ECONOMIC LIBERALISM: HISTORY, CHARACTERISTICS, REPRESENTATIVES - ECONOMY - 2024

The l economic iberalismo is a doctrine that appeared in Britain in the eighteenth century. The political aspect of liberalism had its origin in the search for rights against the upper classes of the Old Regime. In economics, the leading theorist was Adam Smith.

The Industrial Revolution had changed the social and economic structure of England at the time, causing the bourgeoisie to gain much power. This collided with the privileges still enjoyed by the upper classes and, by extension, the state represented by the king.

Adam smith

Although there had already been some theoretical precedents, liberalism was the doctrine that was most consolidated. It stated that there should be no state regulation that would affect the economy.

The most important agent was the individual and, starting from the characteristics that the liberals assigned him, his effort to earn money would make the whole society benefit.

Despite the fact that, over time, economic liberalism has had more influential times than others, in the 20th and 21st centuries it has established itself as the main economic theory. Some authors, however, point out that, really, starting in the 70s of the last century, a new concept appeared: neoliberalism.

History

The origin of economic liberalism is in the 18th century. Following the postulates of liberalism, it tried to end the multiple privileges that the nobility, the clergy and, of course, the monarchy still enjoyed.

On the other hand, the doctrine also opposed one of the economic ideologies in vogue at that time: mercantilism. This was in favor of the intervention of the State in the economic subjects.

Already in the seventeenth century some philosophers appeared whose ideas were close to this liberalism. John Locke is usually considered one of the influences of later authors who defined the doctrine.

Historic context

As noted above, the state was the regulator of all economic decisions and structures of the time. Faced with this, and in the middle of the Industrial Revolution, thinkers appeared who proposed just the opposite.

In the early years of the Revolution, economic liberals refined their ideas on how to build a model similar to the society that was being created. Thus, individual freedom prevailed more and more, with a Parliament that had managed to reduce the powers of the monarch.

At that time, with more political freedom than the rest of Europe, the British began to take care of the economy and individual growth.

Laissez-faire

Economic liberalism started from the idea that the individual always seeks his own benefit. This search, together with that of the rest of the population, makes society end up benefiting. Hence, the State should not interfere in economic relations or, in any case, that this intervention is minimal.

The phrase used to summarize the doctrine was laissez faire, laissez passer, which in French means to let go, to let go. In fact, the motto had already been used by the Physiocrats, but liberalism eventually appropriated it.

With laissez faire, the market should not have any regulation beyond what individuals decide. Similarly, it advocated the total freedom of workers and employers to reach contractual agreements, without the State having to establish regulations to defend any of them.

The Wealth of Nations

the work published in 1776 by Adam Smith, "The Wealth of Nations", is considered the beginning of economic liberalism. Its influence is such that it establishes the moment in which it began to speak of classical economists.

Smith, like other economists before him, aimed to study the best way for society to become rich and, with it, the state. However, unlike other currents, he came to the conclusion that it was the individual who should have all control over economic relationships.

For him, state enrichment was subsequent to individual enrichment, as he said: "When you work for yourself, you serve society more effectively than if you work for the social interest."

Adam Smith considered useless, and even pernicious, the intervention of the powers of the State in the field of the economy. Aspects such as supply or demand were those that should regulate commercial activities, without higher standards.

To explain it, he introduced the metaphor of the invisible hand. According to him, individual egoisms in search of the maximum possible profit are led by the invisible hand of the market to favor society as a whole.

XIX century

The increase in production and the emergence of the industrial bourgeoisie led to a great increase in world markets. Liberalism, with its idea of ​​state non-intervention, won the support of merchants, investors and, of course, the owners of the industries themselves.

Governments were forced to enact liberal economic laws, eliminating tariffs and allowing goods to circulate freely.

Until the end of the 19th century, economic liberalism was the system that prevailed over all the others, and its early results convinced many. However, by the end of the century, the downturn in the economy began to show some of its weaknesses.

The most visible was the creation of inequalities in society. Authors like Charles Dickens showed some of the effects of total deregulation, with layers of the population plunged into poverty or with children having to work from a very young age.

These situations led the rulers, beginning with the conservatives, to introduce some limits to economic activities. Some theorists of the so-called New Liberalism began to demand some regulations that would correct the negative effects.

Labor movements and liberalism

At first, the bourgeoisie and the proletariat were not at odds. The existence of a common enemy, the nobility, made them allied against him.

This changed when economic liberalism took over as the dominant doctrine. The lack of rights of the workers led to the appearance of socialist movements that sought greater social equality.

