Economic liberalism is a

political Politics (from , ) is the set of activities that are associated with making decisions in groups, or other forms of power relations among individuals, such as the distribution of resources or status. The branch of social science that studies ...

and

economic ideology An economic ideology is a set of views forming the basis of an ideology on how the economy should run. It differentiates itself from economic theory in being normative rather than just explanatory in its approach, whereas the aim of economic the ...

that supports a

market economy A market economy is an economic system in which the decisions regarding investment, production and distribution to the consumers are guided by the price signals created by the forces of supply and demand, where all suppliers and consumers ...

based on

individualism Individualism is the moral stance, political philosophy, ideology and social outlook that emphasizes the intrinsic worth of the individual. Individualists promote the exercise of one's goals and desires and to value independence and self-reli ...

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 and personal property, which is owned by a state entity, and from collective or ...

in the

means of production The means of production is a term which describes land, labor and capital that can be used to produce products (such as goods or services); however, the term can also refer to anything that is used to produce products. It can also be used as an ...

Adam Smith Adam Smith (baptized 1723 – 17 July 1790) was a Scottish economist and philosopher who was a pioneer in the thinking of political economy and key figure during the Scottish Enlightenment. Seen by some as "The Father of Economics"——— ...

is considered one of the primary initial writers on economic liberalism, and his writing is generally regarded as representing the economic expression of 19th-century

liberalism Liberalism is a political and moral philosophy based on the rights of the individual, liberty, consent of the governed, political equality and equality before the law."political rationalism, hostility to autocracy, cultural distaste for c ...

up until the

Great Depression The Great Depression (19291939) was an economic shock that impacted most countries across the world. It was a period of economic depression that became evident after a major fall in stock prices in the United States. The economic contagio ...

and rise of

Keynesianism Keynesian economics ( ; sometimes Keynesianism, named after British economist John Maynard Keynes) are the various macroeconomic theories and models of how aggregate demand (total spending in the economy) strongly influences economic output ...

in the 20th century. Historically, economic liberalism arose in response to

feudalism Feudalism, also known as the feudal system, was the combination of the legal, economic, military, cultural and political customs that flourished in medieval Europe between the 9th and 15th centuries. Broadly defined, it was a way of structur ...

and

mercantilism Mercantilism is an economic policy that is designed to maximize the exports and minimize the imports for an economy. It promotes imperialism, colonialism, tariffs and subsidies on traded goods to achieve that goal. The policy aims to reduce a ...

. Economic liberalism is associated with markets and private ownership of capital assets. Economic liberals tend to oppose government intervention and protectionism in the

when it inhibits free trade and Competition (economics), competition, but tend to support government intervention where it protects Property rights (economics), property rights, opens new markets or funds market growth, and resolves market failures. An economy that is managed according to these precepts may be described as a liberal economy or operating under liberal capitalism. Economic liberals commonly adhere to a Political philosophy, political and economic philosophy that advocates a restrained fiscal policy and a balanced budget through measures such as low taxes, reduced government spending, and minimized government debt. Free trade, deregulation, tax cuts, privatization, labour market flexibility, and opposition to trade unions are also common positions. Economic liberalism can be contrasted with protectionism because of its support for free trade and an open economy, and is considered opposed to planned economies and non-capitalist economic orders, such as socialism. As such, economic liberalism today is associated with classical liberalism, neoliberalism, right-libertarianism, and some schools of conservatism like liberal conservatism and fiscal conservatism. Economic liberalism follows the same philosophical approach as classical liberalism and fiscal conservatism.

Origin and early history

Developed during the Age of Enlightenment, particularly by

, economic liberalism was born as the theory of economics of liberalism, which advocates minimal interference by government in the economy. Arguments in favor of economic liberalism were advanced by Smith and others during the age of enlightenment, opposing

and

. It was first analyzed by

in ''An Inquiry into the Nature and Causes of the Wealth of Nations'' (1776), which advocated minimal interference of government in a

, 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 of economic liberalism 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, so that no one is 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".

Initial opposition

Initially, the economic liberals had to contend with arguments from the supporters of feudal privileges for the wealthy, traditions of the aristocracy and the rights of monarchs to run national economies in their own personal interests. By the end of the 19th century and the beginning of the 20th century, this opposition was largely defeated in the primary capital markets of Western countries.

Contrast with other economic philosophies

Contrast between British and American views

Historian Kathleen G. Donohue argues that classical liberalism in the United States during the 19th century had distinctive characteristics as opposed to Britain: "[A]t the center of classical liberal theory [in Europe] was the idea of ''laissez-faire''. To the vast majority of American classical liberals, however, ''laissez-faire'' did not mean no government intervention at all. On the contrary, they were more than willing to see government provide tariffs, railroad subsidies, and internal improvements, all of which benefited producers. What they condemned was intervention in behalf of consumers."

Limits of influence and influence on other perspectives

In its initial formation, economic liberalism was focused on promoting the idea of private ownership and trade; however, due to a growing awareness of concerns regarding policy, the rise of economic liberalism paved the way for a new form of liberalism, known as social liberalism. This promoted an accommodation for government intervention in order to help the poor. As subsequent authors picked up and promoted widespread appeal of a subset of Smith's economic theories to support their own work — of free trade, the division of labour, and the principle of individual initiative — this contributed to obscuring other aspects of the rich body of political liberalism to be found in Smith's work. For example, his work promoted the ideal that the everyday man could hold ownership of his own property and trade, which Smith felt would slowly allow for individuals to take control of their places within society.

Economic liberalism and fiscal liberalism (conservatism)

Economic liberalism is a much broader concept than fiscal liberalism, which is called fiscal conservatism or economic libertarianism in the United States. The ideology that highlighted the financial aspect of economic liberalism is called fiscal liberalism, which is defined as support for free trade.

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 do not seek to replace private enterprise and the free market with public enterprise and economic planning. A social market economy is a largely free-market economy based on a free price system and private property that is supportive of government activity to promote Competition (economics), competition in markets and social welfare programs to address social inequalities that result from market outcomes.

References

Bibliography

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External links

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