Liberalism can mean more than one thing; Classical liberalism describes a major direction in western politics and is a subset of American liberalism.
In the U.S., both Democrats and Republicans fall under the umbrella of classical liberalism; American politics are fairly homogenous in this framework.
Two prominent features of classical liberalism:
1) A reliance on markets for economic decision making.
2) A reliance on democratic institutions for political decision making.
Markets and economic decision making:
A market is the collective of producers, sellers, and buyers of a good or service (e.g., the market for smartphones).
In classical liberalism, markets are left to function with minimal state interference; individuals can own/invest in businesses; businesses decide what to produce and at what price.
This economic system is referred to as capitalism (a term first used, perhaps, by William Makepeace Thackeray in 1852; the term “capitalist” predates that).
Capitalism aims to promote maximum wealth by letting people try, fail, and succeed in business.
Adam Smith and the Wealth of Nations (publication year: 1776):
Smith argued that letting people pursue their own interests generates wealth more effectively than mercantilist policies.
Smith’s famous idea of the “invisible hand” suggests that individuals pursuing self-interest can unintentionally benefit society through market coordination. He warned, however, that markets can be rigged by monopolies and anti-competitive practices.
Smith explicitly criticized attempts to restrict competition and monopolies (e.g., he criticized the East India Company for bad treatment of Indians and for monopoly power).
Mercantilism (prevalent economic theory opposed by classical liberalism):
Euro-centric: focus on accumulating gold; maximize imports and minimize exports; maintain overseas colonies to supply raw materials and markets.
This policy helped spur the American Revolution by limiting colonial production and trade options.
Ironically, the same strategy contributed to later growth of the “Asian tigers” (Japan, South Korea, Taiwan, Hong Kong, Singapore) post-WWII by emphasizing export-led growth and domestic industry.
The market vs. state tension:
Smith understood that capitalism could generate more wealth as long as markets were kept free from restraints; he also acknowledged that people may try to rig markets to limit competition, raise prices, and increase profits.
The East India Company serves as an example of monopoly power and government involvement in commerce.
Democratic institutions in classical liberalism:
Political decisions are made through voting; the state sets rules on who is a qualified citizen and who can run for office, but individuals who meet the criteria can seek office.
Representatives are elected to make decisions on behalf of citizens; this form of government is a republic.
Strengths of classical liberalism:
Higher individual liberty than many alternatives.
Creates opportunities to participate in economic and political life.
Market-based decision making tends to produce wealth more efficiently and at lower cost.
Elections provide a mechanism for conflict resolution and policy change.
Weaknesses/risks of classical liberalism:
Wealth can be distributed unevenly, enabling the wealthy to dominate politics via campaign contributions and lobbying.
Illustration: “the U.S. Senate is pretty much a millionaires’ club.”
Market activity can generate social costs (e.g., pollution) that require state intervention; pollution controls may reduce profits, which some equate with a loss of liberty.
Inclusive political systems (more voice for more people) can be less efficient and slower to respond to immediate needs (e.g., long-term Medicare financing challenges due to interest groups and tax concerns).
Key implication: the form of the republic (constitutional monarchy, parliamentary democracy, American-style separation of powers) is less important than the availability of free and fair elections.
Illiberal democracies (illustrative concept): some republics have elections but are not fully free or fair, such as
Russia, Singapore, and portions of Mexico’s 20th-century history under the Institutional Revolutionary Party (PRI).
3.1.2 Illiberal Democracies and American Liberalism
Illiberal democracy: elections exist, but not all democratic standards are upheld; civil liberties and political competition may be constrained.
Examples discussed: Russia (illiberal tendencies), Singapore (dominant party with restricted civil liberties), Mexico (PRI dominance in the 20th century).
American liberalism as a distinct strand within classical liberalism:
Originates from the Progressive era, reacting to late 19th/early 20th-century capitalism and its excesses (e.g., lack of protections for workers, child labor, unsafe working conditions).
Progressives advocated for reforms such as non-partisan elections, open primaries, and stronger government action in economic management (e.g., breaking up trusts).
American liberalism took on a more defined role after the Great Depression, with a push for broad protections for workers, unions, and a robust social safety net, plus health, safety, and environmental regulations.
Costs and benefits of this approach:
Benefits: reduces starvation and provides safety nets; expanded protections for workers; environmental and health regulations.
