Classical and Modern Liberalism

Voluntary agreements between very unequal parties are not really voluntary. A contract signed by somebody whose alternative is starvation is formally free and substantively coerced.

The obstacles to liberty are not only legal. Poverty, ignorance, disease and idleness restrict what a person can do as effectively as any law.

T. H. Green, at chapter 400, is the hinge. His argument that freedom is a positive power of doing something worth doing, and that the state's job is to maintain the conditions of a moral life, is where the change is made in theory. Beveridge's later naming of want, disease, ignorance, squalor and idleness as the giants to be defeated is the same argument turned into a programme.

Modern liberalism

Its period. From the late nineteenth century, developed in the twentieth.

Its core commitments.

Positive liberty. Freedom is the capacity to make effective use of one's freedom.

An enabling state. Not a minimal state and not a socialist one. Its function is to remove the obstacles that prevent people from using their liberty: compulsory education, public health, social insurance, regulation of working conditions, and support for those who cannot support themselves.

Regulated markets. Markets are accepted and their failures are corrected: monopoly, information asymmetry, external harms such as pollution, and the exploitation of unequal bargaining power.

Equality of opportunity, taken seriously. Genuine equality of opportunity requires that people start from a position where the opportunity can be used, which means education and health rather than the mere absence of legal barriers.

Social justice. A concern with the distribution of resources, on the ground that a distribution nobody could accept from behind Rawls's veil of ignorance is not a just one.

What did not change. Modern liberalism keeps individualism, the priority of liberty, toleration, constitutionalism and the rule of law. It is a change in the means, and in what liberty is taken to consist of, rather than an abandonment of the ideology. This is exactly the point that separates modern liberalism from socialism, and it is the sentence that saves an answer from confusing them.

The transition in one comparison

Ask both what should be done about a person who cannot read.

A classical liberal says nobody is preventing them from learning; the state has no business compelling attendance or taxing others to pay for schools; and charity and self-improvement are the answer.

A modern liberal says an illiterate adult cannot use the vote, cannot read a contract, cannot know their rights, and cannot compete for work; that their liberty is therefore formal and not real; and that compulsory free education is a measure of liberty rather than an interference with it.

Notice that both are arguing from liberty. That is why this is a development within liberalism and not a defeat of it.

Where India sits

Both strands are present in the Indian Constitution and the tension between them is much of Indian constitutional law.

Classical in Part III: rights against the state, freedoms with reasonable restrictions, the rule of law, and originally a fundamental right to property.

Modern in Part IV: directive principles on the right to work, education and public assistance, just and humane conditions of work, a living wage, and the health of workers.

The tension is real and has been litigated. The right to property was moved out of Part III and made a constitutional right in article 300A; the Directive Principles were repeatedly relied on to sustain legislation restricting property and contract; and article 21A now makes free and compulsory education for children a fundamental right, which is a modern liberal proposition sitting in a classical liberal chapter.

A worked example

A State requires all private employers to provide a workplace crèche where more than fifty people are employed.

The classical objection. It is an interference with the employer's freedom of contract and with the use of their property, and it imposes a cost on somebody who has not agreed to it. If employees value a crèche they can bargain for it, and if they will not pay for it in lower wages, they do not value it.

The modern liberal answer. The employees' bargaining position is not equal; the absence of childcare removes an entire class of people, in practice mostly women, from the possibility of employment altogether; and their liberty to work is therefore formal and not real. Removing that obstacle is a measure of liberty.

The test a modern liberal applies. Not whether the measure interferes, since it plainly does, but whether the interference removes a larger obstacle to liberty than it creates, and whether it is the least restrictive way of doing so.

And the socialist's different question, which shows the boundary: a socialist asks who owns the enterprise and how its surplus is distributed, and would regard a crèche as an amelioration that leaves the ownership untouched. The modern liberal is not asking that question at all.

