What is Politics: Study of

UNIT 3 LIBERAL* State and Power

Structure
3.0 Objectives
3.1 Introduction
3.2 Liberal Theory: Definition and Characteristics
3.3 Different Phases of Liberalism
3.3.1 Classical Liberalism
3.3.2 Modern Liberalism/Welfarism
3.3.3 Neo-Liberalism
3.4 Limitations
3.5 Let Us Sum Up
3.6 References
3.7 Answers to Check Your Progress Exercises

3.0 OBJECTIVES
After going through this unit, you will be able to:
Define Liberal theory;
Describe its characteristics ;
Discuss its different phases and finally; and
Critically evaluate it.

3.1 INTRODUCTION
What is a political ideology? In the realm of political theory, the term ‘ideology’
is applied in two contexts: first, as a set of ideas which are accepted by a particular
group, party or nation without examination; and second it is considered the
science of ideas which examines as to how different ideas are formed, how truth
is distorted and how we can overcome distortions to discover true knowledge.
Moreover, it explains our social reality, interprets it in a certain way, evolves a
set of interrelated principles, contests the nature of the political, and prescribes
appropriate action. Liberalism is a political ideology like socialism, fascism, or
nationalism, based on a commitment to individualism, freedom, toleration and
consent. It was the creation of the climate of opinion that emerged at the time of
Renaissance and Reformation in Europe. As an ideology and also a way of life,
‘it reflected the economic, social and political aspirations of the rising middle
class which later on became the capitalist class.’ In the sixteenth and the
seventeenth centuries, when the feudal system was emerging; a new political
system was evolving. The establishment of the absolute nation-states in England
and Europe gave birth to a kind of political system in which the authority of the
king was absolute. The beginning of liberalism was a protest against the
hierarchical and privileged authority, and monarchy – a protest which involved
every aspect of life, and the main slogan of the protest was freedom. To achieve

* Dr. Divya Rani, Academic Associate, Faculty of Political Science, IGNOU, New Delhi.
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Approaches to Political the liberty of the individual and to challenge the authority of the state, liberalism
Theory
demanded liberty in every field of life: intellectual, social, religious, cultural,
political and economic etc. However, liberty has two different perspectives:
Negative and Positive. The central problem with which these liberties were
concerned is the relationship between the individual and the state. The negative
or the classical aspect of (liberty) liberalism remained dominant for a very long
time, especially during the classical liberalism era when the state interference
was minimal. Negative and positive liberalism differ from each other in that
while the former advocate’s liberty as the absence of interference or constraints
or ‘freedom from’ outside authority, the latter supports the idea of liberty as
‘freedom to’ moral and self-development, self-realisation and self-mastery.

In terms of historical background, liberal theory has a longer history than most
political ideologies. In many ways, liberalism captures the ideological map of
various political struggles that human beings have witnessed roughly in the last
3000 years. However, some claim that its roots go back further in history. Ancient
Greece kindled the first spark of self-rule and had inspired generations of liberals.
However, philosophical and political roots of liberalism can be traced in the
social contract theory of Thomas Hobbes and John Locke. Subsequently, it was
developed, revised and amplified by Jeremy Bentham and John Stuart Mill in
their Utilitarian perspective as well as by Herbert Spencer through his doctrine
of ‘Survival of the fittest’ and Thomas Paine viewing the state as a ‘ necessary
evil’. On the economic front, the Physiocrats, Adam Smith, David Ricardo,
Thomas Robert, Malthus and others provided ground and arguments for economic
liberty. Adam Smith and his masterpiece Wealth of Nations introduced a new
perspective of Political Economy.

