just where he ought to be’.
Modern liberalism
Modern liberalism is sometimes described as ‘twentieth-century liberalism’.
Just as the development of classical liberalism was closely linked to the
emergence of industrial capitalism in the nineteenth century, so modern
liberal ideas were related to the further development of industrialization.
Industrialization had brought about a massive expansion of wealth for some,
but was also accompanied by the spread of slums, poverty, ignorance and
disease. Moreover, social inequality became more difficult to ignore as a
growing industrial working class was seen to be disadvantaged by low pay,
unemployment and degrading living and working conditions. These
developments had an impact on UK liberalism from the late nineteenth
century onwards, but in other countries they did not take effect until much
later; for example, US liberalism was not affected until the depression of the
1930s. In these changing historical circumstances, liberals found it
progressively more difficult to maintain the belief that the arrival of industrial
capitalism had brought with it general prosperity and liberty for all.
Consequently, many came to revise the early liberal expectation that the
unrestrained pursuit of self-interest produced a socially just society. As the
idea of economic individualism came increasingly under attack, liberals
rethought their attitude towards the state. The minimal state of classical
theory was quite incapable of rectifying the injustices and inequalities of civil
society. Modern liberals were therefore prepared to advocate the development
of an interventionist or enabling state.
However, modern liberalism has been viewed in two, quite different, ways:
• Classical liberals have argued that modern liberalism effectively
broke with the principles and doctrines that had previously defined
liberalism, in particular that it had abandoned individualism and
embraced collectivism (see p. 99).
• Modern liberals, however, have been at pains to point out that they
built on, rather than betrayed, classical liberalism. In this view,
whereas classical liberalism is characterized by clear theoretical
consistency, modern liberalism represents a marriage between new
and old liberalism, and thus embodies ideological and theoretical
tensions, notably over the proper role of the state.
The distinctive ideas of modern liberalism include:
• individuality
• positive freedom
• social liberalism
• economic management.
Individuality
John Stuart Mill’s ideas have been described as the ‘heart of liberalism’. This
is because he provided a ‘bridge’ between classical and modern liberalism: his
ideas look both back to the early nineteenth century and forward to the
twentieth century and beyond. Mill’s interests ranged from political economy
to the campaign for female suffrage, but it was the ideas developed in On
Liberty ([1859] 1972) that show Mill most clearly as a contributor to modern
liberal thought. This work contains some of the boldest liberal statements in
favour of individual freedom. Mill suggested that, ‘Over himself, over his
own body and mind, the individual is sovereign’, a conception of liberty that
is essentially negative as it portrays freedom in terms of the absence of
restrictions on an individual’s ‘self-regarding’ actions. Mill believed this to be
a necessary condition for liberty, but not in itself a sufficient one. He thought
that liberty was a positive and constructive force. It gave individuals the
ability to take control of their own lives, to gain autonomy or achieve self-
realization.
Mill was influenced strongly by European romanticism and found the
notion of human beings as utility maximizers both shallow and unconvincing.
He believed passionately in individuality. The value of liberty is that it
enables individuals to develop, to gain talents, skills and knowledge and to
refine their sensibilities. Mill disagreed with Bentham’s utilitarianism in so far
as Bentham believed that actions could only be distinguished by the quantity
of pleasure or pain they generated. For Mill, there were ‘higher’ and ‘lower’
pleasures. Mill was concerned to promote those pleasures that develop an
individual’s intellectual, moral or aesthetic sensibilities. He was clearly not
concerned with simple pleasure-seeking, but with personal self-development,
declaring that he would rather be ‘Socrates dissatisfied than a fool satisfied’.
As such, he laid the foundations for a developmental model of individualism
that placed emphasis on human flourishing rather than the crude satisfaction
of interests.
INDIVIDUALITY
Self-fulfilment achieved through the realization of an individual’s distinctive or unique identity or
qualities; what distinguishes one person from all others.
