The Online Library of Liberty

A project of Liberty Fund, Inc.

• Foreword
• Economic Liberalism the Classical View
• 1: The Classical Psychology of Liberalism
• 1: The Theory of Moral Sentiments
• 2: The Lectures
• 3: The Wealth of Nations
• 4: The Achievement of Smith
• 2: The Political Ideas of the Classical Economists
• 1: The Political Philosophy of Hume and Smith
• 2: The Paradox of Economic and Political Freedom
• 3: Human Nature, History, and Government
• 4: The Nationalism of the Economists
• 5: The Structure of Government
• 6: Economic Improvement and Social Progress
• 3: Liberalism In the Great Century
• 1: The Importance of the Nineteenth Century
• 2: The Practice of Policy
• 3: The Meaning of Economic Liberalism
• 4: The Ideas of Policy
• 5: The Theory of Policy In Mill

6

Economic Improvement and Social Progress

Out of the nationalistic feelings of the classical economists and their conception of the structure of government, there emerges the idea of a strong national state based on law. In it power is limited enough to leave each man free in the pursuit of his legitimate interests and great enough to protect him from the encroachments of others in his own country and from abroad. Sovereignty in such a state rests ultimately with the electorate, and the electorate is to consist only of persons possessing some property. The limitation was necessary, the economists said, because men without property could not be expected to exercise the franchise in the interest of order and liberty. This belief in turn was derived from their conception of human nature; it was strengthened by their interpretation of past efforts of self-government, and by the condition of the lower classes in their age.

The limitation on freedom was not, however, something to be imposed forever. If the circumstances which made it necessary were to change, the amount of freedom which the people properly could exercise would change also. The major prerequisite for more freedom was an increase in the real income of the masses. Their poverty was the man cause of whatever social disorder and tyranny that existed, and the reduction of poverty would, the economist believed, make society more orderly, stable, and free. They have a great reputation for being pessimists; actually the classical economists believed society could be greatly improved. If they had believed anything else, their beliefs would have been anomalous indeed, since progress was a byword of their age.

THE CONDITION OF PROGRESS

The issue to which they directed their attention was not the possibility of progress—that was taken for granted—but the circumstances most favorable to it. They believed that in the free market they had found what was most favorable. If men had the liberty of trading freely and if their property was secure, economic progress would follow “naturally,” meaning not providentially but as a matter of course. The accumulation of capital would raise the real income of the masses, and two important changes would occur. They would acquire an interest in supporting the existing order, an order of the kind the economists regarded as ideal. And they would be able to attend to their moral and mental improvement. Then, by reason both of desire and ability, the masses would deserve complete political liberty. I want to emphasize their belief that the condition of political progress was an increase in real income and that the condition of such an increase was an extension of economic freedom (but not complete laisser faire by any means). This belief was a part of a larger conception of the classical economists that the improvement of morals and manners, and progress in the arts and sciences, could advance only as men were free to seek their material welfare in their own way. In this conception the political and economic doctrines of the classicists are most closely related.

The relationship was made clear in many ways. Hume saw in the development of a free market the raising of the moral level of society. He said that as “commerce” diffused its benefits throughout all ranks of society, the coarse and baleful aspects of acquisitiveness would disappear and honor and virtue would replace them.35 Throughout his essays there is disclosed the belief that as liberty becomes more extensive, the material and political welfare of the people is raised and their intellectual and moral qualities as well. Even though he was distrustful of self-government in his own time, he saw the likelihood of its eventual establishment. He stated:

Smith, more than any of the economists, wrote about the relation between economic activity and social progress. He made the development of a free society depend on the extension of economic freedom; and he made the development of virtue and wisdom, on which, he believed, self-government must rely, depend on raising the material welfare of the people.37 Although Ricardo did not express himself directly on this point, he probably agreed with Smith, believing as he did that “the general happiness” of mankind was increased as its income increased, and that the method of increasing income was a free market.38

The dependence of cultural development upon material welfare was expressed most completely by M’Culloch who said:

What the economists believed about progress made their view of representative government considerably more liberal than it otherwise would have been. The amount of order which a state must impose as a practical necessity, and the extent of liberty which of moral necessity it must cultivate, both depend on the material condition of the majority of the people. The better is that condition, the more capable are the people of governing themselves, the more liberty are they able to exercise, and the less is the amount of coercion the state need use. The economists believed that the material condition of society would improve, and hence they also were confident that its government would become more free—that the masses would achieve political liberty commensurate with their economic liberty.

