Classical Liberalism? It's Not That Simple!

Classical liberalism is too simplistic! No that’s not my view. But that is a critique I’ve heard from some.

"Liberals argue that all you have to do is privatize everything and life will be rosy."

"Property rights, property rights! Is that all you people talk about?"

“You people think that all the world’s problems can be solved by free markets!”

Notice that just those three remarks actually cover three different facets of liberalism.

That's important to remember. When one is accused of having a simplistic solitary answer to social problems it's useful to note that the "solutions" are neither simplistic nor solitary. Listing just three of them proves it's not solitary.

What is necessary for a free and prosperous society? That's a good question and the answer is far from simple. More importantly it doesn't address all the other aspects of the human condition, merely the economic and political.

Off the top of my head I find that market liberals have long talked about numerous aspects required for prosperity—not one single, simple solution.

Let's examine a few of those requirements.

First, a rudimentary level of intelligence is needed. Perfect conditions still can't help a society if everyone were incapable of intelligent thought. But there is no such place on earth, so I think we can consider this a fringe issue at best. The same can be said for physical ability and talent.

People do need property rights. Property rights solve many social conflicts and gives people the right incentives to care for things. This benefits the entire society, including future members of that society. But property rights alone are not enough.

People do need the freedom to trade. Freedom to trade means people can seek out the most optimal combination of property. They can barter what they don't value highly for something they value more. But free trade alone is not enough.

People need a sound monetary system. Barter is good but not good enough. It's inefficient. A sound currency, one that doesn't lose its value via the printing presses, means that optimal trading is more likely. But a sound currency is not enough.

People need law. They need to be protected from those who would steal what they produce. They need protection from those who would harm others. They need a police force to protect their rights. But a police force is not enough.

People need to know that contracts will be honoured. They need a system for adjudicating disputes. They need to know that when someone promises to deliver goods that they will do so. They need courts. But law and courts are not enough.

People need trust. In a society where no one trusts anyone else, transaction costs are very high. This gets to something that is critical in any society—the social values of the people within that society.

Trust is one such social value. Other values are honesty, integrity, compassion, a willingness to work, individual responsibility, etc. Markets don't create these values. They do reward them, and when these traits are lacking markets are less efficient and people are less prosperous. These moral values are critical. Moral values are important but they are not enough.

Yes, private ownership is needed. It means that the owners have the incentive to produce the best product for the best price. But private ownership by itself is not enough.

For instance private ownership of a telephone company is good but if regulation prevents competition it leads to monopoly pricing and economic inefficiency. It makes it harder for a society to become prosperous. So you need a competitive market as well, but competitive markets alone are not enough.

Many of the above requirements make specific demands on the type of government that one has in this society. The government has to be a limited one. It can't be a dictatorship. It can't confiscate wealth and destroy private enterprise. It has to respect the rights of people. So limited government is required but limited government is not enough.

If I sat down and started making a list, I could go on for some time. My point is that classical liberalism doesn't offer simple answers. Sure there are some basic principles that make a big difference, but they aren't the only ingredients necessary for a free and prosperous society. We need property rights, we need private ownership, a sound money, adjudication of disputes, protection of rights, good social values, limited government, and so on. We need lots of things.

Is "freedom" the only answer. No. A free people without any values at all, who plunder from one another, will not be prosperous. But good people, in chains, won't be prosperous either. Liberalism recognizes that there are many facets to freedom.

But, what our critics ignore is that we don’t claim that a liberal social structure will solve problems. It can’t. All it does is provide the right incentives, and the right framework within which individuals can work to solve problems. People solve problems, not societal structures. To do that, they need freedom and the right set of incentives. The rest, in the end, is up to them.

Our critics simplify our positions because they want to dismiss them. But they don't understand them. If they did they'd realize how many aspects there are that have to be taken into consideration.