Ep. 208 Liberalism and the economy

[Music] Good day to you folks. Welcome to episode 2008 of the A-Level Politics Show. Today we will take a journey to ideologies land and ask this question to what extent do classical and modern liberals share similar views about how the economy should operate. Now for the skinny on how to write ideologies essays skip back to episode 145. For today's show though I'm going to plow through the content I think you'll need to answer this question. Let's first focus on two key areas to discuss. One, the economic model liberal support and two, liberal views on state involvement in the economy. Now for an essay on ideologies you get higher A02 marks not just for comparing the strands in a liberalism essay that's classical and modern liberals but for also explaining why why the classical liberals love capitalism and hate state involvement and why the modern liberals accept capitalism but only if it is regulated and favours state involvement to pursue its agenda. That's what I'll hope to convey throughout this pod and we'll do so by weaving in all the key terms of the topic and all the key thinkers too. It's vital to focus not just on differences but also on similarities. That's what I'll also do. So what is my direction? It is this. Classical and modern liberals mostly disagree on how the economy should operate. Let's focus first though on the economic model that liberals believe in. So in terms of the economic model all liberal support capitalism there are a number of reasons why both strands of liberalism support capitalism as this main economic model. Number one, modern liberals and classical liberals believe in a meritocracy where the cream rises to the top. In this sense both ML and CL, modern liberals and classical liberals accept that inequality is inevitable. Capitalism therefore is the model which promotes this environment best. Even John Rawls accepted that once helped by the state individual should be left to rise and fall in this capitalistic meritocracy. Secondly, for both modern liberals and classical liberals each individual is unique and thus you need an economic system that promotes individualism capitalism in their view does just that. Thirdly, the liberal view that individuals are rational results in their support for a limited government and a capitalistic economic model that trusts individuals to do what they want with their own money. Both classical and modern liberals believe the humans are immensely capable. Mill spoke of the boundless potential of humans and their innate rationality. Wallstonecraft extended this belief to include women that they too were rational and thus should be allowed the freedom to compete in a free market economy just like men. Finally, capitalism is supported because it allows for economic freedom. Both modern liberals and classical liberals support the concept of tolerance. You should be able to consume and spend what you like which largely fits in with say locks views on religious tolerance. If you want to spend $100,000 on building a super church then be my guest. So long as I can spend $100,000 on a spiritual sanctuary for my cats rest in peace, Theo the cat. Thus capitalism is supported because it promotes liberal principles of human rationality, tolerance, individualism and meritocracy. However, modern liberals and classical liberals differ widely on the rules of capitalism. Should they be limited or should they be plentiful. Classical liberals are scrived to Adam Smith's invisible hand which considered an approach where the market ought to be left to work on his own without rules without interference. This explains that chosen Reagan's support for privatization and deregulation in the 1980s. However, modern liberals believe that markets have a tendency to fail. Busty regulation is a good example alongside water privatization and thus regulation was necessary to ensure that individuals were protected. Obama's regulation of the banks after the 2007-2008 crash would have been supported by modern liberals because it accepts that all the core concepts of liberalism were threatened by an almighty banking system. Rules invites us to consider a world where we would wish to live in if we did not know our position within it. He claims that individuals would rationally choose one where rampant inequality brought about by laissez-faire, unregulated market economies was tamed. He would say this, I think, because he grew up in the Great Depression. While classical liberals would have disagreed with these interventionist policies because it interferes with the idea that the market regulates itself. The classical liberals interventionist economic policies stymied the ability of individuals to create wealth. Next up, let's explore more thoroughly than levels of support for state involvement in the economy. Modern liberals and classical liberals are arguably wary of state involvement in the economy and part due to their share belief in Mills-Harm principle. The idea that the state should only intervene economically if an action of an individual harms other individuals, i.e. if a company sells products that contained, say, poison. All liberals accept that there is a realm of the individual, that's private economic behavior that should be left free from state interference, and the realm of the state matters that need state interference due to the potential negative effect upon other individuals. Again, liberal principles govern the fear on state intervention in the economy. All liberal support tolerance, as I mentioned earlier, and maximum amounts of freedom from the state. And that can be extended to include freedom from excessive taxes. Views on human rationality imply that both classical and modern liberals believe individuals can be trusted to run their own business affairs free from arbitrary state intervention in economic matters, such as how you invest your money. The liberal view that individuals are rational results in their support for a limited government that does not possess draconian powers on the economy. Why would it need to if individuals were well capable of running their own lives? Classical and modern liberals believe that government intervention is limited by