In this way, liberalism and socialism and communism, became enemy ideologies. The 20th century was the scene of the struggle between these doctrines.

Crisis of 29 and New Deal

The Great Economic Depression of 1929 did not precisely help to make economic liberalism more popular. In fact, a trend grew that demanded greater state control of the economy so that the excesses that caused the crisis would not occur again.

The way out of that crisis came at the hands of an economy that, although it had liberal roots, picked up part of the recipes of socialism.

John Maynard Keynes, the most influential economist of the time, was the theoretical author of the so-called New Deal. In this, public investment was used as the main weapon to recover economic growth.

Cold War

The end of the Second World War gave rise to a bipolar world. Liberalism-capitalism and communism competed both politically and economically.

During most of the years of the so-called Cold War, most countries (except those of the communist bloc) developed liberal economies, but with certain nuances.

According to many historians, the fear of the expansion of communism made, especially in Europe, many countries chose to create the so-called Welfare State. These, with an operation based on economic liberalism, established public services close to the more statist systems.

Health, education or the protection of the unemployed from the State, broke with the most orthodox ideas of economic liberalism.

The situation remained more or less the same despite the strength of liberal schools like the Austrian. The balance only began to break from the 1970s. In that decade, leaders like Margaret Thatcher and Ronald Reagan began the so-called Conservative Revolution.

However, many authors consider that the economic system that would prevail from then on was neoliberalism, a variant of the original liberalism.

characteristics

Economic liberalism starts from a very specific idea about human nature. For the followers of this doctrine, the individual seeks, mainly, his own well-being. According to liberals, the human being is eminently selfish. the welfare of others being very secondary.

It is a very individualistic philosophy, although according to its theories the search for individual wealth should redound to the common good.

Market self-regulation

One of its main doctrinal points is that the market is able to function without any external interference.

Thus, the law of supply and demand is one of the most valued aspects to establish the cost of products. Likewise, some theorists pointed out that the value was given by the conjunction of the cost of labor and the valuation of the consumer.

By not needing regulation, liberalism leaves the state out of the equation. This would only have its place in infrastructure construction or national security.

Competition

Competition, whether between individuals or between companies, is one of the axes on which the economy moves according to this theory. It must be established without any type of normative distortion, freely and totally.

The result should be the benefit of the consumer. In theory, prices would fall and quality would increase, as companies would struggle to sell more.

As for the individual, that competence would be transferred to the workers. Only the fittest would be able to get the best jobs.

Private property

Private ownership of the means of production is one of the most important characteristics of liberalism. The State must not own any company in its name.

Nor can it be the owner of the raw materials in the territory. All this has to be put in the hands of private companies.

Main characters

Adam Smith (1723-1790)

The British Adam Smith is considered one of the founders of economic liberalism. His main work was "Research on the nature and causes of the wealth of nations", popularly known as "The wealth of nations."

In this book he established some of the foundations of liberal doctrine. To begin with, he claimed that markets regulated by the states were less efficient than those based on private competition. He was in favor, therefore, of eliminating tariffs, most taxes and other types of regulations.

Smith studied the distribution of wealth, noting that the more trade, the more the income of citizens increases.

One of his best known contributions is the concept "invisible hand". It was the way of calling the force by which the search for wealth individually ended up having an impact on a richer society.

David Ricardo (1772-1823)

His studies focused on how the value of wages, rents or property is established. His most important work was entitled "Principles of political economy and taxation."

In it, he raised issues such as the valuation of society, why the rent of land increases and the advantages of free trade.

He is considered one of the fathers of macroeconomics due to his analysis of the relationship between wages and benefits. Similarly, he was the pioneer of the law of diminishing returns.

His contribution, especially his belief that workers would hardly exceed subsistence wages, have placed him among the so-called "pessimists." In fact, Karl Marx himself picked up part of his influence.

John Maynard Keynes (1883-1946)

Despite not being among the more orthodox theorists of economic liberalism, Keynes's work was of great importance in the 20th century. Starting from the same doctrine, he concluded that the capitalist system was not capable of offering a situation of full employment.

His works served to overcome the Great Depression. To do this, the State stimulated the economy by injecting public money to stimulate domestic demand.

Friedrich Von Hayek (1899-1992)

He was part of the so-called Austrian School of Liberalism. He was one of the most influential economists of the second half of the 20th century.

His philosophy combines economic liberalism with individual freedom. This distinguishes it from later neoliberalism that preferred politically strong governments.

This defense of individualism led him to confront all kinds of interventionism, starting with that of communist societies. Its influence was fundamental for the Conservative Revolution of Thatcher and Reagan, as well as for the policies developed in some European countries..

References

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