Histories of the idea of liberalism usually begin in the seventeenth century with the philosopher taken to be its patron saint, John Locke. In the aftermath of the wars of religion, the story goes, liberals waged a battle against the arbitrary powers of the church and absolutist monarchies. Philosophers began to promote the cardinal liberal virtues of toleration, private property and individualism. The Lockean vision of liberal society was one based on consent. Free individuals would accept a social contract in order to protect their natural rights to life, liberty and property. After centuries of struggle with less enlightened doctrines, this vision was institutionalized in the governments and constitutions of many Western (and now non-Western) societies. In this view, the United States is the country that embodies the liberal dream like no other. Ad Policy Liberalism

The Life of an Idea

By Edmund Fawcett.

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This history is a recent invention. It is, in fact, largely a product of the Cold War. In the middle decades of the last century, British and American liberals—threatened first by socialism, then by totalitarianism in its various forms—gave liberalism a new legitimating canon. As courses in Western civilization were rolled out across American universities after World War II, Locke, private property and individual rights became central.

Before the 1930s, histories of liberalism told a different story. In his excellent Liberalism: The Life of an Idea, the journalist Edmund Fawcett, a former correspondent for The Economist, returns to this earlier telling. For Fawcett, liberalism is, at its simplest, about “improving people’s lives while treating them alike and shielding them from undue power.” To understand its history, “liberty is the wrong place to begin.” Liberalism wasn’t created in the seventeenth century but in the nineteenth, after a trio of revolutions—American, French and industrial—shattered the old order. Liberalism’s first job wasn’t simply to defend private individuals and limit the size of government, but to cope with the rise of capitalism and mass democracy amid the aftershocks of a postrevolutionary world. In Fawcett’s history, there’s nothing on Locke, little on toleration, and America isn’t seen as special. The focus instead is on social conflict, political economy and capitalism, and the story Fawcett tells clears away the distortions produced by Cold War histories of liberalism. It also reflects how our own preoccupations have changed since the crisis of 2008.

For Fawcett, liberalism “as a political practice” was born in the years after 1815. Early liberals believed a new society was emerging that would change politics for good. Political and economic revolution had created a new kind of person, “the individual,” with changed beliefs and interests, who would demand more from government and put up with less. Society was in conflict, rife with clashes between rival interest groups and between capital and labor. Fundamental to liberalism was the idea that such conflict could only be contained, never eliminated. That was the primary task of politics. Institutions were designed to prevent domination by any one group and to embed the liberal “habits of bargaining, persuasion and compromise.” The first liberals, like the French politicians Benjamin Constant and François Guizot, devised political schemes with these aims in mind. Political representation and the separation of powers were intended to check absolute power, restrain majority rule and free people to get on with their lives without having to worry about politics.

The liberal dream, Fawcett writes, was “a myth of order in a masterless world.” Crucially, for liberals, this was only a dream. What distinguished them from conservatives was their belief that progress toward such a world was possible; what distinguished them from socialists was their belief that they would never get there. Conflict was intractable; there was no utopia in which politics would cease. The aim of liberalism was to manage conflict, while still treating people with “civic respect”—a catchall phrase for the various kinds of legal and political equality owed to citizens of liberal societies.

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That the liberalism of the nineteenth century was a “single-minded campaign for liberty and small government” is a caricature dreamed up in the twentieth, Fawcett argues. Nineteenth-century liberalism wasn’t a coherent or consistent ideology. It evolved differently in different places, as liberals responded to the century’s major upheavals—the Napoleonic wars, the reactionary regimes of the post-Napoleonic era, the revolutions of 1848—and grappled with the growing importance of corporations, consumers and the expansion of the modern state’s apparatus. Early liberals came to terms with the new order in a variety of ways. Some campaigned for privacy, some for the enhancement of personal capacities through education. Others looked to restrain arbitrary rule. Many tipped their hat to equality, but they weren’t democrats. People may have been owed equal respect, but exactly who “people” were was less clear; the promise of equal respect was a “democratic seed in an otherwise undemocratic creed.” Because of that promise, liberals were eventually forced to accommodate democracy. The process of accommodation was a long one, however, spanning more than a century. The rise of industrial capitalism brought mass markets, but as the new workforce pushed for the franchise, it also brought demands for mass democracy. “Business liberals” wanted one without the other; “social liberals” wanted to defend the “public interest” but faced the task of reconciling it with their preferences for freedom of contract and free trade. Despite these different responses, however, liberals wary of democracy shared a common aim: to find ways of deflecting working-class demands that would provide compelling alternatives to socialism.

