Economic Liberalism

The liberal theory of economics is the theory of economics developed in the Enlightenment, and believed to be first fully formulated by Adam Smith which advocates minimal interference by government in the economy. The case for economic liberalism which began to be argued in the eighteenth century was the then-startling claim that if everyone is left to their 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] (see spontaneous order and invisible hand). It is the economic component of the political ideology of classical liberalism. The concept of economic liberalism or market liberalism underpinned the move towards a free market capitalist economic system in the late 18th century, and the subsequent demise of the mercantilist system. Today, the liberal theory of economics is strongly associated with libertarianism, neoliberal economics and some schools of conservatism, particularly liberal conservatism.

Basis of Liberalism

Private property and individual contracts form the basis of the liberal theory of economics. The early theory was based on the assumption that the economic actions of individuals are largely based on self-interest, and that allowing them to act without any restrictions will produce the best results, provided that at least minimum standards of public information and justice exist, e.g., no-one should be allowed to coerce or steal.

History of Economic Liberalism

Economic Liberalism and the Enlightenment

Initially, the liberal theory of economics 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. By the end of the 19th century and the beginning of the 20th, these were largely defeated.

Decline and revival

However, new challenges arose from nationalists as well as the left. The most significant challenge to the liberal theory of economics in the nineteenth century came with the reinstitution of tariffs in Germany, which undertook that action to achieve self-sufficiency in order to be able to survive a long war.

Another significant challenge to the economic liberalism came from the progressive and socialist schools of thought that favoured redistribution of wealth, greater economic equality, government programs to help the poor and, in some cases, planned economies. At the turn of the century, many of the liberal parties were taken over by the progressives that opposed economic liberalism and appropriated the mantra of liberals for themselves.

Following World War I and the Great Depression, the theory fell out of favour. It was largely superseded by Keynesian economics in 1945–70 period, which take into account macro-level phenomena and call for a mixed economy involving significant state intervention.

After Keynesianism failed to explain stagflation in the 1970s, many concepts from the classical liberal theory were revived by monetarist and new classical economists. Keynesian economics as practiced in the post World War period is generally considered incapable of explaining the behavior of modern economies. There has been a revival in some Keynesian ideas based more rigorously on economics theory in certain universities under the name New Keynesian economics. The dominant discourse in modern macroeconomics in particular and economics in general, is new classical. New classical economics is rigorously based in theory, in contrast to Keynesian models. The majority of central banks as well as international institutions such as World Bank and International Monetary Fund use the new liberal models in their policy making process.

Since the 1970s, the governments of many countries around the world have adopted economic liberalism to a greater or lesser degree. For example, the theories of Friedrich von Hayek (winner of the Nobel Prize in Economics in 1974) inspired the market-oriented policies of Ronald Reagan and Margaret Thatcher. India, under the direction of then Finance Minister and now Prime Minister Manmohan Singh began to liberalize its economy in the early 1990s, with spectacular results as evidenced by its 9% GDP growth.

Proponents

Notes

1. ^ Adams, Ian. Political Ideology Today. Manchester U Press 2001. p 20

This article discusses liberalism as a worldwide political ideology, its roots and development, and some of its many modern-day variations, including American, European, classical, and modern traditions.

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Politics is the process by which groups of people make decisions. Although the term is generally applied to behavior within civil governments, politics is observed in all human group interactions, including corporate, academic, and religious
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Laozi (China, 6th Century BC) is the author of the classic Chinese text, the Tao Te Ching, and the founder of Taoist philosophy. A common theme that runs throughout the Tao Te Ching is that the ruler should not meddle with society; instead, the people should be left to their own
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Libertarianism

Schools of thought
Agorism
Anarcho-capitalism
Geolibertarianism
Green libertarianism
Right-libertarianism
Left-libertarianism
Minarchism
Neolibertarianism
Paleolibertarianism
Progressive libertarianism

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Cultural liberalism is a liberal view of society that stresses the freedom of individuals from cultural norms. Some cultural liberals believe that society should not impose any specific code of behaviour, and they see themselves as defending the rights of non-conformists
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For the school of international relations, see .

Neoliberalism refers to a political movement that espouses economic liberalism as a means of promoting economic development and securing political liberty.
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Ordoliberalism (also called German neoliberalism) is a school of liberalism emphasizing the need for the state to ensure that the free market produces results close to its theoretical potential (see allocative efficiency).
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Paleoliberalism is a somewhat obscure term for extreme liberalism. The (slightly more common) adjectival form, paleoliberal is defined by The American Heritage Dictionary of the English Language
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Social liberalism, also called new liberalism^[1]^[2] (as it was originally termed), radical liberalism,^[3] modern liberalism,^[4]
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Freedom
By concept
Philosophical freedom Political freedom Liberty
By form
Assembly Association Body: clothing, modifying From government Movement Press Religion and beliefs Speech & expression Thought
Other
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individual rights advocates". Advocates tend to argue for increased civil rights. This is traditionally associated with liberalism.

Role of Governrights

are often codified into law so that they may be protected by impartial third parties such as the . the Government re]].
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Liberal democracy is a form of government. It is a representative democracy in which the ability of the elected representatives to exercise decision-making power is subject to the rule of law, and usually moderated by a constitution that emphasizes the protection of the
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Liberal neutrality is the idea that the liberal state should not promote any particular 'conception of the good'. This idea formed a cornerstone of John Rawls' work and has been developed by many other liberal thinkers including Brian Barry, Robert Nozick, Ronald Dworkin.
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The concept of negative liberty refers to an individual's freedom from authority. According to Thomas Hobbes, "a free man is he that in those things which by his strength and wit he is able to do is not hindered to do what he hath the will to do." (Leviathan, Ch.
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Progressivism

Schools
American Progressivism
New Deal liberalism
Educational progressivism
Progressive libertarianism

Ideas
Democracy
Freedom
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Economic systems

Ideologies and Theories
Primitive communism
Capitalist economy
Corporate economy
Fascist economy
Laissez-faire
Mercantilism
Natural economy
Social market economy
Socialist economy
Communist economy

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The open society is a concept originally developed by philosopher Henri Bergson. In open societies, government is responsive and tolerant, and political mechanisms are transparent and flexible.
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right is the legal or moral entitlement to do or refrain from doing something or to obtain or refrain from obtaining an action, thing or recognition in civil society. Compare with privilege, or a thing to which one has a just claim.
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In the entry Liberalism one can find a comprehensive discussion on liberalism.

In general, liberalism in Europe is a political movement that supports a broad tradition of individual liberties and constitutionally-limited and
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Liberalism in the United States of America is a broad political and philosophical mindset, favoring individual liberty, and opposing restrictions on liberty, whether they come from established religion, from government regulation, or from the existing class structure.
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liberalism in diverse countries around the world. It is an overview of parties that adhere more or less (explicitly) to the ideas of political liberalism and is therefore a list of liberal parties around the world.
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