Economic liberalism

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Economic liberalism is an economic system organized on individual lines, which means the greatest possible number of economic decisions are made by individuals or households rather than by collective institutions or organizations. [1] It includes a spectrum of different economic policies, such as freedom of movement, but its basis is on strong support for a market economy and private property in the means of production. Although economic liberals can also be supportive of government regulation to a certain degree, they tend to oppose government intervention in the free market when it inhibits free trade and open competition.

Economic system system of production and exchange

An economic system is a system of production, resource allocation and distribution of goods and services within a society or a given geographic area. It includes the combination of the various institutions, agencies, entities, decision-making processes and patterns of consumption that comprise the economic structure of a given community. As such, an economic system is a type of social system. The mode of production is a related concept. All economic systems have three basic questions to ask: what to produce, how to produce and in what quantities and who receives the output of production.

An economy is an area of the production, distribution, or trade, and consumption of goods and services by different agents. Understood in its broadest sense, 'The economy is defined as a social domain that emphasize the practices, discourses, and material expressions associated with the production, use, and management of resources'. Economic agents can be individuals, businesses, organizations, or governments. Economic transactions occur when two parties agree to the value or price of the transacted good or service, commonly expressed in a certain currency. However, monetary transactions only account for a small part of the economic domain.

Individualism moral stance, political philosophy, ideology, or social outlook that emphasizes the moral worth of the individual

Individualism is the moral stance, political philosophy, ideology, or social outlook that emphasizes the moral worth of the individual. Individualists promote the exercise of one's goals and desires and so value independence and self-reliance and advocate that interests of the individual should achieve precedence over the state or a social group, while opposing external interference upon one's own interests by society or institutions such as the government. Individualism is often defined in contrast to totalitarianism, collectivism, and more corporate social forms.

Contents

Economic liberalism is associated with free markets and private ownership of capital assets. Historically, economic liberalism arose in response to mercantilism and feudalism. Today, economic liberalism is also considered opposed to non-capitalist economic orders, such as socialism and planned economies. [2] It also contrasts with protectionism because of its support for free trade and open markets.

A 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 or intangible, fixed or circulating. Thus, land and building, plant and machinery, motorcar, furniture, jewellery, route permits, goodwill, tenancy rights, patents, trademarks, shares, debentures, securities, units, mutual funds, zero-coupon bonds etc. are capital assets.

Mercantilism economic policy emphasizing exports

Mercantilism is a national economic policy that is designed to maximize the exports of a nation. Mercantilism was dominant in modernized parts of Europe from the 16th to the 18th centuries before falling into decline, although some commentators argue that it is still practiced in the economies of industrializing countries in the form of economic interventionism.

Feudalism combination of legal and military customs in medieval Europe

Feudalism was a combination of legal and military customs in medieval Europe that flourished between the 9th and 15th centuries. Broadly defined, it was a way of structuring society around relationships derived from the holding of land in exchange for service or labour. Although derived from the Latin word feodum or feudum (fief), then in use, the term feudalism and the system it describes were not conceived of as a formal political system by the people living in the Middle Ages. In its classic definition, by François-Louis Ganshof (1944), feudalism describes a set of reciprocal legal and military obligations among the warrior nobility revolving around the three key concepts of lords, vassals and fiefs.

An economy that is managed according to these precepts may be described as a liberal economy.

Origins

Adam Smith was an early advocate for economic liberalism AdamSmith.jpg
Adam Smith was an early advocate for economic liberalism

Arguments in favor of economic liberalism were advanced during the 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 , which advocated minimal interference of government in a market economy, though it did not necessarily oppose the state's provision of basic public goods with what constitutes public goods originally being seen as very limited in scope. [3] Smith claimed that if everyone is left to his own economic devices instead of being controlled by the state, then the result would be a harmonious and more equal society of ever-increasing prosperity. [1] This underpinned the move towards a capitalist economic system in the late 18th century and the subsequent demise of the mercantilist system.

Age of Enlightenment European cultural movement of the 18th century

The Age of Enlightenment was an intellectual and philosophical movement that dominated the world of ideas in Europe during the 18th century, the "Century of Philosophy".