To do so, they turned to whatever institutions worked best. In the German case, Bismarck’s antisocialist strategy resulted in the national welfare schemes hailed as the origins of the welfare state. But the best institutions were not always those of the state: while philosophers tended to describe state authority as coherent and unitary, in reality its power was messy and diffuse. As a result, liberalism in the age before the fully centralized state was highly experimental. It looked to all sorts of institutional arrangements—national and local, collectivist and individualist. The mid-nineteenth century saw a proliferation of voluntary associations, self-help cooperatives, unions, mutual banks, friendly societies for insurance and other forms of collectivism, both in theory (the writings of Tocqueville, John Stuart Mill and the German theorist of “mutualism” Hermann Schulze-Delitzsch) and in practice. Though these associations are usually thought of as more socialist than liberal, they were often first imagined as alternatives to state socialism.

Liberals were not ideologically bound to local solutions, just as they were not unmitigated champions of individualism. Many did defend liberty of conscience and legal protection for individuals, but their definitions of “individuals” could also include corporations, associations and “group personages.” Individualism as understood today was not high on the list of priorities; better, more effective government was. By and large, liberals welcomed the increased capacity and competence of the state. As government and its capabilities grew, both voters and businesses asked more of them. Liberals initially resisted suffrage extension, but they soon gave in and accepted that their ideals applied to everyone, not just elites. The resulting system of universal franchise and the welfare state was the “historic compromise” of liberal democracy. It was the price they paid to defend liberal capitalism. Though Fawcett sets out to defend liberalism, he sometimes provides a view of liberalism as a counterrevolutionary force that is more familiar to its radical critics than to its defenders.

At the turn of the twentieth century, the quarrel wasn’t just over the size of government or its interference with people’s lives; it was also over who would pay for capitalism’s defense. Business liberals—marginalist economists and vocal members of the business press like Walter Bagehot, the British editor of The Economist—thought the answer could be left to the market. The state was the problem: free the market, legislate for freedom of contract, and capitalism would flourish. The “new liberalism” of T.H. Green, Leonard Hobhouse and Herbert Croly (a co-founder of The New Republic) attacked the unbridled individualism of the market economist and looked instead to a social-welfare state. For Fawcett, the real legacy of the new liberals was their demolition of “polar thinking.” Individualism versus collectivism, market versus state, freedom versus intervention: none of these oppositions reflected reality. The new liberals tried to find a middle ground, but the question of who would pay for liberal democracy was never far from sight. Liberals faced a “taxation trilemma”: they could have free trade, low taxes and small government (the Gladstonian option); high tariffs, low taxes and big government (the option of Bismarck and American big business); or free trade, high taxes and big government (the option of European new liberals and American Progressives). Anything else would lead to unsustainable debt. By swapping polar for practical thinking, the new liberals were able to recognize that liberal-democratic capitalism was constituted by these “many-sided fiscal choices,” and so became the kind of liberal that Fawcett holds in highest esteem.

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Fawcett’s emphasis on political economy means that some traditional liberal problems, like the question of empire, get sidelined. For the defenders of Lockean liberalism, why liberals accommodated empire is a central puzzle: How could defenders of liberty defend colonial exploitation? For liberalism’s critics, the Lockean tradition provides all they need to know: like slavery, empire is an extension of the liberal glorification of the idea that there exists a “natural right” to property. If you look to the seventeenth century, the critics say, you’ll see that defending empire and slavery is what liberals have done best. By making capitalism central rather than liberty, Fawcett dissolves the puzzle. Exploiting the riches of empire abroad was one way for states to resolve political conflict and economic turmoil at home. Much of the time, debates about empire were just an extension of the question of how to pay for liberal capitalism. As Fawcett shows, contemporary observers—Lenin for one, but also anti-imperialist new liberals like J.A. Hobson—saw this clearly. Though Fawcett never quite says so, this is not the only point where the Marxist view of liberalism as a single-minded defense of capitalism fits his story.

It was in the 1930s that the question of how to rescue capitalism from itself was brought into sharpest relief. Fawcett looks to three economists who had different ideas about who would pay for the rescue: John Maynard Keynes, Friedrich Hayek and Irving Fisher. Each provided answers that would shape the future of economic thought and practice. Keynes’s focus on high wages was equivalent to earlier liberals’ concessions to demands for universal suffrage; his economic program was an example of liberalism’s economic compromise with democracy. Hayek’s willingness to belittle politics and look to the market for solutions harked back to an imaginary nineteenth-century laissez-faire liberalism and set the stage for the neoliberalism that followed. Fisher stressed the dangers of falling prices and the role of government monetary policy in preventing booms and busts. Though their recommendations were different, Fawcett emphasizes their similarities: all wanted to “limit capitalism’s disruptive instabilities” while protecting liberal principles. For Hayek (who worried least about capitalism’s disruptive potential), labor would bear the costs of saving capitalism. For Keynes and Fisher, because government paid for the rescue, in effect everyone played their part.