A NOTE ON MILL

In the nineteenth century such an improvement in the real income of the people did occur. When John Stuart Mill, the last of the classical school, wrote of government, he allowed a far greater amount of liberty and insisted on much less order than his predecessors had. I have refrained from considering his political ideas here, except incidentally, because they belong to a period much different from that in which the earlier economists wrote. (His economic policy is described in the next chapter.) His view of the function of government was much more extensive than that of the earlier economists, not only because he lived in a more complex society but also (and more fundamentally) because his ideas were more utilitarian than theirs and more influenced by Helvetius, Holbach, and Bentham than by Hooker, Locke, and Hume. He was not as averse as his predecessors in the classical school to regarding individuals as instruments to be improved and manipulated in the hands of a wise and beneficent government. Yet he did, in many other ways, exemplify the tradition of the earlier economists. His conception of the ideal government was as relative as theirs, and he said even more explicitly than they that the best government for a society is that which is best adapted to the capacities of its members. These capacities were far larger in his age than they were half a century or more earlier. So far had the people of the Western world, and especially those of Great Britain, revealed their worth that Mill urged an extensive though not entirely universal franchise as most consistent with the quality of his age.

In the nineteenth century there not only was a growing belief that the government could do with fewer coercive political powers because the people were better able to exercise their freedom with restraint. There also was a belief among some that the power of the government in international affairs properly should be diminished. As the belief of the economists in self-government increased, so too did their nationalistic feeling diminish. Certain of them, and the political leaders who shared their principles, strongly believed in restraining the foreign policy of Great Britain, in maintaining an indifferent attitude to the troubles of the Continent, and in vigorously opposing the expansion of the empire. Better, they said, that the energies of Britain be directed toward increasing its trade than to meddling in other people’s affairs.

That was the view of Cobden and Bright and the Manchester school, which more than any other was responsible for putting the idea of free trade into practice. It also agitated for world peace and for extending the franchise. The Manchester school carried the classical ideas of political liberty and economic liberty in foreign trade (but only foreign trade) to their ultimate conclusion. The ideas were applied so ruthlessly that the economists of the period (and most were in the classical tradition) stood apart from the school. That, however, is another event, and I have described it elsewhere.40

3

LIBERALISM IN THE GREAT CENTURY

The nineteenth century usually is thought to have been the greatest age of economic liberalism, greater than any other, from its origins in Stoicism down to the present time. Economists think of the century as the long afternoon of the ideology. They believe it then meant laisser faire and that laisser faire was the policy of Great Britain, the major economy of the world. In fact, the century was not like that, and historians have tried to tell us so. They have reported the many ways in which the British government intervened in the market. The historians also have said the intervention was inconsistent with liberalism. In this they are, in my opinion, mistaken. The intervention can most of it be explained as an application of the doctrine—not, to be sure, an application of the liberalism of free markets, anarchy, the constable, and the other elements that erroneously and often are taken to be its exclusive meaning. The intervention was an application of what the doctrine had come to be by the nineteenth century. The purpose of this chapter is to explain what that was.

[35] Hume, “Of Refinement in the Arts,” op. cit., III, 311-312.

[36] Hume, “Of the Liberty of the Press,” op. cit., III, 12n.

[37] Adam Smith, Essays on Philosophical Subjects (London, 1795), pp. 23, 25-27; Lectures, pp. 95, 160; The Wealth of Nations, p. 203.

[38] Ricardo, op. cit., p. 181.

[39] M’Culloch, op. cit., pp. 8-9.

[40]The Manchester School of Economics (Stanford, 1960).