# Economic liberalism

> Mediated Wiki article. Canonical URL: https://mediated.wiki/source/Economic_liberalism
> Markdown URL: https://mediated.wiki/source/Economic_liberalism.md
> Source: https://en.wikipedia.org/wiki/Economic_liberalism
> Source revision: 1339391002
> License: Creative Commons Attribution-ShareAlike 4.0 International (https://creativecommons.org/licenses/by-sa/4.0/)

This article is about the economic ideology based on private property and pro-market principles. For the overlapping economic philosophy in the United States, see [fiscal conservatism](/source/Fiscal_conservatism).

**Economic liberalism** is a [political](/source/List_of_political_ideologies) and [economic ideology](/source/Economic_ideology) that supports a [market economy](/source/Market_economy) based on [individualism](/source/Individualism) and [private property](/source/Private_property) in the [means of production](/source/Means_of_production).[1] [Adam Smith](/source/Adam_Smith) 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](/source/Liberalism) up until the [Great Depression](/source/Great_Depression) and rise of [Keynesianism](/source/Keynesianism) in the 20th century. Historically, economic liberalism arose in response to [feudalism](/source/Feudalism) and [mercantilism](/source/Mercantilism).

Economic liberalism is associated with markets and private ownership of [capital assets](/source/Capital_asset). Economic liberals tend to oppose [government intervention](/source/Government_intervention) and [protectionism](/source/Protectionism) in the [market economy](/source/Market_economy) when it inhibits [free trade](/source/Free_trade) and [competition](/source/Competition_(economics)), but tend to support government intervention where it protects [property rights](/source/Property_rights_(economics)), opens new markets or funds market growth, and resolves [market failures](/source/Market_failure).[2] They also tend to oppose [cartels](/source/Cartels), [monopolies](/source/Monopolies), [financialization](/source/Financialization) of the economy, [rent-seeking](/source/Rent-seeking) behaviour and [unproductive](/source/Productivity) classes reliant on rent, assets or state-granted privileges. An economy that is managed according to these precepts may be described as a liberal economy or operating under liberal [capitalism](/source/Capitalism). Economic liberals commonly adhere to a [political](/source/Political_philosophy) and [economic philosophy](/source/Economic_philosophy) that advocates a restrained [fiscal policy](/source/Fiscal_policy) and a [balanced budget](/source/Balanced_budget) through measures such as low taxes, reduced government spending, and minimized government debt.[3] Free trade, [deregulation](/source/Deregulation), [tax cuts](/source/Tax_cut), [privatization](/source/Privatization), [labour market flexibility](/source/Labour_market_flexibility), and [opposition to trade unions](/source/Opposition_to_trade_unions) are also common positions.[4]

Economic liberalism can be contrasted with [protectionism](/source/Protectionism) because of its support for free trade and an [open economy](/source/Open_economy), and is considered opposed to [planned economies](/source/Planned_economies) and non-capitalist economic orders, such as [communism](/source/Communism).[5] As such, economic liberalism today is associated with [classical liberalism](/source/Classical_liberalism), [neoliberalism](/source/Neoliberalism), [right-libertarianism](/source/Right-libertarianism), and some schools of [conservatism](/source/Conservatism) like [liberal conservatism](/source/Liberal_conservatism) and [fiscal conservatism](/source/Fiscal_conservatism). Economic liberalism follows the same philosophical approach as classical liberalism and fiscal conservatism.[6]

## Origin and early history

Developed during the [Age of Enlightenment](/source/Age_of_Enlightenment), particularly by [Adam Smith](/source/Adam_Smith), 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 [feudalism](/source/Feudalism) and [mercantilism](/source/Mercantilism).[2] It was first proposed by [Adam Smith](/source/Adam_Smith) in *[An Inquiry into the Nature and Causes of the Wealth of Nations](/source/An_Inquiry_into_the_Nature_and_Causes_of_the_Wealth_of_Nations)* (1776), which advocated minimal interference of government in a [market economy](/source/Market_economy), although it did not necessarily oppose the state's provision of basic [public goods](/source/Public_good_(economics)).[7] 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.[1] This underpinned the move towards a [capitalist](/source/Capitalist) economic system in the late 18th century and the subsequent demise of the mercantilist system. Private property and individual [contracts](/source/Contract) form the basis of economic liberalism.[8]

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](/source/Invisible_hand)) and that allowing them to act without any restrictions will produce the best results for everyone ([spontaneous order](/source/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](/source/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".[9]

### Initial opposition

Initially, the economic liberals had to contend with arguments from the supporters of feudal privileges for the wealthy, traditions of the [aristocracy](/source/Aristocracy) and the rights of [monarchs](/source/Monarch) 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.

