper duties.

In other words, the moderate liberal position could be summed up by saying that, even thought he state could at times be dangerous and a threat to liberty (hence one had to be very wary), it was a “necessary evil” which was required to protect the “ liberal order.”

One of these assumptions, that an educated public would behave properly by respecting the rights of others and would make sure the state did not step outside its proper bounds (via the pressure of public opinion and frequent elections), led to the conclusion that the state should provide a minimal of free, state funded education to ensure that this happened. The debate about state funded, compulsory education tore apart the classical liberal movement during the 19thC. For example, in England, one of the leading radical liberals, Richard Cobden, was a strong supporter of state-funded education, whereas Herbert Spencer was not, as he believed it provided a “foot in the door” for the state to tax and regulate and compel the population (which might serve as a model for other attempts to “improve the lot of the people, something which the “new” liberals in the late 19thC certainly did), as well as a means for the state to indoctrinate children in pro-state beliefs. In France, liberals and liberal conservatives (like Guizot) used state funded education as a means to break the control the Catholic Church had over education and to propagate secular and republican political ideas. Even a very radical liberal like Gustave de Molinari, who was the first advocate and theorist of what later became known as “anarcho-capitalism”, believed that education should be made compulsory for all children but that it should not be provided or funded by the state. Even in 19thC America, where the state was much more limited than practically anywhere else, education was provided by the state (via local property taxes), albeit at a a very decentralised, local level. Even here, the state education system was used as a tool in the late 19thC to “Americanise” and “republicanise” immigrants from central and eastern Europe who tended to be Catholic and have other “bad” European habits and beliefs (such as drinking wine and beer) which were thought to be harmful to white, Protestant America.

“New” Liberals

For the growing number of “new” liberals in the late 19thC the state provision of education was just the first of many similar “services” the state should be providing to improve the lives of its citizens in a “positive” rather than “negative” way. The same reasons used by supporters of state education were used to justify the state provision of unemployment insurance, the regulation of factories and other forms of labour, public hygiene, as well as local utilities such as street lighting, gas supplies, and public transport. The Fabian socialists who were also emerging at this time called this activity by the state “municipal socialism”, and it was something that also strongly appealed to the “new” liberals.

In general, the new liberals rejected the great suspicion felt by radical and many moderate liberals of state action. They preferred to see the state as the protector and provider of greater liberty and opportunity, as a friend and benefactor (like a parent, or father) of the ordinary person, and not as their enemy.

In Australia, where the state had always played a greater role in people’s lives from the beginning of the penal colony run by the military (creating a kind of “military socialism”), by the late 19thC there was a opportunity to take the idea of “municipal socialism” even further, to create what was called at the time “colonial socialism.” The state (in the name the Crown) was the largest landowner in the country, infrastructure projects like ports and railways were thought to be impossible to finance via private capital and run by private companies (as they were done in the US) so it was argued that the colonial states had to step in to ensure economic development, and tariff protection for domestic industry was also thought to be essential (except in the state of NSW which was largely free trade). Even most Australian “liberals” were in favour of these measures, except for a handful of radical liberals like William Hearn at the University of Melbourne (a follower of the economic thought of Frédéric Bastiat) and the NSW MP Bruce Smith (who was a follower of Herbert Spencer). Thus, by the time of Federation in 1901 there was a broad consensus among the socialists in the Labor Party and the “liberals” in the Protectionist Party and the Free Trade Party about the need for a large role for the state in the new Commonwealth of Australia.