3.2 LIBERAL THEORY: DEFINITION AND

THINKERS
There are many versions of liberal theory, but the central point of all versions is
freedom. However, the context of freedom has been defined differently by liberal
thinkers. What is liberal theory or liberalism? As a writer has said, liberalism is
a principle of politics which insists on liberty of individuals as the first and
foremost goal of public policy. Liberty, in this sense, implies ‘liberation’ from
restraints- particularly, from the restraints imposed by an authoritarian state. In
fact, it is not a fixed mode of thought, but an intellectual movement which seeks
to accommodate new ideas in order to face new situations and new challenges.
According to Barry (1995), liberalism embraces both explanation and evaluation.
Its explanatory concern is with accounting for that order of events which we
call a social order, and this includes economic, legal and political phenomena.
In the liberal view, the state is a necessary evil. Liberalism treats the state as the
means and the individual as the end. It rules out the absolute authority of the
state. According to John Locke, liberalism is mainly based on these beliefs/
tenets:
i) Man/ Woman is a rational creature.
ii) There is no basic contradiction between an individual’s self-interest and
the common interest.
iii) Man/Woman is endowed with certain natural rights which cannot be
38 transgressed by any authority.
iv) Civil society and the state are artificial institutions created by individuals Liberal
to serve the common interest.
v) Liberalism believes in the primacy of procedure over the end product. The
liberal view of freedom, equality, justice and democracy is a search for the
right procedure in different spheres of social life.

vi) Liberalism promotes civil liberties of individual, including freedom of

thought and expression, freedom of association and movement, personal
freedom and strict compliance with legal and judicial procedure.

The liberal theory developed in two main directions; a) individualism and b)

utilitarianism. Individualism focused on the individual as a rational creature. It
required that individual’s dignity, independent existence and judgment should
be given full recognition while making public policy and decisions. John Locke
and Adam Smith are the early exponents of individualism. On the other hand,
utilitarianism stands for ‘the greatest happiness of the greatest number’ where
the interest of the few may be sacrificed in the interest of majority. Bentham and
Mill are the supporters of utilitarianism.

Thinkers of Liberal Theory

Early exponents of liberalism include John Locke (1632-1704), Adam Smith
(1723-90) and Jeremy Bentham (1748-1832). Locke is known as the father of
liberalism, Smith is known as the father of economics and political economy
and Bentham as the founder of utilitarianism. All of them defended the principle
of laissez-faire which implies the least interference of the state in the economic
activities of individuals. They are the founders of Classical Liberalism which is
also called negative liberalism because it envisions a negative role of the state
in the sphere of mutual interaction of individuals. Locke emphasized toleration
and freedom of individual conscience. Bentham emphasized the expansion of
the market economy and restriction of the sphere of state activity. Mill sought to
revise this view of utilitarians to plead for the expansion of state activity for the
promotion of general welfare. He recommended positive role of the state for the
promotion of individual liberty.

John Stuart Mill (1806-73) sought to modify utilitarianism and the principle of
laissez-faire on philosophical grounds which paved the way for the theory of
welfare state. Then T. H. Green (1836-82), sought to add a moral dimension to
liberalism and thus, advanced a full-fledged theory of welfare state. On the
political side, liberalism promotes democracy; on the economic side, it promotes
capitalism. Liberalism, generally, believes in the ability of individuals to make
meaningful choices and to be responsible for them. The importance that liberalism
attributes to individuals received the most robust intellectual defense from
Immanuel Kant who, influenced by Rousseau, formulated the clearest case for
individual autonomy. Kantian autonomy may be understood as the condition in
which individuals are free from external determination such as coercion, threat
or manipulation in taking actions to implement one’s choices. His/her choice
should be free from internal influences (passions and prejudices) and must be
guided by reason.

Locke, Kant and Mill have been the three most important thinkers who shaped
the liberal tradition. Contemporary liberalism owes much to them. In the 20 th
century, the most profound liberal thinker was John Rawls, whose influence has 39
Approaches to Political been the most profound in liberal thinking. Two monumental treaties written by
Theory
Rawls – A Theory of Justice (1971) and Political Liberalism (1993) – have set
the contemporary terms of debate and discussion on liberalism and its values. A
central trait of Rawl’s liberalism is its political view that citizens are entitled to
live in accordance with their own freely chosen values or ends.
Check Your Progress 1
Note: i) Use the space given below for your answer.
ii) See the end of the unit for tips for your answer.
1) What are the main tenets of liberalism?
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3.3 DIFFERENT PHASES OF LIBERALISM

Liberalism can be divided into three types/phases: the Classical, the Modern
and Neo-liberalism. However, neo-liberalism is contemporary and influenced
by Classical liberalism.