Adam Smith 18th-century Scottish moral philosopher and political economist

Adam Smith was a Scottish economist, philosopher and author as well as a moral philosopher, a pioneer of political economy and a key figure during the Scottish Enlightenment, also known as ''The Father of Economics'' or ''The Father of Capitalism''. Smith wrote two classic works, The Theory of Moral Sentiments (1759) and An Inquiry into the Nature and Causes of the Wealth of Nations (1776). The latter, often abbreviated as The Wealth of Nations, is considered his magnum opus and the first modern work of economics. In his work, Adam Smith introduced his theory of absolute advantage.

Public good Good that is non-excludable and non-rival

In economics, a public good is a good that is both non-excludable and non-rivalrous in that individuals cannot be excluded from use or could be enjoyed without paying for it, and where use by one individual does not reduce availability to others or the goods can be effectively consumed simultaneously by more than one person. This is in contrast to a common good which is non-excludable but is rivalrous to a certain degree.

Private property and individual contracts form the basis of economic liberalism. [4] 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 is freedom of speech and press.

Contract agreement having a lawful object entered into voluntarily by multiple parties

A contract is a legally-binding agreement which recognises and governs the rights and duties of the parties to the agreement. A contract is legally enforceable because it meets the requirements and approval of the law. An agreement typically involves the exchange of goods, services, money, or promises of any of those. In the event of breach of contract, the law awards the injured party access to legal remedies such as damages and cancellation.

The invisible hand describes the unintended social benefits of an individual's self-interested actions. Adam Smith first introduced the concept in The Theory of Moral Sentiments, written in 1759, invoking it in reference to income distribution. In this work, however, the idea of the market is not discussed, and the word "capitalism" is never used.

Spontaneous order, also named self-organization in the hard sciences, is the spontaneous emergence of order out of seeming chaos. It is a process in social networks including economics, though the term "self-organization" is more often used for physical changes and biological processes, while "spontaneous order" is typically used to describe the emergence of various kinds of social orders from a combination of self-interested individuals who are not intentionally trying to create order through planning. The evolution of life on Earth, language, crystal structure, the Internet and a free market economy have all been proposed as examples of systems which evolved through spontaneous order.

Initially, the economic liberals had to contend with the supporters of feudal privileges for the wealthy, aristocratic traditions and the rights of kings to run national economies in their own personal interests.[ citation needed ] By the end of the 19th century and the beginning of the 20th, these were largely defeated.

Aristocracy is a form of government that places strength in the hands of a small, privileged ruling class. The term derives from the Greek aristokratia, meaning 'rule of the best-born'.

A monarch is a sovereign head of state in a monarchy. A monarch may exercise the highest authority and power in the state, or others may wield that power on behalf of the monarch. Typically a monarch either personally inherits the lawful right to exercise the state's sovereign rights or is selected by an established process from a family or cohort eligible to provide the nation's monarch. Alternatively, an individual may become monarch by conquest, acclamation or a combination of means. A monarch usually reigns for life or until abdication.

Today, economic liberalism is associated[ by whom? ] with classical liberalism, neoliberalism, propertarian libertarianism and some schools of conservatism.[ citation needed ]

Classical liberalism is a political ideology and a branch of liberalism which advocates civil liberties under the rule of law with an emphasis on economic freedom. Closely related to economic liberalism, it developed in the early 19th century, building on ideas from the previous century as a response to urbanisation and to the Industrial Revolution in Europe and the United States. Notable individuals whose ideas contributed to classical liberalism include John Locke, Jean-Baptiste Say, Thomas Robert Malthus and David Ricardo. It drew on the classical economic ideas espoused by Adam Smith in Book One of The Wealth of Nations and on a belief in natural law, utilitarianism and progress. The term classical liberalism has often been applied in retrospect to distinguish earlier 19th-century liberalism from social liberalism.

Neoliberalism political philosophy that supports economic liberalization

Neoliberalism or neo-liberalism is the 20th-century resurgence of 19th-century ideas associated with laissez-faire economic liberalism and free market capitalism. While it is most often associated with such ideas, the defining features of neoliberalism in both thought and practice has been the subject of substantial scholarly discourse. These ideas include economic liberalization policies such as privatization, austerity, deregulation, free trade and reductions in government spending in order to increase the role of the private sector in the economy and society. These market-based ideas and the policies they inspired constitute a paradigm shift away from the post-war Keynesian consensus which lasted from 1945 to 1980.

