The Fracture of Liberalism

The Fall and Decline of an Idea

Unlike the entirely emotive slur Fascist, there are still a minority of self-professed Liberals. There are even a few major Liberal parties. Modern leftists often sneer at liberalism, the Aaron Sorkin can-do pragmatist who knows how to roll up his sleeves and make a more egalitarian society. He embraces government regulation of the market, a few sensible green initiatives, a welfare system that works for average Americans. He seems like a totally different creature from the original “liberals,” who advocated for a free-market and almost no government regulations, a boundless respect for the individual, regardless of class, who had a right to his private property. All this flowed from a faith in the invisible hand of The Market, a self-correcting quasi-providence that worked through (not against) the self-interest of men. It is hard to understand how the compassionate capitalist welfare state of affirmative action could ever bear the same ideological name as William Graham Sumner. Is modern liberalism just a mask for a very different tradition? Or is there some genealogical origin for the divergence of classical and modern liberalism. The rest of this essay is an argument for the latter.

Liberalism was not mearly a costume for Socialists to win political allies. The modern notions of liberalism emerged as the original constellation of ideas, Liberalism, shipwrecked upon the shores of the long twentieth century. Rather than thinking of the idea as a single idea, it was a combination of various values and desires that were unsustainable before the power of cartelization and centralization. Not all values were alike for all liberals, and so the original concept exploded into rival traditions. These tensions are manifest in one of the fathers of Liberalism proper: Adam Smith.

While Smith is often treated as an uncritical apologist for “Capitalism” (whatever that exactly means), he was primarily a critic of another reified concept. “Mercantilism” became the bugbear of England’s imperial Parliament. The reign of Whigs introduced legislation that regulated trade and placed tariffs on foreign powers. These, according to Smith, did not lead to England’s magnificent growth over the eighteenth-century, but hamstrung it. Mercantilism was the policy to enrich the “gentlemen capitalists” of the Whig oligarchy, not the striving middling class that could not break into the monopoly of trade. The wealth of nations was found in unfettered trade, not royal monopolies and regulated traffic. Free trade was the only way to wash out artificial hierarchies of government created wealth:

Were all nations to follow the liberal system of free exportation and free importation, the different states into which a great continent was divided, would so far resemble the different provinces of a great empire. As among the different provinces of a great empire, the freedom of the inland trade appears, both from reason and experience, not only the best palliative of a dearth, but the most effectual preventive of a famine; so would the freedom of the exportation and importation trade be among the different states into which a great continent was divided. (Wealth of Nations, IV.5)

Free trade was not simply a policy of national or individual enrichment, it would bring about European (and thus global) peace. Free trade would put an end to war and famine and plague. Smith offers a nearly utopic expectation that Nature, not artificial statecraft, would secure a mutual benevolence that would enrich all. Nevertheless, governments were needed to secure the natural order, introducing a seeming contradiction. If Nature is natural, then why is artifice needed to sustain it?:

All systems, either of preference or of restraint, therefore, being thus completely taken away, the obvious and simple system of natural liberty establishes itself of its own accord. Every man, as long as he does not violate the laws of justice, is left perfectly free to pursue his own interest his own way, and to bring both his industry and capital into competition with those of any other man, or order of men. The sovereign is completely discharged from a duty, in the attempting to perform which he must always be exposed to innumerable delusions, and for the proper performance of which, no human wisdom or knowledge could ever be sufficient; the duty of superintending the industry of private people, and of directing it towards the employments most suitable to the interests of the society. According to the system of natural liberty, the sovereign has only three duties to attend to; three duties of great importance, indeed, but plain and intelligible to common understandings: first, the duty of protecting the society from the violence and invasion of other independent societies; secondly, the duty of protecting, as far as possible, every member of the society from the injustice or oppression of every other member of it, or the duty of establishing an exact administration of justice; and, thirdly, the duty of erecting and maintaining certain public works, and certain public institutions, which it can never be for the interest of any individual, or small number of individuals to erect and maintain; because the profit could never repay the expense to any individual, or small number of individuals, though it may frequently do much more than repay it to a great society. (IV.9)

The Natural order needs protection from its violators. Governments exist to stop invasions, prevent internal criminality, and produce public works that would facilitate the cause of nature. There is no paradox, anymore than a gardener constructs a trellis for a vine to grow properly. In other words, for society to be free a government must rectify certain unnatural inequalities. Public works were, therefore, a means to induce a kind of equality among the lowliest citizens, allowing them to compete. These so-called unnatural inequalities thus require a government to act:

Wherever there is a great property, there is great inequality. For one very rich man, there must be at least five hundred poor, and the affluence of the few supposes the indigence of the many. The affluence of the rich excites the indignation of the poor, who are often both driven by want, and prompted by envy to invade his possessions. It is only under the shelter of the civil magistrate, that the owner of that valuable property, which is acquired by the labour of many years, or perhaps of many successive generations, can sleep a single night in security. He is at all times surrounded by unknown enemies, whom, though he never provoked, he can never appease, and from whose injustice he can be protected only by the powerful arm of the civil magistrate, continually held up to chastise it. The acquisition of valuable and extensive property, therefore, necessarily requires the establishment of civil government. Where there is no property, or at least none that exceeds the value of two or three days labour, civil government is not so necessary. (V.2)

