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The Real Liberal Heritage

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Tags History of the Austrian School of Economics

04/16/2013Anthony Gregory

[This article was originally published in the December 2012 edition of Future of Freedom Foundation.]

Classical Liberalism and the Austrian School by Ralph Raico (Auburn, Ala.: Ludwig von Mises Institute, 2012); 347 pages.


If any one word is responsible for more confusion in the United States than “liberalism,” I’d surely like to know what it is. To the average American, a liberal is someone who votes Democratic, favors redistribution of wealth from rich to poor, wants more government regulation of the market, probably champions gun regulations, loves public education, and generally stands on the opposite side of the spectrum, such as it is, from what passes as “conservative” these days.

Yet outside the United States, and for more than a century, “liberalism” has carried a different meaning, something quite distinct from, if not diametrically opposed to, the modern American definition. Liberalism is the tradition of Adam Smith and John Locke and the more radical of the Founding Fathers—the tradition of the British opponents of the Corn Laws, of French economists and legal theorists such as Frédéric Bastiat, and of Americans who questioned the very necessity of the state in the late 19th century. Liberalism is, in other words, the political creed of those who favored liberty above the state, believed peace was preferable to war, and saw free trade and free association as the very foundations of a just and equitable society; who saw the moral status of wealth accumulation as being determined not by how much was accumulated, but rather by how it was accumulated—whether by the peaceful and productive means of voluntary free exchange or the political means of plunder and government privilege.

Liberalism, in short, is the philosophical antecedent to modern libertarianism. And though many of today’s liberals claim the legacy of old liberalism for themselves, saying that economic realities and refinement of theory forced them into their more collectivist mold, it becomes clear from studying the liberal tradition that its core values of individual liberty, belief in the self-organizing effectiveness of society, and distrust in government have much more in common with today’s consistent opponents of tax-and-spend liberalism than with its proponents.

We libertarians are lucky to have a great historian in Ralph Raico, whose Classical Liberalism and the Austrian School contains nine fantastic essays that shed much needed light on these profound philosophical issues. Raico, our premier historian of classical liberalism, is fluent in the intellectual foundations of those ideals as well as in economics, particularly Austrian economics, rendering him uniquely qualified to discuss the intimate relationship between the most radical of free-market schools and the struggle for individual liberty.

Defining liberalism

Raico laments that “no serious effort has been made to provide an overall account of the history of liberalism” outside of the work of Guido de Ruggiero, which he considers “deeply flawed” and notes “was limited to … Britain, France, Germany, and Italy.” Another problem arises with the very definition of liberalism: “[A] survey of the literature on liberalism reveals a conceptual mayhem. One root cause of this is the frequent attempt to accommodate all important political groupings that have called themselves ‘liberal.’” That approach does not impress Raico, who points out the absurdity of defining liberalism so broadly:

If one holds that the meaning of liberal must be modified because of ideological shifts within the British Liberal Party (or the Democratic Party in the United States), then due consideration must also be given to the National Liberals of Imperial Germany. They—as well as David Lloyd George and John Maynard Keynes—would have a claim to be situated in the same ideological category as, say, Richard Cobden, John Bright, and Herbert Spencer. Yet the National Liberals supported, among other measures: the Kulturkampf against the Catholic Church and the anti-socialist laws; Bismarck’s abandonment of free trade and his introduction of the welfare state; the forcible Germanization of the Poles; colonial expansion and Weltpolitik; and the military and especially naval buildup under Wilhelm II.

“It is evident,” Raico argues, “that mere self-description by politicians or political intellectuals cannot be decisive on this issue.” Even libertarians will sometimes include Keynes and other collectivists on the list of true liberals, but for Raico that will not do. “Canvassing the views of, say, Kant, Spencer, Popper, and Rawls yields no consensus on crucial issues.”

The “chief bone of contention in the debate,” as Raico sees it, is private property, which modern liberals and some presumed older liberals have viewed with hostility, seeing it as a “conservative” institution. Raico takes on one thinker, Michael Freeden, who “seeks to exclude belief in private property altogether from the contemporary meaning of liberalism.” But to welcome welfare state liberals, especially for the sake of continuity of language, results in some perverse implications. “Liberalizing the economy” would no longer mean “dismantling of government controls, but instead, something like extending welfare benefits.”

Raico traces a lot of the problem to the “vastly inflated position in the conception of liberalism” held by John Stuart Mill, the 19th-century thinker with genuinely liberal views on free speech, but who “rejected the liberal notion of the long-run harmony of interests of all social classes,” who “repudiated the liberal principle of non-intervention in foreign wars,” and who redefined “liberty itself” so as to find as much fault in “institutions whose authority over them [people] freely accept” as in state-inflicted physical aggression.

More of the confusion comes in the reluctance of British and American collectivists, in particular, to be honest with their language:

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.