Propertarianism, or proprietarianism, is a right-libertarian ethical philosophy that advocates the replacement of states with contractual relationships. Propertarian ideals are most commonly cited to advocate for a state or other governance body whose main or only job is to enforce contracts and private property.

Position on state interventionism

Economic liberalism opposes government intervention on the grounds that the state often serves dominant business interests, distorting the market to their favor and thus leading to inefficient outcomes. [5] 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. [6] [7] For example, a social market economy is a largely free market economy based on a free price system and private property, but is supportive of government activity to promote competitive markets and social welfare programs to address social inequalities that result from free market outcomes. [6] [7]


See also

Related Research Articles

Anarcho-capitalism political philosophy and school of thought

Anarcho-capitalism is a political philosophy and school of anarchist thought that advocates the elimination of centralized state dictum in favor of self-ownership, private property and free markets. Anarcho-capitalists hold that in the absence of statute, society tends to contractually self-regulate and civilize through the spontaneous and organic discipline of the free market.

Conservatism is a political and social philosophy promoting traditional social institutions in the context of culture and civilization. The central tenets of conservatism include tradition, human imperfection, organic society, hierarchy, authority, and property rights. Conservatives seek to preserve a range of institutions such as religion, parliamentary government, and property rights, with the aim of emphasizing social stability and continuity. The more traditional elements—reactionaries—oppose modernism and seek a return to "the way things were".

Liberal may refer to:

Right-wing politics hold that certain social orders and hierarchies are inevitable, natural, normal, or desirable, typically supporting this position on the basis of natural law, economics, or tradition. Hierarchy and inequality may be viewed as natural results of traditional social differences or the competition in market economies. The term right-wing can generally refer to "the conservative or reactionary section of a political party or system".

Free-market anarchism, or market anarchism, includes several branches of anarchism that advocate an economic system based on voluntary market interactions without the involvement of the state. A branch of market anarchism is left-wing market anarchism, including mutualists such as Kevin Carson and Gary Chartier, who consider themselves anti-capitalists and self identify as part of the socialist movement.

Democratic capitalism, also known as capitalist democracy, is a political, economic, and social ideology that involves the combination of a liberal democratic political system with a capitalist economic system. It is based on a tripartite arrangement of a private sector-driven market economy based predominantly on a liberal democratic policy, economic incentives through free markets, fiscal responsibility, and a liberal moral-cultural system which encourages pluralism. This ideology supports a capitalist economy subject to control by a democratic political system that is supported by the majority. It stands in contrast to corporatism by limiting the influence of special interest groups, including corporate lobbyists, on politics.

Social liberalism is a political ideology and a variety of liberalism that endorses a regulated free market economy and the expansion of civil and political rights. A social liberal government is expected to address economic and social issues such as poverty, health care and education in a liberal state. It does so in allowing autonomy of the individual and products of the market economy unrestricted access with the goal to increase wellbeing for all.

Liberal conservatism is a political ideology combining conservative policies with liberal stances, especially on economic, social and ethical issues, or a brand of political conservatism strongly influenced by liberalism.

Anarchism is generally defined as the political philosophy which holds the state to be undesirable, unnecessary and harmful, or alternatively as opposing authority and hierarchical organization in the conduct of human relations. The nature of capitalism is a polarizing issue among anarchists, who advocate stateless societies based on non-hierarchical voluntary associations. Capitalism is generally considered by scholars to be an economic system that includes private ownership of the means of production, creation of goods or services for profit or income, the accumulation of capital, competitive markets, voluntary exchange and wage labor which has generally been opposed by anarchists historically. Furthermore, since capitalism is variously defined by sources and there is no general consensus among scholars on the definition nor on how the term should be used as a historical category, the designation is applied to a variety of historical cases, varying in time, geography, politics and culture.

Conservatism in the United States Political ideologies

American conservatism is a broad system of political beliefs in the United States that is characterized by respect for American traditions, republicanism, support for Judeo-Christian values, moral universalism, business, anti-communism, individualism, advocacy of American exceptionalism, and a defense of Western culture from the perceived threats posed by socialism, authoritarianism, and moral relativism. Liberty is a core value, as is with all major American parties. American conservatives consider individual liberty—within the bounds of American values—as the fundamental trait of democracy; this perspective contrasts with that of modern American liberals, who generally place a greater value on equality and social justice and emphasize the need for state intervention to achieve these goals. American conservatives believe in limiting government in size and scope, and in a balance between national government and states' rights. Apart from some libertarians, they tend to favor strong action in areas they believe to be within government's legitimate jurisdiction, particularly national defense and law enforcement. Social conservatives oppose abortion and favor restricting LGBT rights, while privileging traditional marriage and allowing voluntary school prayer.