Radical liberalism was practically non-existent in Australia because of its later political development. Radical liberals in Britain had drawn upon the natural rights tradition as expressed in the writings of the Levellers (1640s), John Locke (16890s), and the Commonwealthmen (1720s and 1730s), which had also spread to the north American colonies on the eve of the Revolution, and were the guiding principles of the “classical liberalism” which emerged there (although not called that at the time). [See Rothbard’s chapter on “The American Revolution and Classical Liberalism” from For a New Liberty (1974) online at Mises Wire.] When Australians were thinking about independent colonial government in the 1850s this radical strain of liberalism was dying out in Britain (except for a few individuals such as Thomas Hodgskin – see his The Natural and Artificial Right to Property Contrasted (1832)) and was rapidly being replaced by the less radical utilitarian strain of liberalism whose main theorists were Jeremy Bentham and John Stuart Mill. One might say that if there were a guiding light for Australian liberalism it was Bentham and not Locke who held the torch aloft. Thus on the eve of Federation the ideas of JS Mill (moderate and rather weak as they were) and those of Thomas Green (a staunch advocate of the “new” much more interventionist strain of liberalism) had the greatest impact on the development of Australian liberalism. [See David Llewellyn , AUSTRALIA FELIX: Jeremy Bentham and Australian colonial democracy (PhD. thesis, University of Melbourne, July 2016).]

A sure indicator of the “moderate” even “compromised” nature of Australian liberalism was the widespread support for protectionism in the colonies and then for the first 70 odd years of the new Commonwealth. Belief in free trade was an absolute precondition for being a liberal (even a moderate liberal) at the time of Cobden and Gladstone. Not so in Australia. [Side note: The alliance between the Australian Liberal Party and the Country Party defended the policy of protection until it was gradually overturned ironically enough by the Labor Party under Hawke and Keating.]

[Revised: 25 Apr. 2022]

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

The degree to which classical liberals have upheld the principle that the state should not use (or at least minimise its use of) violence or coercion (the “non-aggression principle” (NAP)) is reflected in their attitudes about how powerful the state should be and what functions it is legitimate for it to engage in. Liberals have held a considerable range of views about what the proper functions of the state, should be. It is a topic which has divided liberals from the beginning, not to mention divided them from advocates of other political philosophies which support varying amounts of government coercion like conservatism, socialism, marxism, fascism, and other forms of government intervention in the economy (“interventionism”). Accordingly, we can assign all political points of view to a spectrum based upon their adherence to the NAP with one extreme being no limits to the power of the state to use (or initiate) aggression against individuals (“total power”) – what I term “the Right” – and the other being the strictest possible adherence to the NAP (or “total liberty”)- or what I term “the Left”. I have drawn up the following diagram to illustrate this version of the “political spectrum”:

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It should be noted that the traditional “left-right spectrum” positions the total power of the communist state on “the left” and the nearly equally total power of the fascist/Nazi state of “the right”, which leaves the classical liberal state in the centre or the right of the centre. I think this way of distinguishing between different political philosophies and their different attitudes towards the use of state coercion (“power”) is misleading to say the least. In my “Liberty vs. Power” spectrum the ultra-minimal or severely limited state is at the far right, the total power of the communist state is at the far left, while the interventionist welfare state is to the left of the centre.

The reason for this is that historically “liberals” opposed the status quo of their day (for example, the absolutist state, or the mercantilist state”) and usually sat on the left hand-side of the speaker in the Chamber, while the defenders of the regime (the status quo) sat on the right of the Speaker. Thus it seems logical that, now that various forms of statism (such as the welfare state, the regulatory state, the warfare state) have become the new status quo, the opponents of these forms of interventionism should again be considered to be on “the left”.

Thus we have the following categories of more or less “statist” regimes situated on “the right”:

COMMUNISM: a fully planned economy; state controlled society; rule by single Party (Stalinism, Pol Pot, China)

FASCISM/NAZISM: state directed private industry; adulation of leader; war & conquest (Italy. Germany 1930s-40s

WELFARE STATE: state provision of health, welfare, education; significant regulation of economy (Western Europe, Australia)

WELFARE/WARFARE STATE: significant state intervention in health, education, welfare; significant regulation of economy; Military-Industrial Complex; war & empire (USA)

BONAPARTISM: authoritarian rule by populist elected leader; rule by plebiscite and decree; hostility to traditional elites; replaced by new elites; importance of army (France 19thC)

