Economic liberalism: definition, features, examples

2024 Author: Henry Conors | [email protected]. Last modified: 2024-02-12 02:55

Liberalism is not only a political trend. It assumes the existence of certain concepts, views that characterize the economy, social, spiritual sphere in a liberal country. And in this vein, we will consider one very interesting concept. This is economic liberalism. Let's give its definition, consider the concept, get acquainted with the founder of the idea, observe the development of the theory in history.

What is this?

Economic liberalism is an ideology that is an integral part of classical liberalism. As far as economic philosophy is concerned, he will support and propagate the so-called laissez-faire economy. In other words, the policy of non-intervention of the state in its own economic life.

Followers of economic liberalism believe that social freedom and political independence are inseparable from economic freedom. They provide philosophical arguments to support their opinion. Activelythey are also for the free market.

These ideologues speak negatively about state intervention in the affairs of the free market. They advocate maximum freedom of both trade and competition. This is what distinguishes economic liberalism from a number of other trends. For example, from fascism, Keynesianism and mercantilism.

Founder

The author of the concept of economic liberalism is Adam Smith, a famous 18th century economist. The subject of studying economics as a science, he considered the economic development of society, the constant improvement of the welfare of society. A. Smith called the sphere of production the source of we alth.

All the basic principles of economics, proclaimed by scientists, are inextricably linked with the doctrine of the "natural order" presented by the Physiocrats. But if they believed that the "natural order" is primarily dependent on the forces of nature, then Smith said that it is determined only by human nature and only corresponds to it.

Egoism and economics

Man by nature is an egoist. He may only be interested in achieving personal goals. In society, he is limited, in turn, by the interests of other individuals. Society is a collection of individuals. Consequently, this is the totality of their personal interests. From this it can be argued that the analysis of the public interest must always be based on an analysis of the nature and interests of the individual.

Smith said that people need each other, but need as selfish. Therefore, they give each othermutual services. Hence, the most harmonious and natural form of relations between them is the exchange.

As for the economic policy of liberalism, here Adam Smith argued somewhat unambiguously. He explained all complex processes only by the motives of the actions of the so-called economic man, whose main goal is we alth.

About the concept

The theory of economic liberalism occupies an important place in the teachings of Adam Smith. The essence of his concept: the laws of the market best influence the development of the economy only in one case - when private interest in society is higher than public interest. That is, the economic interests of a society are only the sum of the economic interests of the individuals that make it up.

And what about the state? It must maintain the regime of so-called natural freedom. Namely: to take care of the protection of law and order, to protect private property, to ensure a free market and free competition. In addition, the state also performs such important functions as organizing the education of citizens, communication systems, public services, transport communication structures, etc.

Adam Smith considered only money to be the great wheel of circulation. The income of ordinary workers is directly dependent on the level of welfare of the entire state. He denied the regularity of reducing wages to the subsistence level.

Division of labor

Beyond principleseconomic liberalism, the scientist has extensively explored the theme of the division of labor. The source of we alth, according to Smith, is only labor. The we alth of the whole society depends on two factors at the same time - the share of the working population and the overall productivity of labor.

The second factor, according to the scientist, has a much higher value. He argued that it was his specialization that increased labor productivity. Hence, each worker process must be executed by non-universal workers. And it should be divided into several operations, each of which will have its own performer.

Specialization, according to Smith, should be preserved from such a simple grading of the work process to division into branches of production, social classes at the state level. The division of labor, in turn, will lead to a massive reduction in production costs. Even in his time, the scientist actively advocated the mechanization and automation of labor. He correctly believed that the use of machines in production would lead to positive economic shifts.

Capital and capitalism

Besides liberalism and economic freedom, Adam Smith also studied capital a lot. It is important to highlight a few key points here. Capital is two parts. The first is the one that generates income, the second is the one that will go to consumption. It was Adam Smith who proposed dividing capital into fixed and circulating.