Raico seeks to trace the origins of liberalism back far enough to establish a distinct and long-standing trend of thought that held political power in suspicion. Those origins pre-date the Enlightenment and are found in the medieval era. Raico credits the Catholic Church for its role in modernizing law, desacralizing the state, and promoting decentralized authority. He then discusses the mid-17th-century English Levellers, who opposed radical egalitarianism, violations of freedom of conscience, and state monopoly.

French liberals and class struggle

Raico devotes an entire chapter to the French liberals, who have often been neglected in the English-speaking world. “Benjamin Constant is,” according to Raico, “the representative figure not only of French but of European liberalism in the nineteenth century.” Constant had found the flaw in the French Revolution and its terror in “the idea of Ancient Liberty misapplied to the modern age.”

The classical republics of Greece and Rome, as well as writers such as Rousseau and Abbé de Mably, saw freedom consisting “in the citizens’ exercise of political power. It is a collective notion of freedom, and it is compatible with—even demands—the total subordination of the individual to the community.” Modern liberty, in Constant’s view, was different: it was “one based on free labor and peaceful commerce.” Constant, like today’s libertarians, contended with opponents on both the left and right: “His enemies were the Jacobin and socialist descendants (for the most part) of Jean-Jacques Rousseau on the one side, and, on the other, the theocratic conservatives such as de Maistre and de Bonald.” Constant’s vision of peaceful diversity and social pluralism continues to be relevant in today’s culture wars, as “conflicting groups wish to make use of the state power to realize their own cultural—religious, moral ethical, even aesthetic—values.”

The French liberals identified many problems of the modern state in very sophisticated terms. They saw “the danger of centralized powers.” Raico identifies French Catholic liberals for their major contributions to religious liberty. He finds much to credit in Alexis de Tocqueville’s views on “the danger of centralized power,” the anti-statism advocated by Count de Montalembert, and the anarchism of Gustave de Molinari, who opposed the nation-state but also found revolutionary movements threatening to liberty.

Of the French contributions to liberal thought that continue to be neglected even by many libertarians, the theory of class conflict is a major one. The cause of this neglect may be that “few ideas are as closely associated with Marxism as the concepts of class and conflict.” Marx saw the inevitable tension between the workers and the state-privileged capitalists as the great hinge on which history would unstoppably turn.

Yet as Marx himself noted in 1852, “No credit is due to me for discovering the existence of classes.” Instead, he credited “bourgeois historians” and “bourgeois economists.” In particular, he named the French historians François Guizot and Augustin Thierry.

Raico traces class-conflict theory to the heritage of classical liberalism, finding that a liberal class-conflict theory emerged in a polished form in France, in the period of the Bourbon Restoration, following the defeat and final exile of Napoleon.

From 1817 to 1819, two young liberals, Charles Comte and Charles Dunoyer, edited the journal Le Censuer Européen. Along with Thierry, they began to formulate a theory, later expounded on by Constant and Jean-Baptise Say, of class conflict. According to Say, the market economy provided for a harmony of interests. Conflict arose when a state drew parasitically from some to benefit others. Thus we have the two adversarial classes: the rulers and the ruled.

According to Comte,

What must never be lost sight of is that a public functionary, in his capacity as functionary, produces absolutely nothing; that, on the contrary, he exists only on the products of the industrious class; and that he can consume nothing that has not been taken from the producers.

At times, Marx’s class theory closely resembled that of the liberals. Marxism contains two rather different views of the state: most conspicuously, it views it as the instrument of domination by exploiting classes that are defined by their position within the process of social production, e.g., the capitalists. Sometimes, however, Marx characterized the state itself as the independently exploiting agent.

The difference in economic and social theory goes a long way in explaining the distinction between Marxist and liberal class analysis, despite the many similarities. It also hints at the difference between the way left-liberals and classical liberals look at the economy and wealth distribution. If one believes that the state is merely doing the bidding of the capitalists, then the latter become the principal enemy, and the state can presumably be taken over for the purpose of proletarian liberation—an endeavor that, whenever it is attempted in real life, results in mass suffering and totalitarianism. If, on the other hand, the state itself is the exploiter and parasite, and the politically connected capitalists are merely beneficiaries of its intrinsically exploitative nature, then taking over and enlarging the state cannot be seen as the proper course of action—rather, shrinking the state as much as possible would be the solution to inequitable privilege.

Economic science has long been fundamental to classical liberalism. As Raico explains, Austrian economics has emerged as the school most conducive to championing free markets and individual liberty. In its origins, its historical dialectical relationship with socialist economics, its emphasis on subjective value and methodological individualism, and its many theories that undermine the case for state intervention, today’s libertarians have every reason to study this field closely. Seeing that economics as much as anything divides modern liberalism from its more libertarian counterpart, precision in economic education takes on great importance.

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