3.3.1 Classical Liberalism

The early exponents of liberal theory strived for liberty in all spheres and insisted
that law must enforce all contracts (excluding slavery) since each individual
was the best judge of his own interest. The state was not allowed to impose its
own conception of ‘good’ on individuals in their mutual dealings. This idea of
negative liberty led to the doctrine of laissez faire; that is, freedom from
government interference in economic affairs. Hence, most of the advocates of
negative liberty, such as, Adam Smith (1723-90), Jeremy Bentham (1748-1832),
James Mill (1773-1836), Herbert Spencer (1820-1903) and Henry Sidgwick
favoured a minimal state. Such a combination of political and economic
arguments for liberty is known as classical liberalism or laissez-faire
individualism. Liberal ideas resulted from the breakdown of feudalism in Europe
and growth, in its place, of a market capitalist society. It became the centrepiece
of classical, or nineteenth-century, liberalism. It is usually associated with the
work of John Locke, besides Adam Smith and Thomas Paine, and other 20 th
century thinkers such as Friedrich Von Hayek, Robert Nozick and Milton
Friedman. Its chief distinguishing ideas are those of limited government, the
rule of law, the inviolability of private property, the freedom to enter into, and
maintain contracts and finally, the acceptance by the individual of their own
fates.

In the 1770s, most people believed that rights came from the government. People
thought they had only such rights as government decided to give them. But
following the British philosopher John Locke, Jefferson argued that it is the
40 other way around. People have rights apart from those given by a government,
as part of their nature. Further, people can both form governments and dissolve Liberal
them. The only legitimate purpose of government is to protect these rights. It
was John Locke who provided classical liberalism one of its most influential
ideas that the aim and justification of government are to protect the life, liberty
and property of its citizens. These are natural rights constituted in, and protected
by, natural law, which is antecedent to political society. Locke believed that the
appropriate means by which the government can provide this protection is a
system of justice defined and made possible by law. All citizens are equally
subject to the authority of the government and citizens find it reasonable to
accept the authority because each is guaranteed the rights to life, liberty, and
property. According to Heywood (2004), classical liberals emphasize that human
beings are essentially self-interested and largely self-sufficient; as far as possible,
people should be responsible for their own lives and circumstances. One of the
clearest statements of this philosophy is found in the Declaration of
Independence.

By the end of the 19th century, some serious consequences of the Industrial
revolution and laissez-faire market occurred in the form of rising of capitalism.
The main problem was that the profit had concentrated in the hand of a small
number of industrialists. Consequently, masses of people failed to benefit from
the wealth flowing from factories that resulted in the poverty of the populace.
On the other side, because of the industrial revolution, the production of goods
and services were at a massive level, but masses could not afford to buy. Markets
became glutted, and the system periodically came to a near halt in periods of
stagnation that finally resulted in the Great Depression. Moreover, the industrialist
class used its power not only in economic decision making but also influenced
and controlled government to limit competition and obstruct social reforms. It
became the main drawbacks of classical liberalism vis-a-vis the laissez-faire
market economy.

3.3.2 Modern Liberalism/ Welfarism

The aforementioned problem brought a new change in society, the uprising of
the working class. In the 20th century the rising working-class questioned classical
liberalism and its core argument to support negative liberty, i.e. laissez-faire
market. Laissez-faire individualism encouraged capitalist economy, and
consequently, the working class was deprived of its due share. A new form of
liberalism came up – Modern Liberalism, also known as welfarism. Thinkers of
this strand of liberalism believed that government has to remove obstacles that
stand in the way of individual freedom. The main exponent of this statement
was T.H. Green. According to him, excessive power of government might have
constituted the greatest obstacle to freedom in an earlier era, but by the middle
of the 19th century these powers had been greatly reduced or mitigated. Now,
there were different kinds of hindrances, such as poverty, disease, discrimination
and ignorance that could be overcome only with positive (positive liberty)
assistance of government.