Distinctions that carry marks

What this distinction is NOT

It is not liberalism against socialism. Modern liberalism keeps individualism, the priority of liberty and the market; socialism does not. The disagreement between the two liberalisms is about means.

It is not a chronological replacement. Classical liberalism did not disappear, and its economic strand revived strongly in the late twentieth century in what is often called neo-liberalism.

It is not that classical liberals were indifferent to poverty. Many were not. They believed the remedy was growth, charity and self-improvement rather than the state.

"Modern" is not a compliment and "classical" is not an insult. They are labels for two phases of one ideology, and the argument between them is live.

Quick revision

1. Classical liberalism: negative liberty, a minimal state, natural rights especially property, free markets, and equality of opportunity meaning the absence of legal barriers. Locke, Smith, Spencer.
2. What broke it: industrial conditions in which people were legally free and substantively unfree, so that freedom without capacity was empty, agreements between unequal parties were not really voluntary, and the obstacles to liberty were not only legal.
3. T. H. Green is the hinge: freedom as a positive power, and the state hindering the hindrances.
4. Modern liberalism: positive liberty, an enabling state, regulated markets, equality of opportunity taken seriously, and social justice. Green, Hobhouse, Keynes, Beveridge, Rawls.
5. What did not change: individualism, the priority of liberty, toleration, constitutionalism and the rule of law. The change is in means, which is what separates modern liberalism from socialism.
6. In India: Part III is classical, Part IV is modern, property moved from Part III to article 300A, and article 21A puts a modern liberal proposition into a classical liberal chapter.

Test yourself

1. Distinguish classical from modern liberalism. Classical liberalism conceives liberty negatively, as the absence of interference, treats the state as a necessary evil confined to defence, order, contract and property, favours free markets and minimal regulation, and understands equality of opportunity as the absence of legal barriers. Modern liberalism conceives liberty positively, as the capacity to make effective use of one's freedom, accepts an enabling state that removes obstacles such as poverty, ignorance and disease, regulates markets to correct their failures, and understands equality of opportunity as requiring the real capacity to use it.

2. Why did classical liberalism give way to modern liberalism? Because its central assumption failed under industrial conditions. A population without land, dependent on wages, working long hours in dangerous conditions, uneducated and without provision for unemployment, injury or old age was free in the classical sense, since nobody was legally stopping them from anything, and was not free in any sense that mattered. Three observations followed: freedom without capacity is empty; agreements between very unequal parties are formally voluntary and substantively coerced; and the obstacles to liberty are not only legal.

3. Why is modern liberalism not socialism? Because what changed was the means and the conception of liberty, not the ideology's foundations. Modern liberalism retains individualism, the priority of liberty, toleration, constitutionalism, the rule of law and the market, and it justifies state action by reference to liberty rather than to equality. A socialist asks who owns the enterprise and how its surplus is distributed; a modern liberal asks whether an obstacle to a person's effective freedom has been removed, and does not ask the ownership question at all.

4. Show both strands in the Indian Constitution. Part III is classical: rights held against the state, freedoms subject only to reasonable restrictions, the rule of law, and originally a fundamental right to property. Part IV is modern: directive principles on the right to work, to education and to public assistance, on just and humane conditions of work, on a living wage and on the health of workers. The tension has been worked out in practice, with the right to property moved out of Part III into article 300A, the Directive Principles repeatedly relied on to sustain legislation restricting property and contract, and article 21A making free and compulsory education for children a fundamental right.

5. Apply both to a law requiring workplace crèches. The classical objection is that it interferes with freedom of contract and with the use of property and imposes a cost on somebody who did not agree, employees being able to bargain for a crèche if they value it. The modern liberal answer is that bargaining positions are unequal and that the absence of childcare removes a whole class of people from employment altogether, so their liberty to work is formal and not real, and removing that obstacle is a measure of liberty. The modern liberal test is not whether the law interferes, which it plainly does, but whether it removes a larger obstacle to liberty than it creates and does so in the least restrictive way.