Positive freedom
The clearest break with early liberal thought came in the late nineteenth
century with the work of T. H. Green (see p. 53), whose writing influenced a
generation of so-called ‘new liberals’ such as L. T. Hobhouse (1864–1929)
and J. A. Hobson (1854–1940). Green believed that the unrestrained pursuit
of profit, as advocated by classical liberalism, had given rise to new forms of
poverty and injustice. The economic liberty of the few had blighted the life
chances of the many. Following J. S. Mill, he rejected the early liberal
conception of human beings as essentially self-seeking utility maximizers,
and suggested a more optimistic view of human nature. Individuals, according
to Green, have sympathy for one another; their egoism is therefore
constrained by some degree of altruism. The individual possesses social
responsibilities and not merely individual responsibilities, and is therefore
linked to other individuals by ties of caring and empathy. Such a conception
of human nature was clearly influenced by socialist ideas that emphasized the
sociable and cooperative nature of humankind. As a result, Green’s ideas have
been described as ‘socialist liberalism’.
ALTRUISM
Concern for the interests and welfare of others, based either on enlightened self-interest or a belief in
a common humanity.
Green also challenged the classical liberal notion of freedom. Negative
freedom merely removes external constraints on the individual, giving the
individual freedom of choice. In the case of the businesses that wish to
maximize profits, negative freedom justifies their ability to hire the cheapest
labour possible; for example, to employ children rather than adults, or women
rather than men. Economic freedom can therefore lead to exploitation, even
becoming the ‘freedom to starve’. Freedom of choice in the marketplace is
therefore an inadequate conception of individual freedom.
In the place of a simple belief in negative freedom, Green proposed that
freedom should also be understood in positive terms. In this light, freedom is
the ability of the individual to develop and attain individuality; it involves
people’s ability to realize their individual potential, attain skills and
knowledge, and achieve fulfilment. Thus, whereas negative freedom
acknowledges only legal and physical constraints on liberty, positive freedom
recognizes that liberty may also be threatened by social disadvantage and
inequality. This, in turn, implied a revised view of the state. By protecting
individuals from the social evils that cripple their lives, the state can expand
freedom, and not merely diminish it. In place of the minimal state of old,
modern liberals therefore endorsed an enabling state, exercising an
increasingly wide range of social and economic responsibilities.
While such ideas undoubtedly involved a revision of classical liberal
theories, they did not amount to the abandonment of core liberal beliefs.
Modern liberalism drew closer to socialism, but it did not place society before
the individual. For T. H. Green, for example, freedom ultimately consisted in
individuals acting morally. The state could not force people to be good; it
could only provide the conditions in which they were able to make more
responsible moral decisions. The balance between the state and the individual
had altered, but the underlying commitment to the needs and interests of the
individual remained. Modern liberals share the classical liberal preference for
self-reliant individuals who take responsibility for their own lives; the
essential difference is the recognition that this can only occur if social
conditions allow it to happen. The central thrust of modern liberalism is
therefore the desire to help individuals to help themselves.
Social liberalism
The twentieth century witnessed the growth of state intervention in most
western states and in many developing ones. Much of this intervention took
the form of social welfare: attempts by government to provide welfare support
for its citizens by overcoming poverty, disease and ignorance. If the minimal
state was typical of the nineteenth century, during the twentieth century
modern states became welfare states. This occurred as a consequence of a
variety of historical and ideological factors. Governments, for example,
sought to achieve national efficiency, healthier work forces and stronger
armies. They also came under electoral pressure for social reform from newly
enfranchised industrial workers and, in some cases, the peasantry. However,
the political argument for welfarism has never been the prerogative of any
single ideology. It has been put, in different ways, by socialists, liberals,
conservatives, feminists and even at times by fascists. Within liberalism, the
case for social welfare has been made by modern liberals, in marked contrast
to classical liberals, who extol the virtues of self-help and individual
responsibility.
WELFARE STATE
A state that takes primary responsibility for the social welfare of its citizens, discharged through a
range of social-security, health, education and other services.
century with the emergence of so-called social-democratic liberalism,
especially in the writings of John Rawls (see p. 53). Social-democratic
liberalism is distinguished by its support for relative social equality, usually
seen as the defining value of socialism. In A Theory of Justice (1970), Rawls
developed a defence of redistribution and welfare based on the idea of
‘equality as fairness’. He argued that, if people were unaware of their social
position and circumstances, they would view an egalitarian society as ‘fairer’
than an inegalitarian one, on the grounds that the desire to avoid poverty is
greater than the attraction of riches. He therefore proposed the ‘difference
principle’: that social and economic inequalities should be arranged so as to
benefit the least well-off, recognizing the need for some measure of inequality
to provide an incentive to work. Nevertheless, such a theory of justice
remains liberal rather than socialist, as it is rooted in assumptions about
egoism and self-interest, rather than a belief in social solidarity.