It was John Stuart Mill (1806-73) who introduced the conecpt of positive liberty
and consequently the transition from negative to positive liberalism. However,
Mill started with a defense of laissez-faire individualism, but realizing its
weaknesses in the light of the new socio-economic realities, he proceeded to
modify it. He, therefore, sought to discover an area where state intervention
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Approaches to Political could be justified. At the outset, he drew a distinction between two types of
Theory
actions of men: ‘self-regarding actions’ whose effect was confined to the
individual himself; and ‘other-regarding actions’ which affected others. The real
significance of making such a distinction lay in Mill’s efforts to define a sphere
where an individual’s behaviour could be regulated in the interests of the
community. Thus, he was contemplating a positive role for the state in securing
social welfare even if it implied curbing liberty of the individual to some extent.
It was Mill who gave a sound theory of taxation, pleaded for the limitation of
the right of inheritance, and insisted on state provision of education. After J. S.
Mill, T.H. Green (1836-82), L.T. Hobhouse (1864-1929) and H.J. Laski (1893-
1950) further developed the positive concept of liberty. Green postulated a theory
of rights and insisted on the positive role of the state in creating conditions
under which men could effectively exercise their moral freedom. Hobhouse and
Laski advocated that private property was not an absolute right and that the
state must secure the welfare of the people- no matter if it is constrained to
curtail the economic liberty of the privileged few.

It is important to note that the political thought of the early exponents of positive
liberty was associated with the theory of the welfare state, which first appeared
in England and then spread to other parts of the world. Positive liberty was
considered an essential complement to negative liberty in all modern states.
However, some contemporary liberal thinkers, known as Libertarians, have
sought to lay renewed emphasis on negative liberty. Of these, Isaiah Berlin
(1909-97), F. A. Hayek (1899-1992), Milton Friedman (1912-2006) and Robert
Nozick (1938- 2002) are the most prominent.

From the late nineteenth century onwards, however, a form of social liberalism
emerged which looked more favourably on welfare reform and economic
management. It became the characteristic theme of modern or twentieth-century
liberalism. It is best illustrated in the views of John Stuart Mill, besides those of
Kant, Green, and Hobhouse. In very distinct ways modern liberalism establishes
an affirmative relationship between liberty (especially, the positive variant) and
human progress. The modern liberal believes the man to be a ‘progressive being’
with unlimited potential for self-development; one which does not jeopardize a
similar potential in others. This approach lays down and justifies the value of
distributive justice and experiments such as the welfare state. Modern liberalism
exhibits a more sympathetic attitude towards the state. It is also known as
welfarism.

The process of modern liberalism or welfarism was interrupted by First World

War. The devastation of WWI was massive, but the positive outcome was the
overturning of four of Europe’s great imperial dynasties- Germany, Austria,
Hungary, Russia and Ottoman Turkey-into liberal democracies. Europe was
reshaped by the Treaty of Versailles on the basis of the principle of self-
determination, which in practice meant the breakup of imperialists in nationally
homogeneous states. Subsequently, the League of Nations was created in the
hope of preventing wars and settling international disputes in a peaceful manner.
However, these steps could not prevent future wars. Many events such as harsh
peace terms imposed by victorious Allies, Great Depression, Nazi uprising and
Soviet Communism threatened liberalism. This was because during the postwar
period, the old rhetoric Sharing the Wealth gave way to a concentration on growth
rates as liberals inspired by the British economist J M Keynes’ policy – wanted
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the government to borrow, tax, and spend not only merely to counter contractions Liberal
of the business cycle, but to encourage the expansion of economy. Thus, a further
expansion of social welfare programme occurred in liberal democracies during
the postwar decades. Modern welfare state practices were introduced in Britain
and America, which provided not only usual forms of social insurance but also
pensions, unemployment benefits, subsidized medical care, family allowances
and government-funded higher education. The liberal democratic model was
also adopted by Asia and Africa by most of the new nations that emerged from
the dissolution of the British and French colonial empires in the 1950s and early
60s. The new nations adopted the western model believing that these model and
institutions would lead to the same freedom and prosperity that had been achieved
in Europe. However, the results were mixed.