According to Smith, the capitalist economy can only be in the following states: growth, stagnation and decline. Then he developed two schemes: expanded and simple production. Simple -it is a movement from the public stocks to the gross product, and also to the replacement fund. In the expanded production scheme, accumulation and savings funds are additionally added to it.

It is the expanded production that creates the dynamics of the we alth of the state. It depends on the growth of capital accumulation and its efficient use. Technological progress is here one of the factors of expanded production.

Direction of public thought

Now let's move on to modern economic liberalism. It is understood as a direction of social thought, asserting the need to limit the scope of activities and powers of the state. Its supporters today are confident that the state should only ensure a peaceful, prosperous and comfortable life for its citizens. But in no case should you interfere in their economic affairs. This idea was widely developed by the German scientist, one of the classics of liberalism, W. Humboldt in his work "The Experience of Establishing the Limits of State Activity".

Discussion of the role of the state in economic life, in liberalism and conservatism today generates a lot of controversy. On the amount of taxes, the limits of subsidies, branches of agriculture and industry, on paid or gratuitous he alth care and education. But all this, one way or another, comes down to Humboldt's formula for the limits of state activity.

What is a strong state?

At the same timeIt is important to note that modern economic liberalism advocates a strong state no less zealously than conservatives. The difference is in how they interpret and regard this concept.

When liberals talk about a big, strong state, they do not mean its size. From an economic point of view, they care about something else. What is the share of state incomes/expenditures in the general category of incomes/expenditures of the society. The more the state collects money in the form of taxes from the income of the population, the "bigger and more expensive" it will be from the standpoint of economic liberalism.

Here you can select a lot of examples. For example, the "big state" of the USSR, which crushed the economy. But the opposite examples are also negative: Reaganomics in the United States and Thatcherism in the UK.

Liberals or conservatives?

So who wins the debate today? Conservatives, conductors or supporters of political, economic liberalism? It is difficult to answer, because the balance of power in this confrontation is not static.

For example, at the end of the last century, society recognized the correctness of precisely the supporters of liberal ideas. Based on the example of many world states, it could be judged that state intervention in economic activity, even justified by its concern for social justice, leads to a general impoverishment of citizens. Practice shows another amazing thing: the economic "pie" incredibly shrinks every time you try to redistribute it.

Society today agrees with the liberals: the freedom of an individualpersonality is not opposed to common interests. Freedom of the individual in the modern world is the main driving force behind the development of society. Including economic.

Anti-bureaucratic movement

But that's not all the meaning of economic liberalism. It is also understood as a social anti-bureaucratic movement that originally originated in Great Britain, the United States, New Zealand. Its main goal is to influence the fact that the activity of the public administration system has changed radically. Sometimes such a movement is even called a "managerial revolution".

OECD (an organization that unites the most developed countries of the world) provides a document with a complete list of ongoing work that stimulated precisely the followers of economic liberalism. And this is a number of effective changes:

• Decentralization of state administration.
• Delegation of responsibility from higher to lower levels of management.
• Major or partial revision of the responsibilities of governments.
• Reducing the size of the government sector in the economy.
• Corporatization and privatization of state industries in the economy.
• Orientation of production to the end consumer.
• Developing quality standards for the provision of civilian services.

Management without bureaucrats

Speaking of modern economicliberalism, it is impossible not to mention this joint work of American scientists D. Osborne and P. Plastrik. Governance Without Bureaucrats presents the ideal entrepreneurial model of public administration.

Here government agencies act as producers of services, and citizens - their consumers. The creation of a market environment in such conditions helps to increase the efficiency of the most inflexible bureaucrats.

As for Russia, in our country the problem of economic liberalism is quite relevant. Experts agree that it is represented even more sharply in the Russian Federation than in neighboring states and antipode countries. The "managerial revolution" in Russia must also take place right on time. If the moment is missed, then the country will be waiting for about the same as the Soviet Union, which missed the next scientific and technological revolution.

Economic liberalism is a public thought, a social anti-bureaucratic movement. Its main goal is to minimize state intervention in the economy. After all, it, even for good purposes, steadily leads to one thing - the general impoverishment of the population.