ABSOLUTE MONARCHY: Royal court; privileged aristocracy; established church; standing army; serfdom (17-18thC France)

MERCANTILISM: protection & subsidies for domestic industry; controls on exports; colonies with monopoly access to metropole; navy & empire (France & UK 18thC)

The coloured arrows in the table above show the historical movement beginning in the 18thC as liberal ideas began to have an impact. The policies of the mercantilist state in England and France were gradually reformed as a result of the influence of free trade ideas by theorists and activists such as Adam Smith and Richard Cobden in England and Jean-Baptiste Say and Frédéric Bastiat in France , so these countries began to move towards the “Liberty” end of the spectrum (the “left”). This progress was halted by the massive increase in state intervention which began during WW1 and which continued in the post-war period. Free trade and laissez-faire were abandoned and some nations turned to fascism (Italy and Germany) or communism (Russia, China). Thus the direction taken in the 20thC was towards the “Power” end of the spectrum (the “right”). After a brief flirtation with liberal reforms in the 1980s (Thatcher in Britain, Reagan in the US, David Longe in NZ) which shifted some countries to the Liberty end (the left), in the 21stC it seems we are headed back in the opposite direction once again.

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If we zoom into the “liberal” end of the political spectrum we can see some more detail about how different kinds of liberals have viewed the power of the state. Thus we can see the following:

CLASSICAL LIBERAL STATE: defence, police, public goods (broadly defined), education [A. Smith, J.S. Mill, F.A. Hayek]

MINARCHIST STATE: defence, police, no other public goods [L. Mises, A. Rand, R. Nozick]

ULTRA-MINARCHIST OR “NIGHT-WATCHMAN” STATE: defence, police, with considerable private or local provision of security [J.B. Say, Frédéric Bastiat, G. de Molinari 2 (older)]

FULLY PRIVATISED OR VOLUNTARIST “STATE”: private production of security, all state activities deregulated, privatised, or abolished [H. Spencer, Gustave de Molinari 1 (younger), Murray Rothbard]

Thus, to return to our distinction between “radical” liberals and “moderate” liberals, we can see that radical liberals have supported the “minarchist” or “ultra-minarchist” or even the “fully privatised” voluntary state; while moderate liberals have supported the “classical” functions of the state as articulated by Adam Smith for example.

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

Introduction and the Problem of Definition

“Liberal” and “Liberalism” as concepts have been contested since their first appearance, most probably sometime in the late 18th century, when the adjective “liberal” began to be used to describe an individual’s behaviour or views (“liberal sympathies”) or the nature of institutions (a “liberal system” or “order”), and the early to mid-19th century when the noun “liberalism” began to be used to describe a separate political ideology.

Liberalism has evolved over time to the point where its different versions require modification by an appropriate adjective, to “hyphenate” it if you will, in order to distinguish them from earlier and later versions of themselves. This makes it problematical for the historian to discuss liberalism’s origin, evolution, and meanings; and for the contemporary advocate to clearly explain to others what they mean by these terms.

Some CL thinkers believe the problem of definition has become so confusing that we need to do the following:

1.) to “reclaim” the word “liberal” for our own purposes and discontinue the use of “hyphens” to distinguish one form from another (this is Dan Klein’s approach)

• This would help us make it clear that there is a distinction between “real” liberals and those who are LINO (liberals in name only), and that this difference is based on significant differences in people’s attitudes about some very fundamental notions, such as property rights, free markets, and the coercive powers of the state

2.) to use the related word “libertarian” which emerged in the 1970s to distinguish it from the other forms of “corrupted” or “false” liberalism;

• this is especially a problem in the US where “liberal” means the exact opposite of what it once meant;
• this is less of a problem in the rest of the world where the word “liberal” still has some attachment to the ideas of free markets and small/limited government; but even here “liberal parties” are often what I call “LINO” – liberal in name only as they accept the role of and in fact seek the increase of the welfare state, the regulatory state, and the “nanny state”