3.3.3 Neo-Liberalism
The three decades of unprecedented growth that the Western countries
experienced after the Second World War proved the success of modern liberalism.
However, in the mid-1970s, slowing of economic growth in the Western countries
presented a serious challenge to modern liberalism. By the end of that decade
economic stagnation, maintenance of social benefits of the welfare state pushed
governments towards excessive taxation and massive debt that showed up the
failure of Keynesian economics. As modern liberals struggled to meet the
challenge of stagnating living standards in industrial economies, others saw an
opportunity for a revival of classical liberalism with some modification, and
that came as neo-liberalism.

It is a contemporary version of classical liberalism (also known as libertarianism)

which seeks to restore laissez-faire individualism. It criticizes the welfare state,
therefore opposes state intervention and control of economic activities. The chief
exponents of this perspective include Milton Friedman (1912-2006) and Robert
Nozick (1938-2002). In the second half of the twentieth century, these thinkers
realized that the idea of welfare state was inimical to individual liberty, as it
involved the forced transfer of resources from the more competent to the less
competent. In order to restore individual liberty, they sought to revive the principle
of laissez-faire not only in the economic sphere but also in the social and political
sphere. Neo-liberalism advocates full autonomy and freedom of the individual.
In the political sphere, neo-liberalism particularly insists that man’s economic
activity must be actively liberated from all restrictions to enable him to achieve
true progress and prosperity. The ideology emphasizes the value of free market
competition; hence it also promotes laissez-faire economy. Furthermore, it
promotes minimal state intervention in economic and social affairs and its
commitment to the freedom of trade and capital.
Although the terms sound similar, neo-liberalism is distinct from modern
liberalism. Both have their ideological roots in classical liberalism of the 19th
century, which advocated economic laissez-faire and the freedom (or liberty) of
individuals against the excessive power of government. This variant of liberalism
is often associated with the economist Adam Smith, who argued in The Wealth
of Nations (1776) that markets are governed by an “invisible hand” and thus,
should be subject to minimal government interference.
However, liberalism evolved over time into a number of different (and often
competing) traditions. Modern liberalism developed from the social-liberal 43
Approaches to Political tradition, which focused on impediments to individual freedom — including
Theory
poverty, inequality, disease, discrimination, and ignorance — that had been
created or exacerbated by unfettered capitalism and could be ameliorated only
through direct state intervention. Such measures began in the late 19th century
with workers’ compensation schemes, the public funding of schools and hospitals,
and regulations on working hours and conditions and eventually, by the mid-
20th century, encompassed broad range of social services and benefits
characteristic of the so-called  welfare state. By the 1970s, however, economic
stagnation and increasing public debt prompted some economists to advocate a
return to classical liberalism, which in its revived form came to be known as
neo-liberalism. The intellectual foundations of that revival were primarily the
work of the Austrian-born British economist Friedrich von Hayek, who argued
that interventionist measures aimed at the redistribution of wealth lead inevitably
to totalitarianism, and of the American economist Milton Friedman, who rejected
government fiscal policy as a means of influencing the business cycle. Their
views were enthusiastically embraced by the major conservative political parties
in Britain and the United States, which achieved power with the lengthy
administrations of British Prime Minister Margaret Thatcher (1979–90) and the
U.S. President Ronald Reagan (1981–89). Thatcherism and Reaganism
dominated the socio-political economic discourse for a long time.

Neo-liberal ideology and policies became increasingly influential, as illustrated