The [Ottoman Empire](/source/Ottoman_Empire) had liberal free trade policies by the 18th century, with origins in [capitulations of the Ottoman Empire](/source/Capitulations_of_the_Ottoman_Empire), dating back to the first commercial treaties signed with France in 1536 and taken further with [capitulations](/source/Capitulation_(treaty)) in 1673, in 1740 which lowered [duties](/source/Duty_(economics)) to only 3% for imports and exports and in 1790. Ottoman free trade policies were praised by British economists advocating free trade such as [J. R. McCulloch](/source/J._R._McCulloch) in his *Dictionary of Commerce* (1834), but criticized by British politicians opposing free trade such as [Prime Minister](/source/Prime_Minister_of_the_United_Kingdom) [Benjamin Disraeli](/source/Benjamin_Disraeli), who cited the Ottoman Empire as "an instance of the injury done by unrestrained competition" in the 1846 [Corn Laws](/source/Corn_Laws) debate, arguing that it destroyed what had been "some of the finest manufactures of the world" in 1812.[10]

## Contrast with other economic philosophies

### Contrast between British and American views

Historian Kathleen G. Donohue argues that [classical liberalism in the United States](/source/Classical_liberalism_in_the_United_States#Classical_liberalism) 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."[11]

### 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](/source/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](/source/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](/source/Fiscal_conservatism) or economic libertarianism in the United States.[12] The ideology that highlighted the financial aspect of economic liberalism is called fiscal liberalism, which is defined as support for [free trade](/source/Free_trade).[13]

### Position on state interventionism

Economic liberals oppose government intervention in the economy when it leads to outcomes they consider to be inefficient.[14] They are supportive of a strong state that protects the right to property and enforces contracts.[2] They may also support government interventions to resolve market failures.[2] [Ordoliberalism](/source/Ordoliberalism) and various schools of [social liberalism](/source/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](/source/Public_enterprise) and [economic planning](/source/Economic_planning).[15][16] A [social market economy](/source/Social_market_economy) is a largely free-market economy based on a [free price system](/source/Free_price_system) and private property that is supportive of government activity to promote [competition](/source/Competition_(economics)) in markets and [social welfare](/source/Social_welfare) programs to address [social inequalities](/source/Social_inequalities) that result from market outcomes.[15][16]

## See also

- [Conservatism in the United States](/source/Conservatism_in_the_United_States)
- [Constitutional economics](/source/Constitutional_economics)
- [Doux commerce](/source/Doux_commerce)
- [Economic freedom](/source/Economic_freedom)
- [Economic liberalization](/source/Economic_liberalization)
- [Economic progressivism](/source/Economic_progressivism)
- [Georgism](/source/Georgism)
- *[Laissez-faire](/source/Laissez-faire)*
- [Libertarianism in the United States](/source/Libertarianism_in_the_United_States)

## References

1. Adams 2001, p. 20.

1. Oatley, Thomas (2019). [*International Political Economy: Sixth Edition*](https://books.google.com/books?id=4GJoDwAAQBAJ). Routledge. pp. 25, 34–35. ISBN 978-1351034647. [Archived](https://web.archive.org/web/20210721011053/https://books.google.com/books/about/International_Political_Economy.html?id=4GJoDwAAQBAJ) 2021-07-21 at the Wayback Machine. Retrieved 2021-07-21.

1. Simmons, Beth A.; Dobbin, Frank; Garrett, Geoffrey (2006). ["Introduction: The International Diffusion of Liberalism"](https://www.cambridge.org/core/journals/international-organization/article/introduction-the-international-diffusion-of-liberalism/1AAA24743F00B2AE436300BB686D8049). *International Organization*. **60** (4): 781–810. [doi:10.1017/S0020818306060267](https://doi.org/10.1017/S0020818306060267). [ISSN 1531-5088](https://www.worldcat.org/issn/1531-5088). [S2CID 146351369](https://api.semanticscholar.org/CorpusID:146351369)

1. Boudreaux, Don (2015-03-31). ["Milton Friedman on the Real World Effects of Labor Unions"](https://cafehayek.com/2015/03/milton-friedman-on-the-real-world-effects-of-labor-unions.html). *Cafe Hayek*. [Archived](https://web.archive.org/web/20201125030049/https://cafehayek.com/2015/03/milton-friedman-on-the-real-world-effects-of-labor-unions.html) 2020-11-25 at the Wayback Machine. Retrieved 2020-10-13.