3.) to use another term entirely given the intellectual baggage which accompanies the word “liberal”, for example;

• “individualism” is the preferred term for Steve Davies (IEA), which he uses to distinguish it from anything which gives priority to other things that are deemed to be “social”, such as “socialism”
• “voluntaryism” used by Carl Watner to refer to a system where voluntary and not coercive relationships exist between individuals; this is based upon the views of the late-19thC voluntaryists like Auberon Herbert
• “anarcho-capitalism” used by Rothbard and his followers from the late-1960s

Modern “liberalism” has drifted so far from these two streams of liberal thought that it should be regarded as a very different political animal. Something similar has happened to other non-liberal traditions, such as socialism and “labourism”, which have moved a great distance away from what they were when they emerged in the mid and late 19thC. They have incorporated numerous aspects of “liberalism” into their own and created a new kind of “hybrid” political philosophy.

One might say that modern “liberalism” has become more social/socialist and might be better termed “liberal socialism” (socialism with some liberal aspects grafted onto it); while at the same time modern “socialism” has become more “liberal” and might be better termed “socialist liberalism” (liberalism with some socialist aspects grafted onto it).

Thus, socialists today face the same problem liberals do when trying to make sense of all this. What is “real” socialism? What is “real” liberalism? What is the connection between the “ideal” of socialism and what they used to call “actually existing” socialism? And similarly, what is the connection between the “ideal” of liberalism and how these ideas have actually been implemented by liberal parties?

And in the end, does this matter any more when the differences between “liberalism” and “socialism” in the modern era have, for all intents and purposes, practically disappeared?

The Emergence of “Hyphenated” Liberalism

We can distinguish between the different forms CL has taken by the following criteria:

1. the historical period in which it emerged or became dominant
2. how consistently or extensively the idea of liberty was applied
3. whether one has freedom “by right” or “by permission”
4. different attitudes about the nature of the state and its proper role
5. different ideas about what the ultimate goal of what politics/liberalism should be
6. the different value or weight given to the various (three) bundles of freedom (political, economic, social)
7. different ideas about what a liberal society should or could be

In this post I would like to address the first two of these criteria. I will address the others in later posts.

1.) the historical period in which it emerged or became dominant

• “proto-liberalism” (before the word “liberal” was used by adherents to describe themselves – Levellers, Commonwealthmen, Whigs)
• “old” or classical liberalism which emerged in the mid-19thC – especially Richard Cobden, John Stuart Mill, the English Liberal Party (1859), William Gladstone, (PM on and off between 1868-94)
• modern or “new” liberalism (first wave): emerged in Britain in the late 19thC (1880s and 1890s) with works by L.T. Hobhouse, John A. Hobson, T.H. Green, who argued that state could and should be used as a “positive” influence to increase the “liberty” of people (understood not as the absence of coercion but as an increased capacity to do things)
• “neo-liberalism” or new liberalism (second wave): it emerged post-1938 as an attempt to revive interest in liberal ideas in a world increasingly dominated by fascism and communism; the idea was to use the state to provide greater welfare services (welfare state) and to regulate the economy to provide more “competition” (an “ordered economy”) , thus it would meld aspects of the welfare-state, greater regulation of the economy, and private ownership of property and the free market; it arose out of the work of the German economist Walter Eucken in 1937 (Ordnung der Wirtschaft (The Order of the Market) (1937)) and a meeting in Paris in 1938, the “Colloque Walter Lippman”, to discuss his recent book An Enquiry into the Principles of the Good Society (1937); this resulted in the formation of organisations such as the Walter Eucken Institut (1954) and the movement known as “Ordo-liberalismus” (ordered liberalism, or liberalism ordered by the state); the Mont Pèlerin Society in (1947) founded by Friedrich Hayek, Frank Knight, Karl Popper, Ludwig von Mises, George Stigler and Milton Friedman; it should be noted that the Australian Liberal Party was formed at roughly the same time by Robert Menzies (October 1944) and thus needs to be seen as part of this second wave of new or “neo” liberalism.
• Side Note 1: Robert Menzies gave a series of influential radio addresses in 1942 in which he laid out his ideas about liberalism in preparation for the formation of the new Liberal Party in 1944. It was then that he gave his famous talk on “The Forgotten People” (22 May, 1942), the ordinary tax-payers and citizens, whose interests he wanted the Liberal Party to represent.
• Side Note 2: It is an interesting question to ask when “liberals” first became aware that they had a coherent worldview which could be applied to many (perhaps all) aspects of how a society could be organised on liberal principles. I think a good marker of this self-awareness is the appearance of one volume treatments of their philosophy which attempted to tie all the various pieces together in an overview of their position. I have drawn up a list of such attempts in order to track this development which spans the nearly 100 years between 1792 (Humboldt) to 1888 (Bruce Smith) . [See my comments in this post: One Volume Surveys of Classical Liberal Thought | Reflections on Liberty and Power.]]

