Economic liberalism
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Economic liberalism (also known as fiscal conservatism in United States politics) is a
political Politics (from , ) is the set of activities that are associated with Decision-making, making decisions in Social group, groups, or other forms of Power (social and political), power relations between individuals, such as the distribution of reso ...
and
economic ideology An economic ideology distinguishes itself from economic theory in being Normative economics, normative rather than just explanatory in its approach. Economic ideologies express perspectives on the way an economy should run and to what end, whereas ...
based on strong support for an
individualist Individualism is the moral A moral (from Latin Latin (, or , ) is a classical language belonging to the Italic languages, Italic branch of the Indo-European languages. Latin was originally spoken in the area around Rome, known as Latium. Th ...
market economy A market economy is an economic system An economic system, or economic order, is a system of Production (economics), production, allocation of resources, resource allocation and Distribution (economics), distribution of goods and services wit ...
and
private property Private property is a legal designation for the ownership of property by non-governmental legal entities. Private property is distinguishable from public property Public property is property Property (''latin: Res Privata'') in the Abstract ...
in the
means of production The means of production is a concept that encompasses the social use and ownership Ownership is the state or fact of exclusive rights and control over property, which may be any asset, including an object, land or real estate, intellectual prope ...
. Economic liberals tend to oppose
government intervention Economic interventionism, sometimes also called state interventionism, is an economic policy position favouring government intervention in the market process to correct market failure In neoclassical economics, market failure is a situation ...
in the
market Market may refer to: *Market (economics) *Market economy *Marketplace, a physical marketplace or public market Geography *Märket, an island shared by Finland and Sweden Art, entertainment, and media Films *Market (1965 film), ''Market'' (1965 ...
when it inhibits
free trade Free trade is a trade policy A commercial policy (also referred to as a trade policy or international trade policy) is a government's policy governing international trade International trade is the exchange of capital, goods, and service ...
and open competition, but support government intervention to protect
property rights The right to property, or the right to own property (cf. ownership) is often classified as a human right for natural persons regarding their possessions. A general recognition of a right to private property is found more rarely and is typically hea ...
and resolve
market failure In neoclassical economics, market failure is a situation in which the allocation of goods and services by a free market is not Pareto efficient, often leading to a net loss of economic value. Market failures can be viewed as scenarios where indivi ...
s. Economic liberalism has been generally described as representing the economic expression of
classical liberalism Classical liberalism is a political ideology An ideology () is a set of belief A belief is an Attitude (psychology), attitude that something is the case, or that some proposition about the world is truth, true. In epistemology, philosopher ...
. As an
economic system An economic system, or economic order, is a system A system is a group of interacting Interaction is a kind of action that occurs as two or more objects have an effect upon one another. The idea of a two-way effect is essential in the co ...
, economic liberalism is organized on individual lines, meaning that the greatest possible number of
economic An economy (; ) is an area of the production Production may be: Economics and business * Production (economics) * Production, the act of manufacturing goods * Production, in the outline of industrial organization, the act of making products ( ...

economic
decisions are made by
individual An individual is that which exists as a distinct entity Entity may refer to: Computing * Character entity reference, replacement text for a character in HTML or XML * Entity class, a thing of interest within an entity–relationship model or d ...
s or
household A household consists of one or several persons who live in the same dwelling and share meals. It may also consist of a single family or another group of people. The household is the basic unit of analysis in many social, microeconomic and governm ...

household
s rather than by
collective A collective is a group of entities that share or are motivated by at least one common issue or interest, or work together to achieve a common objective. Collectives can differ from cooperatives in that they are not necessarily focused upon an e ...
institution Institutions, according to Samuel P. Huntington, are "stable, valued, recurring patterns of behavior." Institutions can refer to social mechanism, mechanisms which govern the behavior of a set of individuals within a given community, and are ide ...
s or
organization An organization, or organisation (English in the Commonwealth of Nations, Commonwealth English; American and British English spelling differences#-ise, -ize (-isation, -ization), see spelling differences), is an legal entity, entity—such a ...

organization
s. An economy that is managed according to these precepts may be described as liberal capitalism or a liberal economy. Economic liberalism is associated with
markets Market may refer to: *Market (economics) *Market economy *Marketplace, a physical marketplace or public market Geography *Märket, an island shared by Finland and Sweden Art, entertainment, and media Films *Market (1965 film), ''Market'' (1965 ...
and private ownership of
capital assetA capital asset is defined to include property of any kind held by an assessee, whether connected with their business or profession or not connected with their business or profession. It includes all kinds of property, movable or immovable, tangible ...
s. Historically, economic liberalism arose in response to
mercantilism Mercantilism is an economic policy The economic policy of governments covers the systems for setting levels of taxation, government budgets, the money supply and interest rates as well as the labour market, nationalization, national owner ...