1. Brown, Wendy (2005). *Edgework: Critical Essays on Knowledge And Politics*. Princeton University Press. p. 39..

1. Gamble, Andrew (2013). ["Neo-Liberalism and Fiscal Conservatism"](https://books.google.com/books?id=zYltAAAAQBAJ&q=info:iYMlJ3MGTnAJ:scholar.google.com/&pg=PA53). *Resilient Liberalism in Europe's Political Economy*. Thatcher, Mark & Schmidt, Vivien A. (eds.). Cambridge University Press. pp. 53–77. ISBN 978-1107041530. [Archived](https://web.archive.org/web/20210726031251/https://books.google.com/books?id=zYltAAAAQBAJ&q=info%3AiYMlJ3MGTnAJ%3Ascholar.google.com%2F&pg=PA53) 2021-07-26 at the Wayback Machine. Retrieved 2021-07-26.

1. Aaron, Eric (2003). *What's Right?*. Dural, Australia: Rosenberg Publishing. p. 75.

1. Butler 2015, p. 10.

1. Walford v Miles [1992] 2 A.C. 128

1. Paul Bairoch (1995). [*Economics and World History: Myths and Paradoxes*](https://web.archive.org/web/20171012060209/https://www.scribd.com/document/193124153/Economics-and-World-History-Myths-and-Paradoxes-Paul-Bairoch). [University of Chicago Press](/source/University_of_Chicago_Press). pp. 31–32. Archived from [the original](https://www.scribd.com/document/193124153/Economics-and-World-History-Myths-and-Paradoxes-Paul-Bairoch) on 2017-10-12. Retrieved 2017-08-16. – via Scribd.[dead link]

1. Donohue, Kathleen G. (2005). [*Freedom from Want: American Liberalism and the Idea of the Consumer*](https://books.google.com/books?id=ud7TN4Asro8C&pg=PA2). Johns Hopkins University Press. p. 2. ISBN 978-0801883910. [Archived](https://web.archive.org/web/20210201201625/https://books.google.com/books?id=ud7TN4Asro8C&pg=PA2) 2021-02-01 at the Wayback Machine. Retrieved 2016-12-03.

1. Fujii, George (2013). "Liberalism". Encyclopedia of the Cold War. Routledge. ISBN 978-1135923112.

1. Peter Ghosh, Lawrence Goldman (ed.) (2006). [*Politics and Culture in Victorian Britain: Essays in Memory of Colin Matthew*](https://books.google.com/books?id=f6Kne2lSRrgC&dq=Economic+liberalism+%22fiscal+liberalism%22&pg=PA56). OUP Oxford. p. 56. ISBN 978-0191514449. Hence the emphasis today on the study of political economy, and the identification of Gladstone with 'fiscal liberalism', defined above all as the liberalism of free trade.

1. Turner 2008, pp. 60–61.

1. Turner 2008, pp. 83–84.

1. Balaam & Dillman 2015, p. 48.

## Bibliography

- Adams, Ian (2001). [*Political Ideology Today*](https://archive.org/details/politicalideolog0000adam). Manchester University Press. ISBN 978-0719060205.
- Balaam, David N & Dillman, Bradford (2015). *Introduction to International Political Economy*. Routledge. ISBN 978-1317347309.
- Butler, Eamonn (2015). *Classical Liberalism – A Primer*. Do Sustainability. ISBN 978-0255367080.
- Turner, Rachel S. (2008). *Neo-Liberal Ideology: History, Concepts and Policies*. Edinburgh University Press. ISBN 978-0748688685.

---
Adapted from the Wikipedia article [Economic liberalism](https://en.wikipedia.org/wiki/Economic_liberalism) by Wikipedia contributors ([contributor history](https://en.wikipedia.org/wiki/Economic_liberalism?action=history)). Available under [Creative Commons Attribution-ShareAlike 4.0 International](https://creativecommons.org/licenses/by-sa/4.0/). Changes may have been made.