Economic management
In addition to providing social welfare, twentieth-century western
governments also sought to deliver prosperity by ‘managing’ their economies.
This once again involved rejecting classical liberal thinking, in particular its
belief in a self-regulating free market and the doctrine of laissez-faire. The
abandonment of laissez-faire came about because of the increasing
complexity of industrial capitalist economies and their apparent inability to
guarantee general prosperity if left to their own devices. The Great
Depression of the 1930s, sparked off by the Wall Street Crash of 1929, led to
high levels of unemployment throughout the industrialized world and in much
of the developing world. This was the most dramatic demonstration of the
failure of the free market. After World War II, virtually all western states
adopted policies of economic intervention in an attempt to prevent a return to
the pre-war levels of unemployment. To a large extent these interventionist
policies were guided by the work of the UK economist John Maynard Keynes
(1883–1946).
Key concept
Keynesianism
Keynesianism refers, narrowly, to the economic theories of J. M. Keynes (1883–1946) and, more
broadly, to a range of economic policies that have been influenced by these theories. Keynesianism
provides an alternative to neoclassical economics and, in particular, advances a critique of the
‘economic anarchy’ of laissez-faire capitalism. Keynes argued that growth and employment levels
are largely determined by the level of ‘aggregate demand’ in the economy, and that government can
regulate demand, primarily through adjustments to fiscal policy, so as to deliver full employment.
Keynesianism came to be associated with a narrow obsession with ‘tax and spend’ policies, but this
ignores the complexity and sophistication of Keynes’ economic writings. Influenced by economic
globalization, a form of neo-Keynesianism has emerged that rejects ‘top-down’ economic
management but still acknowledges that markets are hampered by uncertainty, inequality and
differential levels of knowledge.
In The General Theory of Employment, Interest and Money ([1936] 1963),
Keynes challenged classical economic thinking and rejected its belief in a
self-regulating market. Classical economists had argued that there was a
‘market solution’ to the problem of unemployment and, indeed, all other
economic problems. Keynes argued, however, that the level of economic
activity, and therefore of employment, is determined by the total amount of
demand – aggregate demand – in the economy. He suggested that
governments could ‘manage’ their economies by influencing the level of
aggregate demand. Government spending is, in this sense, an ‘injection’ of
demand into the economy. Taxation, on the other hand, is a ‘withdrawal’ from
the economy: it reduces aggregate demand and dampens down economic
activity. At times of high unemployment, Keynes recommended that
governments should ‘reflate’ their economies by either increasing public
spending or cutting taxes. Unemployment could therefore be solved, not by
the invisible hand of capitalism, but by government intervention, in this case
by running a budget deficit, meaning that the government literally
‘overspends’.
Keynesian demand management thus promised to give governments the
ability to manipulate employment and growth levels, and hence to secure
general prosperity. As with the provision of social welfare, modern liberals
have seen economic management as being constructive in promoting
prosperity and harmony in civil society. Keynes was not opposed to
capitalism; indeed, in many ways, he was its saviour. He simply argued that
unrestrained private enterprise is unworkable within complex industrial
societies. The first, if limited, attempt to apply Keynes’ ideas was undertaken
in the USA during Roosevelt’s ‘New Deal’. By the end of World War II,
Keynesianism was widely established as an economic orthodoxy in the West,
displacing the older belief in laissez-faire. Keynesian policies were credited
with being the key to the ‘long boom’, the historically unprecedented
economic growth of the 1950s and 1960s, which witnessed the achievement
of widespread affluence, at least in western countries. However, the re-
emergence of economic difficulties in the 1970s generated renewed sympathy
for the theories of classical political economy, and led to a shift away from
Keynesian priorities. Nevertheless, the failure of the free-market revolution of
the 1980s and 1990s to ensure sustained economic growth resulted in the
emergence of the ‘new’ political economy, or neo-Keynesianism. Although
this recognized the limitations of the ‘crude’ Keynesianism of the 1950s–