Libertarianism is a collection of political philosophies and movements that uphold liberty as a core principle. Libertarians seek to maximize political freedom and autonomy, emphasizing freedom of choice, voluntary association, and individual judgment. Libertarians share a skepticism of authority and state power, but they diverge on the scope of their opposition to existing political and economic systems. Various schools of libertarian thought offer a range of views regarding the legitimate functions of state and private power, often calling for the restriction or dissolution of coercive social institutions.

Right-libertarianism Political ideology

Right-libertarianism, or right-wing libertarianism, refers to libertarian political philosophies that advocate natural law and a major reversal of the modern welfare state. Right-libertarians strongly support private property rights and defend market distribution of natural resources and private property. This position is contrasted with that of some versions of left-libertarianism.

Small government is a concept or principle widely invoked by liberalism, mainly by political conservatives and libertarians, to describe an economic and political system where there is minimal government involvement in certain areas of public policy or the private sector, especially matters considered to be private or personal. It is an important topic in classical liberalism, libertarianism and conservatism, but challenged by supporters of big government. However, what specific policies should be adopted to advance the objective of small government, and how they are to be applied, is subject to considerable debate.

Fusionism philosophical and political combination of traditionalist and social conservatism with political and economic right-libertarianism

In American politics, fusionism is the philosophical and political combination or "fusion" of traditionalist and social conservatism with political and economic right-libertarianism. The philosophy is most closely associated with Frank Meyer.

Political ideologies in the United States

Political ideologies in the United States refers to the various ideologies and ideological demographics in the United States. Citizens in the United States generally classify themselves as adherent to positions along the political spectrum as either liberal, progressive, moderate, or conservative. Modern American liberalism aims at the preservation and extension of human, social and civil rights as well as the government guaranteed provision of positive rights. It combines social progressivism and to some extent ordoliberalism and is highly similar to European social liberalism. American conservatism commonly refers to a combination of economic liberalism and libertarianism and social conservatism. It aims at protecting the concepts of small government and individual liberty while promoting traditional values on some social issues.

Libertarian conservatism political ideology

Libertarian conservatism or conservative libertarianism is a political philosophy and ideology that combines right-libertarian politics and conservative values. Libertarian conservatism advocates the greatest possible economic liberty and the least possible government regulation of social life, mirroring laissez-faire liberalism, but harnesses this to a belief in a more traditional and conservative social philosophy emphasizing authority and duty. Libertarian conservatism prioritizes liberty as its main emphasis, promoting free expression, freedom of choice and laissez-faire capitalism to achieve socially and culturally conservative ends as they reject liberal social engineering, or in the opposite way but not excluding the above, libertarian conservatism could be understood as promoting civil society through conservative institutions and authority - as family, fatherland, religion, education - in the quest of libertarian ends for less state power.

Liberalism is a political and moral philosophy based on liberty, consent of the governed, and equality before the law. Liberals espouse a wide array of views depending on their understanding of these principles, but they generally support limited government, individual rights, capitalism, democracy, secularism, gender equality, racial equality, internationalism, freedom of speech, freedom of the press and freedom of religion.

Liberal socialism is a socialist political philosophy that incorporates liberal principles. Liberal socialism does not have the goal of completely abolishing capitalism and replacing it with socialism, but it instead supports a mixed economy that includes both private property and social ownership in capital goods. Although liberal socialism unequivocally favours a market-based economy, it identifies legalistic and artificial monopolies to be the fault of capitalism and opposes an entirely unregulated economy. It considers both liberty and equality to be compatible and mutually dependent on each other.

References

  1. 1 2 Adams 2001, p. 20.
  2. Brown, Wendy. Edgework: Critical Essays on Knowledge And Politics. Princeton University Press. 2005. p. 39.
  3. Eric Aaron. What's Right?. Dural, Australia. Rosenberg Publishing. 2003. p. 75.
  4. Butler 2015, p. 10.
  5. Turner 2008, p. 60-61.
  6. 1 2 Turner 2008, pp. 83–84.
  7. 1 2 Balaam & Dillman 2015, p. 48.

Bibliography