Costs: higher taxes and increased costs for businesses and consumers due to regulatory expansion; more government involvement in private life in some contexts.
The role of elections and governance:
The central question is not the form of the republic but whether elections are free and fair.
Illiberal practices can exist within democracies that still conduct elections, complicating the liberal label.
3.1.3 American Liberalism, Conservatism, and Populism
American liberalism (as distinct from classical liberalism):
Roots in the Progressive era and magnified by the Great Depression; support for an active government role in the economy and in personal life.
Fights for worker protections, unions, a broader social safety net, and regulations in health, safety, and the environment.
Trade-offs: greater social protections and reduced hardship vs higher taxes and stricter business and private-sector regulation.
American conservatism:
A subset of classical liberalism with a tendency toward less government involvement in the economy, especially in the post-World War II era.
Arguments focus on taxes, regulation, and the size/scope of government; conservatives often claim that government programs discourage work and self-reliance.
Traditional conservatives favor lower taxes, a balanced federal budget, and less regulation; some conservatives in later years emphasize social issues (abortion, gay marriage) and social legislation.
The political landscape includes both economic conservatism and social conservatism; some conservatives seek common ground with liberals on environmental concerns.
Populism:
Not a strict ideology but a political approach emphasizing “the ordinary people” and a critique of “the elites” or the powerful.
Strengths: can mobilize broad support and draw attention to neglected issues; can democratize politics by appealing to common concerns.
Weaknesses: can be demagogic or simplistic, and may be oppressive or anti-pluralist when in power.
Notable populists: Huey Long, Ralph Nader, Ross Perot, Pat Buchanan; Hugo Chávez cited as a populist example from another country.
Populism often uses messaging that appeals to the average voter, as in cultural productions (e.g., the film Dave, 1993), which plays on the desire for honest, ordinary leadership.
Tension and overlap:
Political figures can display both liberal and conservative traits in different issues (e.g., conservative on economy, liberal on social issues).
The quote attributed to Charles Dudley Warner: “Politics makes strange bedfellows” highlights that coalitions can be unusual when different groups align around certain issues.
3.1.4 Popularianism, Libertarianism, and Critical Reflections
Populism in practice:
Populists often criticize big business and big government while claiming to defend the “little guy.”
When in power, they can govern in a high-handed or unresponsive manner, sometimes contradicting their original critique.
Huey Long (Governor of Louisiana, 1928):
Implemented progressive policies like oil tax, free textbooks, and infrastructure investments.
Also used coercive tactics (10% wage donations to his re-election fund, favoritism in contracts, punishment of opponents).
Ultimately assassinated in 1935; his administration illustrates how populist leaders can overstep and centralize power.
Libertarianism:
Core idea: minimal government—only national defense, police, and fire protection; otherwise limited government activity; social issues largely not addressed by government.
Origin: reaction to Soviet-style communism; proponents include Ayn Rand and economists Ludwig von Mises, Friedrich Hayek, Milton Friedman.
Core arguments:
Favors maximum individual freedom and limited taxation/regulation to spur growth.
Critiques/limitations:
Historical periods show that near-total laissez-faire can fail to address downturns, worker protections, or public safety (e.g., late 19th/early 20th century experiences).
Anti-trust laws were sometimes used to suppress labor organization rather than to promote competition; markets alone don’t automatically solve environmental and public health problems.
Environmental externalities and public goods (e.g., pollution, fishing rights, air/water quality) may require government intervention; property-rights theories can be insufficient in these contexts.
Distinctions within libertarian thought:
“Small ‘l’ libertarianism” (broad, non-partisan preference for limited government) vs. the Libertarian Party (active electoral pursuit of libertarian governance).
Overall perspective:
Classical liberalism remains the dominant framework in many parts of the world, with various adaptations and critiques.
Each ideology has strengths and weaknesses and can yield different governance outcomes depending on institutional design and policy choices.
3.1.5 Exercises
Exercise 1: What seems to be different between American conservatives and liberals at present? How would you describe your own conservatism or liberalism in political beliefs?
Exercise 2: If Libertarians won enough elections to govern, what changes would occur? How would people respond to altered mixes of public services and taxes? How would such governance function?
Licensing note: The page is shared under CC BY-NC-SA 3.0; authoring and edits were conducted within the LibreTexts platform.