Smithian political economy can superficially appear near socialistic. Government must balance the inequities of accumulated wealth from forclosing accumulation to the poor. In order to rectify this problem, Smith advocated a number of tangible policies: a standing professional army (as opposed to militias) and public education. The former was a rejection of classical republicanism, which believed voluntary military service produced a free citizenry. It was also a rejection of classical whiggery, which deplored any permanent military when the realm was at peace. A professional army was an embrace of what Benjamin Constant later considered as modern liberty, the allowance of man to de-politicize so as to focus on his economic and private activities.

The latter, public education, was necessary to prevent the natural effects of an economy from creating brutes. The division of labor, the natural process of an ever efficient economy, would reduce man to apish servility:

In the progress of the division of labour, the employment of the far greater part of those who live by labour, that is, of the great body of the people, comes to be confined to a few very simple operations; frequently to one or two. But the understandings of the greater part of men are necessarily formed by their ordinary employments. The man whose whole life is spent in performing a few simple operations, of which the effects, too, are perhaps always the same, or very nearly the same, has no occasion to exert his understanding, or to exercise his invention, in finding out expedients for removing difficulties which never occur. He naturally loses, therefore, the habit of such exertion, and generally becomes as stupid and ignorant as it is possible for a human creature to become. The torpor of his mind renders him not only incapable of relishing or bearing a part in any rational conversation, but of conceiving any generous, noble, or tender sentiment, and consequently of forming any just judgment concerning many even of the ordinary duties of private life. Of the great and extensive interests of his country he is altogether incapable of judging; and unless very particular pains have been taken to render him otherwise, he is equally incapable of defending his country in war. The uniformity of his stationary life naturally corrupts the courage of his mind, and makes him regard, with abhorrence, the irregular, uncertain, and adventurous life of a soldier. It corrupts even the activity of his body, and renders him incapable of exerting his strength with vigour and perseverance in any other employment, than that to which he has been bred. His dexterity at his own particular trade seems, in this manner, to be acquired at the expense of his intellectual, social, and martial virtues. But in every improved and civilized society, this is the state into which the labouring poor, that is, the great body of the people, must necessarily fall, unless government takes some pains to prevent it.

Wage labor, the boon of national prosperity, was simultaneously the bane of mankind. Public schools were a necessary government policy to course correct the free-market’s transmogrification of men into beasts. The government must, therefore, act to prevent the natural ill effects.

The difference between Smith and later historicist economists was the belief in Nature. For later Americans (Henry Carey) and Germans (Frederich List), there was no such thing as Nature, it was really a question of historical human social forces. The “free market” was nothing more than an illusion crafted upon a historical circumstance, namely Britain’s mercantile and manufacturing domination. Only protective tariffs and national regulation would preserve native industries from being overrun by competitors. But Smith had refused these doom and gloom scenarios from the outset. He believed that, no matter what policies, free-trade would wash out the differences in the end:

It is the great multiplication of the productions of all the different arts, in consequence of the division of labour, which occasions, in a well-governed society, that universal opulence which extends itself to the lowest ranks of the people. (I.1)

Smithian Liberalism would flourish long after his death, though not always in his direction. While there were some pseudo-admirers in the United States, France, and abroad, most had an awkward combination of free-trade egalitarianism with social renewal. Liberals, by and large, opposed the decadent incompetence (or perceived as such) of the Ancien Regime, which protected mediocre nobles and churchmen from the withering light of merit and new ideas. Europe’s Liberal moment exploded in 1848, producing republican government challening old privileges and restrictions. But in Britain, Liberals found themselves assaulted by both Tories and Radicals (and sometimes both at the same time). Smithian concern for wage-earner had not been sufficiently appreciated. Chartists demanded rights not only for middling classes (which achieved status through the Reform Bills of 1832-34), but the lowliest. Liberalism, first as Whiggery and then as its own party, persisted, achieving its climax of victory in the repeal of the protectionist Corn Laws. Even the regnant Toryism of Sir Robert Peel embraced these initiatives. Europe may have dissolved into chaos, England had (through a robust violence in favor of private property) prevailed.

