The “Old” vs. the “New” Liberalism

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Ralph Raico July 9, 2020 SNB & CHF

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It is not disputed that the popular meaning of liberal has changed drastically over time. It is a well-known story how, around 1900, in English-speaking countries and elsewhere, the term was captured by writers who were essentially social democrats. Joseph Schumpeter (1954: p. 394) ironically observed that the enemies of the system of free enterprise paid it an unintended compliment when they applied the name liberal to their own creed, historically the opposite of what liberalism stood for from the start. For a century now, controversy has raged over the true meaning of liberalism (Meadowcroft 1996b: p. 2). Stephen Holmes (1988: p. 101) scoffs at the dispute as involving nothing more than “bragging rights.” That does not stop him, though, from joining others of

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It is not disputed that the popular meaning of liberal has changed drastically over time. It is a well-known story how, around 1900, in English-speaking countries and elsewhere, the term was captured by writers who were essentially social democrats. Joseph Schumpeter (1954: p. 394) ironically observed that the enemies of the system of free enterprise paid it an unintended compliment when they applied the name liberal to their own creed, historically the opposite of what liberalism stood for from the start.

For a century now, controversy has raged over the true meaning of liberalism (Meadowcroft 1996b: p. 2). Stephen Holmes (1988: p. 101) scoffs at the dispute as involving nothing more than “bragging rights.” That does not stop him, though, from joining others of the camp Schumpeter referred to in fighting to secure the label for themselves. There is a profound truth in Thomas Szasz’s proposition (1973: p. 20): “In the animal kingdom, the rule is, eat or be eaten; in the human kingdom, define or be defined.” This is nowhere clearer than in the “political kingdom.”

How did this momentous transformation of the term liberal—what Paul Gottfried (1999: p. 29) calls “a semantic theft”—come about?

This is the conventional interpretation—liberals from the eighteenth century on characteristically believed in laissez-faire. Beginning in the last decades of the nineteenth century, however, British thinkers like T.H. Green and L.T. Hobhouse (and their counterparts in the United States, Germany, and elsewhere) realized that laissez-faire was totally inadequate to the conditions of modern society. Often inspired by John Stuart Mill—in Hobhouse’s reverent words (1964: p. 63), “The teaching of Mill brings us close to the heart of liberalism”—they undertook to give liberalism a more up-to-date shape. As one expositor of the conventional view has written,

The central value of the liberated individual, of man as far as possible his own sovereign, did not change; the understanding of that value and the means for achieving it did. (Smith 1968: p. 280)1

In particular, the state, which earlier liberals had feared as the enemy of individual liberty, was now seen as a potent engine for furthering it in vital ways. The old liberalism gave way to the new.

The first thing to be pointed out is the political purpose behind the semantic change. It was to ease the way for the revolutionary extension of the state’s agenda (ultimately, this has become in principle a limitless agenda). The crying need for such an extension, however, was grounded in a highly questionable theory, which is still operative. It is that the “old” liberalism of laissez-faire had been made obsolete by deep-seated changes in society. The pioneers of the “new liberalism” and their successors based their claims on the supposedly overwhelming power of business enterprise over consumers and workers. But, despite all their propaganda, such a power cannot be shown, empirically or theoretically, to exist (Rothbard 1970: pp. 168–73; Hutt 1954; Armentano 1982; Reynolds 1984: pp. 56–68; DiLorenzo and High, 1988).

Moreover, and decisively, the standard rationale for speaking of a “new liberalism” is analytically flawed. For the end of achieving “the liberated individual” cannot be definitive of liberalism. Other ideologies, among them communist anarchism and many varieties of socialism, share that end.

Consider this statement by Eduard Bernstein, the founder of revisionist socialism (1909: pp. 129, emphasis in original):

The development and protection of the free personality is the goal of all socialist measures, even of those which superficially appear to be coercive. A closer examination will always show that it is a question of a coercion that increases the sum of freedom in society, that gives more freedom, and to a wider group, than it takes away.2

How does this differ from the standpoint of the “new liberals” for the past century and more?3 What divides liberalism from opposing ideologies is precisely its substantive program, the means it advocates—private property, the market economy, and the minimizing of the power of the state and of state-backed institutions.4

In Anglophone countries, those who anywhere else would be straightforwardly identified as social democrats or democratic socialists shy away from acknowledging their proper name. It is hard to avoid the conclusion that this is essentially a matter of political expediency. For some reason, labels suggestive of socialism have not been popular in countries of English heritage (cf. Gottfried 1999: p. 9).

