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Subject Area: Political Theory

The Social Meaning of Economic Liberalism - Leonard P. Liggio, Literature of Liberty, April/June 1979, vol. 2, No. 2 [1979]

Edition used:

Literature of Liberty: A Review of Contemporary Liberal Thought was published first by the Cato Institute (1978-1979) and later by the Institute for Humane Studies (1980-1982) under the editorial direction of Leonard P. Liggio.

Part of: Literature of Liberty: A Review of Contemporary Liberal Thought, 20 vols. 19781-982

About Liberty Fund:

Liberty Fund, Inc. is a private, educational foundation established to encourage the study of the ideal of a society of free and responsible individuals.


The Social Meaning of Economic Liberalism

Joyce Oldham Appleby

  • San Diego State University

“Ideology and Theory: The Tension between Political and Economic Liberalism in Seventeenth-Century England.” The American Historical Review 81 (June 1976): 499–515.

By the end of the seventeenth century—ninety years before Adam Smith's Wealth of Nations was published—British writers on political economy had challenged the cruder mercantilist fallacies. Yet in the eighteenth century the “balance-of-trade” doctrine was reasserted in its crudest forms. The author seeks the answer to this paradox in the tension and interplay between theory and ideology.

The balance-of-trade doctrine focused on production for the foreign market as the source of specie, and hence, of wealth. Domestic consumption robbed the nation's store of capital. Therefore, foreign markets for British goods were sought. This view conceived of the whole nation as one patriotic unit or enterprise. There was scant appreciation of individuals' particular interests and desires.

The balance-of-trade theory could not explain Britain's economic growth, especially the great rise in domestic consumption (which should have impoverished the nation). Writers of political economy such as Henry Martyn, Nicholas Barbon, Daniel Defoe, and Bernard Mandeville fashioned a new social view challenging the foundations of the old. They viewed society as an agglomeration of self-interested individuals, and they extolled the role of domestic consumption for its effects on economic growth. These writers also stressed the dynamic interaction between growing consumption wants and increased effort and increased production. Not only would new products meet a demand, but consumers, having discovered products heretofore undreamed of, would be stimulated to work harder and produce more. Growth would be “self-sustaining.”

If crude errors had been decisively rejected by the end of the seventeenth century, why were the new ideas not developed? Appleby argues that ideology was a barrier to further theorizing along new lines. The prevalent ideology enshrined an idea of upper class governance and lower class deference and discipline. The socio-political structure would have been threatened by the new ideas. Among other things, the new view suggested that the poor could improve themselves through individual effort—too democratic a view for the times.

Businessmen sought freedom for themselves, including freedom from the bonds of a traditional society. They nonetheless accepted the permanent rule of the lower classes by an elite, of which they were now members. A theory in which the poor's interests were one with the ruling class's, in which the poor could improve themselves through effort, and in which the consumption of the lowest classes was elevated to the end of production, clashed too strongly with the dominant ideology and with class interests.