Or had it? By the 1870s, Britain was in crisis. The manufacturing magnates of Manchester, the advocates of Smithian Liberalism, were in decline. Textiles, the pride of empire, were now no longer unchallenged. Sure, Britain had to reopen ports like Buenes Aires and the Sueze, even occupying the latter until Egypt became a British colony. But free-trade had flourished and the Empire remained globally supreme. Yet the end of the nineteenth-century boded ill. The working class, increasingly self-conscious, were not interested in Manchester Liberalism. They instead turned to the squishy socialism of Labour, a combination of quasi-Marxist science and Methodist-inflected romance. To forestall this radicalism, National Conservatives, like the theatrical Benjamin Disraeli, spearheaded reform. There were limits placed on hours and work conditions, enfranchisement of all Briton men, even national welfare programs to protect the weakest. This robust state paternalism even mapped onto a more aggressive foreign policy, the Jingoism that would mark the soaring pride of a self-conscious British Empire. No more embarassment, no more shuffling feet about Little England or romance for a hobbit world of shopkeepers and squires. But even that was not enough to forestall the growth of politicized labor unions. Thus Labour, in its wooly socialist hue, was born. Liberalism, it seemed, was in crisis.

Similar to England, other nations were determined to displaced this wobbly superpower. The United States, after its catastrophic civil war, had fully embraced the American System of Henry Clay. The dominant Republican Party passed tariffs, kept sound money, and advanced the national interest to replace Britain as the manufacturing center. To meet growing hostility, with a brief Liberal interlude in the non-consecutive terms of Grover Cleveland, American flirted with its own National Conservative turn in Theodore Roosevelt, though it was mostly a colorful and popular, though ineffective, flop. America was simply not like Europe. At the same time, a rapidly uniting Germany embraced protective union through the Sollverein and its cartelized industries. The anti-liberal Cameralism gave to Bismarckian policy, introducing national insurance and wide enfranchisement. The Second Reich secured unity under Kaiser Wilhelm, its kulturkampf wiping out bastions of nobility and ecclesiastics who refused to centralize. Whereas American growth remained generally private and decentralized, German centralization brought with it the specter of Socialism, which Bismarck deflected and undermined successfully as Chancellor. These two competitors, through these policies of active economic growth, soon rivaled Britain as chief manufacturers. The age of free-trade had seemingly died.

What were liberals to do? Had they lost their nerve? It was simply not the same historical moment. Self-professed liberals, staring at rapidly unionizing labor and the flagging prosperity of production, had to make a choice. Some in Britain, especially over the question of Irish home-rule, threw in with the Tories. The insurgent candidacy of John Chamberlain, a quondam Liberal who advocated for protective tariffs for a Dominion of the white colonies, threatened to topple the old hegemony. On the other hand, some Liberals had realized that suppressing the working-class was not possible. They had become the animals that Smith feared, and more was needed to socialize them and uplift them. John Hobson (who later inspired Vladimir Lenin) lamented the ill effects of imperialism and how it had transformed free-trade into a new form of mercantilism. It was simply impossible to resist the drift into Socialism without, to some extent, joining them. Socialists were right that Liberalism had failed in its successes, but that did not mean Liberalism itself had failed. Had not Smith advocated government intervention to prevent artificial accruing of wealth? New regulation was thus necessary to protect the market. Everyone, it seems, had rejected the old paradigm in itself.

The same process occurred abroad. In Germany, the Social Democratic Party was the largest on the eve of World War One. The only other option for Liberals was to embrace Conservatives, to defend the old privileges as a form of defense of private property. Similarly, in America, many old Liberals, who had begun to slough off their attachments in the Progressive movement, embraced similar reforms as their kin abroad. Usually taken with a form of Anglophilia or admiration for Bismarckian efficiency (or both, as demonstrated in the British Fabian Society, that mixed technocratic socialism with ruthless political pragmatism), Progressives gave up on a nascent defense of free-markets. Though a self-aggrandizing advocate of anything that worked, Liberals found their man in Franklin Roosevelt to enact his New Deal. Unlike the far less successful and far more idealist Woodrow Wilson, who himself was a transitioning Liberal in the model of British Prime Minister William Gladstone, Roosevelt seemed to advance all the necessary programs Liberals desire. Free-trade, yes, but free-trade with necessary regulation of industry. Wall Street was given less rope so that it would not hang itself. But other Liberals, who saw this clubman Caesar as a jeopardy to any individual iniative or industrial genius, began to jump ship for the Republican Party. The party that had seemingly embraced political mediocrity to pursue economic excellence was now the only hope against the quasi-socialism of Anglophile, WASP, Progressives.

Classical Liberalism was thus shattered, creating a rightward Libertarianism and a leftleaning Social Democracy of Modern Liberalism. The old constellation shattered before historical forces, even leading the father of Austrian economics, Ludwig von Mises, to join the Austrian fascists to forestall a socialist take-over. While the right-adjacent members began to adopt protective tariffs to defend sound-money, the left-adjacent began to embrace welfare programs to provide for the bestialized wage-earners. Property rights became a defense of old privileges (even in America, where this concern became linked to large corporate owners). The need to reassert Nature involved complex, history dissolving, projects of social engineering. The problem of racial discrimination was nothing real, but the artifice of suppressing natural talent, no different than a Whig magnates against the ambitious middling classes. Free-trade may be absolute, yet it might demand wild social inequalities or a massive government civil rights regime.

Liberalism was dead. And yet Liberalism lived on.