a social contract. No state should be able to rest away a person's wealth without consent. Both would support Locksview that the state ought to protect property rights rather than have the state encroach upon those property rights. Any state intervention in the economy ought to be subject to the restraints placed by the classical modern liberal vision of a liberal democracy whereby the state is limited by checks and balances, devolve power, independent jisheries, a separation of power and warston crossed view of foundational equality. That's not to say that liberals want the state to completely ignore economic matters. Liberals do believe that humans are rational and capable. Yes, but also acknowledge that they could also act selfishly and break contracts. Therefore, a state is required to act as a neutral umpire between individuals. In this sense, all liberals, modern and classical alike believe that the state is a necessary evil in relation to say business dealings. This idea relates to locks mechanistic theory. The idea that the state is created by individuals for individuals. It is a mechanism for individuals to get what they need out of the economy and in their dealings with fellow humans to engender trust in those business dealings. However, modern liberals have a far more expansive view than classical liberals in relation to the state and its involvement in the economy. Only modern liberal support keen zinism and therefore increased state management of the economy, whereas classical liberals believe in laissez-faire economics and therefore limited state regulation in the economy. Modern liberal support a welfare state, which implies higher taxation. Rules is veil of ignorance. Imagine the world where no one knew their position in society imposed questions to the inhabitants of that world regarding the things that they would want in case they found themselves at the bottom of the social structure. Because humans are rational, wrote rules, they would rationally choose a world where the risk of the potential for their own individual suffering was minimized, especially if they had no idea which side of the street they would end up on. Thus leading modern liberals to support the welfare state paid for through taxation. Yet this enabling state or welfare state would, according to classical liberals, curb freedom because it would demand higher taxes from others to pay for it. Thus curtailing the economic freedom of those individuals and undermine the concept of a night watchman limited state. The classical liberals, high taxation is an encroachment on negative freedom whereby individuals should be free from the state and societal obligation and can operate in the economy as they wish. However, modern liberals believe that true freedom can only be realized with help. Not everyone can compete in a market economy unless they first have the financial means to do so, hence their support for positive freedom. That's state and societal intervention to encourage the freedom to the choice to do things while classical liberal support negative freedom, the freedom from the state and society. Modern liberals believe that the state should remove barriers to freedom, such as poor housing or food in security in order for individuals to be free to partake in the competitiveness that meritocratic capitalist systems demand. Betty Frieden's belief in equality of opportunity similarly implies state involvement to regulate working conditions for men and women affecting the way businesses are run. Yet for classical liberals, meritocracy is skewed by such help. Indeed, classical liberals want limited state intervention in the economy because of their belief in egotistical individualism, emphasizing the self-interestedness of human beings. Human nature for classical liberals is largely fixed in a self-interested state, which logically leads to a state or government and society that should ask less of humans. It is their tendency to be unkind and to think of themselves, and they should be largely free to get on with maximizing their own happiness through wealth accumulation. The lowering of the top rate of tax for high income earners in the UK is one such example of a policy that classical liberals would support because it doesn't presume individuals have a responsibility towards one another. Yet modern liberals would support higher taxation. Why? Because modern liberals tend to emphasize developmental individualism. Mill believed that human nature was not fixed, human flourishing, new no bounds. Mill believed that education is proof that individuals have this boundless potential because of their constant ability to improve themselves. This implies a support for state-funded education and higher taxes for paying for it. Whereas classical liberals who like lock believe in the fixed state of human nature downplay the importance of education and the state's responsibility to provide it, the classical liberal such measures would have a deleterious impact on economic freedom due to the higher taxes they would bring about. Thus, classical and modern liberals are deeply divided over the state's role in the economy because of their fundamentally different starting points when it comes to their views on the types of individualism and the type of freedom that they prioritize. Thus, while liberal support capitalism, they are divided over the restraints that ought to be placed upon it, while they might be wary of state intervention in the economy, modern liberals have a far more positive view of the benefits it could bring and classical liberals are deeply skeptical that it could bring any. I hope you enjoyed this whistle stop tour of all things liberalism in the economy. Why not check out the other pods and liberalism which cover such things as liberalism in the state or liberalism and liberal democracy, the focus of the 2024 public exam? To be all over this topic and more besides, why not subscribe to it? Plus, plus, plus. Your one-stop shop for all things A-level politics. For just £1.99 a month, you get access to the complete back catalogue of A-level politics shows. 208 at the time of recording. Cancel anytime, deets in the show notes. Until the next time, peeps. Bye-bye. you