6.2.1 Classical Liberalism: Minimal State and Individual Freedom

Classical Liberalism

Emergence and Core Principles

Free Markets and Minimal State Intervention

Importance of Free Markets

Role of Government

• According to classical liberals, the role of the government should be limited to:
  • Protecting private property
  • Enforcing contracts
  • Ensuring national defense
• They believe that any further intervention infringes on individual liberties and hinders economic growth.

Self-Help and Self-Reliance

• Classical liberals emphasize self-help and self-reliance. Samuel Smiles, in his book Self Help (1859), argued that it would be counterproductive for the state to replace the individual in providing resources. Smiles feared this would lead to what is now termed the 'dependency syndrome'.

Negative Freedom

• Negative freedom means the absence of restraint, where the actions of one individual should be tolerated by others unless they clearly harm others.

Private Property and Economic Freedom

Private Property

Protection of Property

• The protection of private property is central to classical liberal economic thought, with the government's role primarily focused on safeguarding these rights.

Economic Liberalism

Belief in Economic Liberty

Adam Smith and the Invisible Hand

• Adam Smith, in Wealth of Nations (1776), described the 'invisible hand' of market forces that naturally guides resources to their most productive uses. Smith believed that the economy is a self-sustaining mechanism where forces of demand and supply ensure maximum wealth creation.

Economic Assumptions

• Classical liberals assumed that those who failed to engage in the economy (work hard or save) were to blame for their situation, which was why economic liberalism was popular in the 18th and 19th centuries when unemployment rates were low.
• Free market economics helped Britain become the largest economy by 1860.
• The popularity of free market economics surged in the UK and USA during the 1980s and 1990s with neo-liberalism.

Laissez-Faire Economics and the Invisible Hand

Laissez-Faire Economics

• Classical liberals advocate for laissez-faire economics, a policy of minimal governmental interference in economic affairs. They argue that the "invisible hand" naturally guides resources to their most productive uses, creating wealth and improving living standards.

Wealth Trickle-Down

• For Smith and other free-market advocates like David Ricardo, wealth would 'trickle down' from the wealthiest to the rest of the population. Governments should not interfere in trade by imposing duties and tariffs on imports.

Opposition to Government Intervention

• The belief in self-regulating markets underpins classical liberal opposition to government intervention, including regulation, subsidies, or other forms of economic control.

View on Welfare and Redistribution

Opposition to Extensive Welfare

• Classical liberals generally oppose extensive welfare programs and wealth redistribution. They argue that individuals should be responsible for their own well-being and that government efforts to redistribute wealth undermine personal responsibility and economic incentives.

Minimal and Targeted Welfare

• Welfare should be minimal and targeted only at those who are truly unable to support themselves, rather than being a comprehensive system that creates dependency.

Individual Liberty

• Individual liberty is a core belief of classical liberalism, emphasizing the inherent right of each person to pursue their own interests and make choices without undue interference from the state or others.
• This concept of negative liberty supports freedom from external constraints, particularly government control, and argues that individuals are best suited to determine their own paths in life.
• Classical liberals believe that protecting individual liberty leads to greater creativity, innovation, and prosperity, as it allows people to act according to their own reason and initiative within a framework of laws that protect private property and personal rights.