mercantilism
and
feudalism Feudalism, also known as the feudal system, was the combination of the legal, economic, military, and cultural customs that flourished in Medieval Europe In the history of Europe, the Middle Ages or medieval period lasted from the 5t ...
. Today, economic liberalism is also considered opposed to non-capitalist economic orders such as
socialism Socialism is a political Politics (from , ) is the set of activities that are associated with Decision-making, making decisions in Social group, groups, or other forms of Power (social and political), power relations between individuals, ...
and
planned economies A planned economy is a type of economic system where investment To invest is to allocate money Image:National-Debt-Gillray.jpeg, In a 1786 James Gillray caricature, the plentiful money bags handed to King George III are contrasted with th ...
. It also contrasts with
protectionism Protectionism is the economic policy The economic policy of governments covers the systems for setting levels of taxation, government budgets, the money supply and interest rates as well as the labour market, nationalization, national o ...
because of its support for free trade and open markets. Economic liberals commonly adhere to a Political philosophy, political and economic philosophy which advocates a restrained fiscal policy and the Balanced budget, balancing of budgets, through measures such as low taxes, reduced government spending, and minimized government debt. Free trade, deregulation of the economy, Tax cut, lower taxes, privatization, labour market flexibility, and opposition to trade unions are also common positions. Economic liberalism follows the same philosophical approach as
classical liberalism Classical liberalism is a political ideology An ideology () is a set of belief A belief is an Attitude (psychology), attitude that something is the case, or that some proposition about the world is truth, true. In epistemology, philosopher ...
and fiscal conservatism.


Origins

Arguments in favor of economic liberalism were advanced during the Age of Enlightenment, Enlightenment, opposing mercantilism and feudalism. It was first analyzed by Adam Smith in ''An Inquiry into the Nature and Causes of the Wealth of Nations'' (1776) which advocated minimal interference of government in a market economy, although it did not necessarily oppose the state's provision of basic Public good (economics), public goods. In Smith's view, if everyone is left to his own economic devices instead of being controlled by the state, the result would be a harmonious and more equal society of ever-increasing prosperity. This underpinned the move towards a capitalist economic system in the late 18th century and the subsequent demise of the mercantilist system. Private property and individual contracts form the basis of economic liberalism. The early theory was based on the assumption that the economic actions of individuals are largely based on self-interest (invisible hand) and that allowing them to act without any restrictions will produce the best results for everyone (spontaneous order), provided that at least minimum standards of public information and justice exist. For example, no one should be allowed to coerce, steal, or commit fraud and there should be freedom of speech and press. This ideology was well reflected in English law; Lord Ackner, denying the existence of a duty of good faith in English contract law, emphasised the 'adversarial position of the parties when involved in negotiations'.Walford v Miles [1992] 2 A.C. 128 Initially, the economic liberals had to contend with the supporters of feudal privileges for the wealthy, Aristocracy, aristocratic traditions and the rights of Monarch, kings to run national economies in their own personal interests. By the end of the 19th century and the beginning of the 20th, these were largely defeated. Today, economic liberalism is associated with
classical liberalism Classical liberalism is a political ideology An ideology () is a set of belief A belief is an Attitude (psychology), attitude that something is the case, or that some proposition about the world is truth, true. In epistemology, philosopher ...
, neoliberalism, right-libertarianism and some schools of conservatism such as liberal conservatism.


Position on state interventionism

Economic liberalism opposes government intervention in the economy when it leads to inefficient outcomes. They are supportive of a strong state that protects the right to property and enforces contracts. They may also support government interventions to resolve market failures. Ordoliberalism and various schools of social liberalism based on classical liberalism include a broader role for the state, but they do not seek to replace private enterprise and the free market with Public sector, public enterprise and economic planning. A social market economy is a largely free market economy based on a free price system and private property, but it is supportive of government activity to promote Competition (economics), competitive markets and social welfare programs to address social inequalities that result from market outcomes. Historian Kathleen G. Donohue argues that classical liberalism in the United States during the 19th century had distinctive characteristics as opposed to Britain:


See also

* Capitalism * Conservatism in the United States * Constitutional economics * Doux commerce * Economic freedom * Economic liberalization * Georgism * ''Laissez-faire'' * Libertarianism in the United States


References


Bibliography

* * * *


External links

* {{liberalism Economic liberalism, Classical liberalism Economic globalization Economic ideologies Ideologies of capitalism Liberalism Political ideologies Free market