At the outset let me start by saying that Liberalism as we know it today is very distinct from the Liberalism of the yesteryears. The idea of Liberalism has undergone many shifts in its journey and its popularity among the masses has waxed and waned. My attempt is to decode what the meaning of Liberalism is because we are far too eager to identify people as Liberals and Conservatives and Progressives etc without knowing fully well what these terms actually mean. And I have chosen liberalism in particular because according to me its meaning in the political sense is in contradiction to the basic postulates and principles it relies on for its economic policy, which makes its study quite interesting.
The idea of Liberalism in the economic sense was first popularized by Adam Smith in his book ‘Wealth of Nations’ which was published in 1776, wherein he argued that there is an invisible ‘hand of the market’ which leads to the most efficient and prosperous outcomes. He advocated that markets should be allowed to function without any interference from the Government and quite simply Governments should not encroach upon the economic choices that individuals make and thereby refrain from influencing final economic outcomes. This theory came to be called Laissez faire Capitalism. This theory placed great faith and emphasis on the Individual. It propounded that Individuals need to make their own choices in the marketplace unhindered by any Government interference and that these choices will necessarily lead to the most efficient and prosperous outcomes. It failed to recognize that even though these outcomes may be efficient, they may not be equitable. It is not my intention to go into the correctness of Adam Smith’s theory but just to throw light on the foundation of economic liberalism. Thus at the heart of economic liberalism lies the Individual. It rejects collective state action and urges Individuals to take responsibility for their own actions and directs Governments to withdraw from the markets. Ironically, this idea which was the most liberal idea of its time has come to be regarded as the most Conservative idea today. Today Individual responsibility is at the heart of Conservative political thought popularized by Ronald Reagan and Margaret Thatcher. Liberals today espouse that Governments have a legitimate role to play in the marketplace and can create equitable outcomes and ensure that the gains from the marketplace are equitably distributed. Some Liberals today continue to believe in the efficiency of the market but think that it needs to be regulated, so as to not concentrate its gains among the few and thereby reduce inequality and harbor an egalitarian society.
In the Political Sense, Magna Carta was perhaps the first liberal legal document drafted in the 13th century which curtailed the powers of the British Monarch, King John III, for the very first time. The Magna Carta was relied heavily upon by James Maddison and other Founding Fathers for drafting the Bill of Rights of the US Constitution. The US Constitution represented a charter of power granted by Liberty and not the Charter of Liberty granted by power. How such a liberal document supposedly ushering in an era of untrammeled freedom could legitimize Slavery and say that all men who are not ‘free’ (slaves) will be considered as three-fifths of a free man is a question which bothers many political thinkers. Be that as it may, the Bill of Rights and the Magna Carta, both considered to be the great liberal charters of their times placed great emphasis on the Individual and sought to protect certain individual rights from the tyranny of the State. It was the first ever experiment in the world wherein the power of the King or the Government against the people was sought to be curtailed by a written charter to be enforced by an independent Judiciary (at least in America). Of course one cannot forget the French Revolution which espoused the noble ideals of Liberty, Equality and Fraternity (which the Preamble to the Indian Constitution borrows from). The French revolution too was based on the idea of Individual liberty and the Individual was at the heart of its struggle.
Thus in the 18th Century, Liberalism both in the Economic as well as in the Political sense meant great emphasis on the Individual and sought to protect the Individual from the whims and fancies of potential tyrannical Governments.
Politically, the idea of Liberalism hasn’t undergone any change. Liberals continue to believe that Individual rights have to be protected against state action and in a conflict between Individual Rights and objectives of the State, Constitutional Courts should largely be in favour of the Individual.
Economically though Liberalism has undergone a profound change whereby Liberals today believe that unregulated Individualism is detrimental to national interest and that the Government should step in and ensure that distribution of material resources of the society is more or less egalitarian. Thus Liberalism in the economic sense today distrusts the Individual and is in favour of collective state action to correct an efficient but inegalitarian market which is diametrically opposite to the views propounded by Liberals of yesteryears.
Thus Liberalism today suffers a fundamental contradiction on its political and economic side. It gives two completely opposite answers to the same question of what is the position of the Individual in a society vis a vis the Government. Also Liberalism today is quite distinct from liberalism of the yesteryears as explained above. How will Liberalism evolve in the future remains anybody’s guess.