Liberalism, as it developed in the seventeenth and eighteenth
centuries and flowered in the nineteenth, puts major emphasis on
the freedom of individuals to control their own destinies. Indi
vidualism is its creed; collectivism and tyranny its enemy. The
state exists to protect individuals from coercion by other individu
als or groups and to widen the range within which individuals
can exercise their freedom; it is purely instrumental and has no
significance in and of itself. Society is a collection of individuals,
and the whole is no greater than the sum of its parts. The ulti
mate values are the values of the individuals who form the soci
ety; there are no super-individual values or ends. Nations may be
convenient administrative units; nationalism is an alien creed.
In politics, liberalism expressed itself as a reaction against
authoritarian regimes. Liberals favored limiting the rights of
hered itary rulers, establishing democratic parliamentary institu
tions, extending the franchise, and guaranteeing civil rights.
They favored such measures both for their own sake, as a direct
expression of essential political freedoms, and as a means of facil
itating the adoption of liberal economic measures.
In economic policy, liberalism expressed itself as a reaction
against government intervention in economic affairs. Liberals
favored free competition at home and free trade among nations.
1
Milton Friedman on Freedom
They regarded the organization of economic activity through free
private enterprise operating in a competitive market as a direct
expression of essential economic freedoms and as important also
in facilitating the preservation of political liberty. They regarded
free trade among nations as a means of eliminating conflicts that
might otherwise produce war. Just as within a country, individu
als following their own interests under the pressures of competi
tion indirectly promote the interests of the whole; so, between
countries, individuals following their own interests under condi
tions of free trade indirectly promote the interests of the world as
a whole. By providing free access to goods, services, and resources
on the same terms to all, free trade would knit the world into a
single economic community.
“Liberalism” has taken on a very different meaning in the twen
tieth century and particularly in the United States. This differ
ence is least in the concrete political forms favored: both the
nineteenth-century liberal and the twentieth-century liberal favor
or profess to favor parliamentary forms, nearly universal adult
franchise, and the protection of civil rights. But even in politics
there are some not unimportant differences: in any issue involving
a choice between centralization or decentralization of political
responsibility, the nineteenth-century liberal will resolve any
doubt in favor of strengthening the importance of local govern
ments at the expense of the central government; for, to him, the
main desideratum is to strengthen the defenses against arbitrary
government and to protect individual freedom as much as possible;
the twentieth-century liberal will resolve the same doubt in favor
of increasing the power of the central government at the expense of
local government; for, to him, the main desideratum is to strengthen
the power of the government to do “good for” the people.
The difference is much sharper in economic policy where lib
eralism now stands for almost the opposite of its earlier mean
ing. Nineteenth-century liberalism favors private enterprise and
2
Liberalism, Old Style
a minimum of government intervention. Twentieth-century lib
eralism distrusts the market in all its manifestations and favors
widespread government intervention in, and control over, eco
nomic activity. Nineteenth-century liberalism favors individual
ist means to foster its individualist objectives. Twentieth-century
liberalism favors collectivist means while professing individu
alist objectives. And its objectives are individualist in a differ
ent sense; its keynote is welfare, not freedom. As Schumpeter
remarks, “as a supreme, if unintended, compliment, the ene
mies of the system of private enterprise have thought it wise to
appropriate its label.”1 The rest of this article is devoted entirely
to liberalism in its original meaning, and the term will be used
throughout in that sense.
Political liberalism and economic liberalism derive from a sin
gle philosophy. Yet they have frequently led independent lives
in application, which suggests that their relation to one another
deserves examination in the realm of ideas as well. During the
nineteenth century, many countries adopted large elements of eco
nomic liberalism, yet maintained political forms that were nei
ther liberal nor developing at any rapid pace in a liberal direction.
Russia and Japan are perhaps the outstanding examples. During
the twentieth century, countries that have achieved and main
tained most of the concrete elements of the liberal political pro
gram have been moving away from liberal and toward collectivist
economic policies. Great Britain is the most striking example; cer
tainly for the first half of this century, the general drift of British
economic policies has been toward greater direct intervention
and control by the state; this drift has been checked in the past
few years, but whether the check is more than transitory remains
to be seen. Norway, Sweden, and, with a lag of several decades,
the United States, exhibit much the same tendencies.