2.) how consistently or extensively the idea of liberty was applied

• “radical” liberalism: the pure, consistent, radical, or across-the-board application of liberal principles to all aspects of social, political, and economic activity (the Enlightenment (part of Israel’s “radical Enlightenment”), radicals in the American and French revolutions, radicals in early and mid- 19thC (Thomas Jefferson, Thomas Hodgskin, Herbert Spencer, Frédéric Bastiat, Gustave de Molinari); believed that the role of the role should be “ultra-minimal” (Bastiat and others of the “Paris school of political economy) or even non-existent (Spencer, Molinari)

[A side note on other language used to describe this:]

• cf. Hayek’s concept of “true” vs. “false” individualism could also be applied to liberalism; thus “radical” liberals would see themselves as advocates of “true liberalism” and others (moderates, new liberals) as advocates of “false liberalism”; another German work one could use is “ersatz” or fake (substitute) liberalism
• cf. Isaiah Berlin’s idea of the difference between “negative” freedom and “positive” freedom could also be applied to the idea of liberalism itself; thus there is “negative” liberalism (where the state abstains (largely) from intervention in peoples’ lives and the economy, and “positive” liberalism (where the state plays a very active role in providing welfare and regulation (health and safety)
• the historian and economist Walter Grinder uses the term “real” liberalism to describe this group
• liberalism “proper” vs. “proper liberalism” (Gottfried Dietze): “liberalism proper” which advocates liberty without restriction (libertarianism), while “proper liberalism” advocates limited government which enforces some moral restrictions on behaviour
• “moderate” liberalism: this describes what most people have historically regarded as “classical liberalism” which emerged after the defeat of Napoleon (1815), the first electoral reform act which allowed many of the middle class in England to vote (1832), the rise of the Anti-Corn Law League (1838) and its success in introducing free trade in England (1846), and the formation of the English “Liberal Party” (1859). Moderate liberals thought the role of the state should be “limited” to national defence, the police, and some public goods (classic statement by Adam Smith – roads, money, post office). Some CLs (like Cobden) thought it should also provide education for children; others accepted the “civilising” and “liberalising”, and “Christianising” influence of the (British) Empire
• “new” liberalism (also called “social” liberalism): this was a late 19th century phenomenon (Green, Hobhouse, Hobson) which introduced aspects of “socialism” into the CL tradition whereby the state should play a much greater role in maximising “positive” liberty by using legislation/coercion to reduce “harm” (factory legislation, child labour, public health/hygiene) or provide positive benefits to ordinary working people (compulsory public education, health and unemployment insurance), or to do things more “efficiently” or “rationally” than the market and its “profit-makers” (public works – gas, electricity, railroads – as part of “municipal socialism”). It was justified by ideas which were inherent in liberal thinking at the time (the utilitarianism of Bentham, JSM) and the weakness of natural law/rights thinking in the British (Australian) stream of CL thought.