This stark political fact was clear to Edward Bellamy, author of the socialist classic Looking Backward. In 1888, in a letter to William Dean Howells, Bellamy weighed what to call his doctrine. He rejected the term “socialist.” That was a word he “never could well stomach,” since it is foreign “in itself and equally foreign in all its suggestions.” “Whatever German and French reformers may choose to call themselves, socialist is not a good name for a party to succeed with in America,” he confided to Howells (Schiffman 1958: pp. 370–71). Bellamy chose instead the name “nationalist.” Others, on similar grounds, have preferred the label “liberal.”

The social-democratic commandeering of liberal met with great success, leading some laissez-faire liberals to incline towards describing themselves as individualists (Raico 1997). Amusingly, the next step was for socialists like John Dewey to try to capture that term as well. It turned out, according to Dewey, that there was an old individualism before the age of great corporations and modern social science; that kind must now be replaced by a new individualism (Dewey 1930).

One product of this “new individualism” would be “a coordinating and directive council in which captains of industry and finance would meet with representatives of labor and public officials to plan the regulation” of the economy. While this was obviously a replica of the corporate state that Mussolini was erecting in Italy, Dewey chose to ignore that parallel. The power center he proposed would have a voluntarist, and thus appropriately American, slant, as the United States set out constructively “upon the road which Soviet Russia is traveling” in such a deplorably destructive way (Dewey 1930: p. 118).5 So, after the concept of liberalism was transformed to exclude adherents of the market economy and private property, now individualism was also to be redefined, to the same end. It is almost as if socialists like Dewey were trying simply to define the advocates of free enterprise out of existence, and debate, altogether.6

[Adapted from “Liberalism: True and False,” in Classical Liberalism and the Austrian School.]

1. This is from David G. Smith’s entry on liberalism in The International Encyclopedia of the Social Sciences. It is a pity that such an important topic should have been left to Smith, whose treatment is often hopelessly confused; e.g., he claims that Ludwig von Mises cannot be considered a liberal because he was too “extreme” in leaving “the individual at the mercy of nature, society, and group and economic power,” yet he labels J.-B. Say and Bastiat “liberal economists” (Smith 1968: p. 277, 280).
2. Cf. Pierre Angel 1961, especially pp. 7, 9, 287, 332, 382–87, 411–15, and 420–33. Bernstein rejected Marxism’s central economic concepts as well as state ownership, and was resigned to the indefinite continued existence of the capitalist order. He insisted, however, that it should evolve into a “democratized” capitalism, with an expanding “social” legislation (he considered the Weimar “social state” a good start). Bernstein’s revisionism ended by absorbing German socialism and for all practical purposes Western socialism altogether, except for those who became known as Communists.
3. See also Lukes 1973: p. 12, where the author cites Jean Jaurès as asserting that “socialism is the logical completion of individualism,” in that it realizes individualist ends through means more appropriate to the modern age. Lukes agrees, positing that “the only way to realize the values of individualism is through a humane form of socialism.” We should be grateful to him for at least keeping individualism (in this context, the equivalent of political and economic liberalism) and socialism conceptually distinct.
4. Cf. R.W. Davis (1995: pp. vii–viii), in his foreword to the distinguished series The Making of Modern Freedom: “We use freedom in the traditional and restricted sense of civil and political freedom—freedom of religion, freedom of speech and assembly, freedom of the individual from arbitrary and capricious authority over persons and property, freedom to produce and to exchange goods and services, and the freedom to take part in the political process.” Davis, the director of the Center for the History of Freedom at Washington University, the sponsor of the series, adds that this “modern, conceptually distinct, idea of freedom” must be sharply differentiated from “the boundless calls for freedom from want and freedom from fear” of Franklin Roosevelt’s Four Freedoms.
5. A year later, Rexford Tugwell, of Roosevelt’s “Brain Trust,” wrote in The New Republic that “the interest of the liberals among us in the institutions of the new Russia of the Soviets has created a wide popular interest in ‘planning.'” (Gottfried 1999: p. 66).
6. Cf. Gottfried 1999: p. 13: “When Dewey decided to characterize his proposed social reforms as ‘liberal,’ he had already tried out ‘progressive,’ ‘corporate,’ and ‘organic.'”