For Fawcett, all of these solutions count as liberal ones. His book is intended as a defense of liberal values, capaciously defined. The usual cast list of Mill, Tocqueville and Isaiah Berlin is expanded to include unfamiliar philosophers and household-name politicians on both the left and the right who wouldn’t normally make the cut: Roger Nash Baldwin, the founder of the American Civil Liberties Union, stands alongside the German progressive Eugen Richter; Margaret Thatcher and Herbert Hoover are squeezed in alongside Franklin Roosevelt and Lyndon Johnson; Marxist Jean-Paul Sartre rubs shoulders with Milton Friedman and conservative philosopher Michael Oakeshott. Though Fawcett surveys arguments for the free market, human rights and liberal dissent (from Louis Brandeis to West Germany’s 1948 liberal Constitution to Albert Camus), there is no attempt to recover the one “true liberalism.” This is a story of success through adaptability. The moment of liberalism’s greatest success is not the post-1989 ideological victory of the “end of history,” but the mid-twentieth century. The defenders of liberal capitalism did a good job: despite the decline of self-described liberal parties, this was an era of inclusive social-democratic liberalism and practical thinking that spoke to liberalism’s achievements. “As liberalism conceded to democracy, democracy conceded to liberalism,” Fawcett writes. At the heart of the historic compromise was a commitment to compromise itself.

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The midcentury was also a turning point, however, when liberalism’s adaptability led it in the wrong direction. For as well as a time of compromise, it was one of economic transformation. In the years after World War II, governments became increasingly accountable to electorates for their nations’ economic performance. As the state’s economic responsibilities for healthcare, welfare and pensions increased, liberalism’s compromise with democracy looked more and more expensive. Domestic politics in liberal democracies came to focus almost exclusively on what the economy could provide. This change reinforced the split within liberalism. Social liberals—philosophers like John Rawls and politicians like Lyndon Johnson—came to see managing economic distribution as the central political task. Given that liberal democracies were socially and economically unequal, what, they asked, do you say to society’s losers? The tradition of neoliberalism that was transformed by Milton Friedman and played out in the policies of Thatcher and Reagan went the opposite way. Politics was the problem; economics was the answer. Market reasoning seeped into political thought in the ideas of public-choice theorists like James Buchanan. Following Hayek, economists took politics out of political economy. Even though, in practice, politicians still relied on the state to free the market, the right-wing liberals of the 1970s reintroduced and remoralized precisely the kind of polar thinking that the 1930s new liberals had tried to overcome.

Pitting economics against politics led liberalism to forget its own lesson: politics is about managing conflict, and because conflict is inescapable, abandoning politics is never an option. As a result, market reasoning overreached itself. Neoliberalism eroded the achievements of the midcentury years of compromise. Its market solutions to the conflict between capital and labor were themselves monopolistic—and so, ultimately, illiberal. Today, Fawcett writes, liberalism’s historic compromise with democracy is “at risk from fiscal overstretch.” The ability of liberal democracies to get through the current crisis will depend on their willingness to balance the competing demands of wages, welfare and stability. To succeed, they will need politics. What is required is precisely the sort of compromises that market reasoning rules out.

Fawcett suggests that the liberal tradition surveyed in his book can provide the resources to get us out of the current mess. Liberalism has triumphed until now. It can adapt. But even if the good intentions of liberals are taken at face value, liberalism’s victory is overstated: practice rarely meets the standards of theory. In many ways, Fawcett provides the tools for a more powerful challenge. He doesn’t set out to undermine the Lockean tradition; his narrative does that on its own. There is no staunch vindication of the liberty and dignity of the individual. Instead, capitalism is what matters. This is true in style as much as substance: the most exciting sections of the book are on economic thought, insurance schemes and taxation (a feat in itself). This makes for better history, but it will also make some liberals uncomfortable.

Fawcett’s liberals are democrats only by necessity. Their worries about social inequality are often instrumental. They aren’t squeamish about empire and put practical compromise first. They are willing to do what it takes to defend the capitalist order, co-opting alternative visions and tinkering around the edges. Liberalism’s dominance is, on this account, a function of that willingness. What Fawcett clearly and compellingly shows is that the relationship of capitalism to the state, of economics to politics, should be at the heart of any history of liberal ideas. Whether you take his version as a story about liberalism’s realist adaptability or its counterrevolutionary intent, it’s a fitting one for a moment in which capitalism and political economy are back on the agenda.