by the British Labour Party’s official abandonment of its commitment to the
“common ownership of the means of production” in 1995 and by the
cautiously pragmatic policies of the Labour Party and the U.S. Democratic
Party from the 1990s. As national economies became more interdependent in
the new era of economic globalization, neo-liberals also promoted free-
trade policies and the free movement of international capital. The clearest sign
of the new importance of neo-liberalism, however, was the emergence
of libertarianism as a political force, as evidenced by the increasing prominence
of the Libertarian Party in the United States and by the creation of assorted think
tanks in various countries, which sought to promote the libertarian ideal of
markets and sharply limited governments. During the 1990s, India also adopted
the liberalization policy. The 1990s was the era of liberalization; different regional
organizations and interconnected trade relations promoted the new liberal
economic policy. However, the Lehman Bank crisis in 2007 and later the Euro
crisis in 2009 led some economists and political leaders to reject the neo-liberal
dominance of the market (Maximally free market) and to resume the greater
government regulation of financial and banking industries.
Check Your Progress 2
Note: i) Use the space given below for your answer.
ii) See the end of the unit for tips for your answer.
1) What are the main differences between Classical and Modern Liberalism?
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 Liberal
3.4 LIMITATIONS
It is worth noting that Locke’s philosophical and political beliefs represent the
basic tenets of early liberalism which paved the way for the rise of capitalism.
Locke particularly promoted a line of thinking which was designed to protect
the economic interests of the then newly emerging merchant- industrialist class
and pleaded for vesting political power in this class. And it also encouraged
capitalism. Liberalism has been a dynamic philosophy which has responded to
the changing needs of time but also has failed. There are a few problems with
this theory which can be pointed out as its failure: It retains its bourgeois
character- liberalism arose for the protection of the interests of the bourgeoisie
when political power was wielded by feudal interests.Actual imbalance of group
interests- contemporary liberalism upholds representative democracy on the
assumption that the state represents the interests of all groups within society
and that it ensures reconciliation of conflicting interests. However, bringing
change in its core arguments such as laissez-faire individualism to welfare and
promotion of democracy and free trade, liberalism is criticized for its complexity.
Marxists have criticized the liberal commitment to civic rights and potential
equality because it ignores the reality of unequal class power. Feminists argue
that individualism is invariably construed on the basis of male norms which
legitimize gender inequality. The early period of liberalism encouraged
capitalism. In the 20th-century welfare policy and intervention of the state were
to some extent incorporated in modern liberal theory. It also promoted the
democratization of the state. However, the 20th century was the century of
dictatorship, depression and war. Neo-liberalism promoted trade and economic
interdependencies. The 21st century is facing an economic crisis that is testing
liberalism. Especially, after the Euro crisis of 2009 preceded by the global
financial crisis of 2007. Many scholars stated that in this neo-liberal market
economy, the world is not facing a war of tanks, but a war of banks.
Check Your Progress 3
Note: i) Use the space given below for your answer.
ii) See the end of the unit for tips for your answer.
1) What are the shortcomings of liberalism?
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3.5 LET US SUM UP

Liberal theory is considered as the oldest ideology, and it was considered as a
life style as it promotes the freedom of the individual. The theory has evolved
and changed its basic concept from laissez-faire to the welfare state to laissez-
faire with minimal state interference and focusing on the individual’s rights and
freedom. However, the failure of the welfare state policy and the contemporary
global economic crisis has raised questions about the shortcomings of liberal
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Approaches to Political theory; the future of liberal theory and its practice will depend largely on how
Theory
precisely it meets challenges before it.

3.6 REFERENCES
Barry, P. Norman. (1995). An Introduction to Modern Political Theory. The
Macmillan Press: London.
Baylis, John and et al. (2011). The Globalization of World Politics. Oxford
University Press: New York.
Bhargava, Rajeev and Ashok Acharya. (2008). Political Theory An Introduction.
Pearson: New Delhi.
Heywood, Andrew. (2013). Political Theory An Introduction. Palgrave
Macmillan: New York.
Jha, Shefali (2010). Western Political Thought. Pearson: New Delhi.

3.7 ANSWERS TO CHECK YOUR PROGRESS

EXERCISES
Check Your Progress 1
1) Your answer should highlight that liberalism sees individual as an end and
the state as the means, also include views of John Locke, Immanuel Kant
and J S Mill.
Check Your Progress 2
1) In classical liberalism, due to least role of state, capitalism creates
inequalities that hinder an individual’s development. Modern liberalism
argues for direct state intervention to tackle issues like poverty, inequality
etc.
Check Your Progress 3
1) Highlight that liberalism retains its bourgeois character and leads to class
divisions, legitimizes gender inequality.

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