This article was first published on Dailyfriend on 29 October 2022
Liberalism is a package deal
I’ve got a problem with “free markets.” I don’t mean I have an issue with markets being free, but I think the term itself fails to explain what is at stake.
It isn’t markets per se that are free, but people. Markets are only free when individuals within the marketplace are themselves free. Markets are only free to the extent that individuals are free, no less and no more.
Yes, freeing up markets – that is, freeing up individuals – makes the market freer than it was previously and generally that means the people themselves are more prosperous.
This is one reason I emphasise the importance of inclusive markets. Markets that exclude women, migrants, specific races, religions, or others are less free and thus less prosperous. As the economist Julian Simon put it, people are the ultimate resource and the ultimate source of wealth creation.
That’s one reason the idea of “trickle down” economics is nonsense. It isn’t that wealth doesn’t trickle down, but that it also trickles up. It goes from one side to another as well. The prosperity of one benefits all. Prosperity emanates out from the individual to other individuals; it doesn’t just rain down as a gift from the wealthy. As Frédéric Bastiat put it, “By virtue of exchange, one man’s prosperity is beneficial to all others.”
In the end it doesn’t matter if the individual in question is the owner of a major corporation or a street vendor hawking fruits and vegetables. The amount of benefit they bestow on others may vary but any individual who produces value in the market bsenefits others whether they intended to do so or not.
This is the source of Adam Smith’s concept of the “invisible hand.” Smith said that as individuals strive to improve their own lives they appear to be led by an invisible hand to “advance the interest of society “without intending it [or] knowing it.” The producer “intends only his own gain, and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention.”
A better term to describe “free markets” is economic liberalism. Now “liberal” is a reference to freedom. In ancient Rome the word ‘liber’ meant free, or a free individual. So economic liberalism is freedom of the individual within the economic sphere, regardless of race, gender, sexual orientation, citizenship, etc.
Even that is half the story about the wider concept that was historically called liberalism. While there is economic liberalism, liberalism is not restricted to the economic realm alone. It covers social and political freedoms as well.
The thing about liberalism, or what many call classical liberalism, is the economic emphasis came late in the game. Liberalism started out pushing for freedom of thought – it argued that merely holding religious views different from the majority was not a good reason to burn people at the stake. Freedom of conscience came before free markets were emphasised.
The classical liberals were also early abolitionists demanding the end of human slavery. They wanted the rights of women expanded, separation of church and state, equality of rights before the law, and a host of other freedoms. Economic freedom was intricately connected to freedom in general.
This is one reason I think market liberals must talk about those being excluded or being given second-class citizenship. Liberalism isn’t just about buying what you want; it includes marrying who you want. It isn’t just economic freedom; it’s social freedom as well. Most importantly, it isn’t just about your rights, but also the rights of everyone else.
The one restriction on liberty liberals have emphasised is liberalism properly understood means you don’t violate the equal rights of others.
Oscar Wilde put it this way, “Freedom, individualism and being yourself so long as you don’t hurt another’s physical person or property.” Herbert Spencer said that each individual “may claim the fullest liberty” provided it is “compatible with the possession of like liberties” by everyone else. Liberalism never said liberty was absolute; it was always fenced in by the equal liberty or rights of others.
David Hume argued the same principle but also applied it to nations, saying, “The increase of riches and commerce in any one nation, instead of hurting, commonly promoted the riches and commerce of all its neighbours.”
Prof. Deirdre McCloskey has noted that liberalism may have started with the liberation of specific groups, but the principles applied to all groups and was thus ever expanding. “Liberalism liberated first poor white men, then, yes, former slaves, then women, then immigrants, then colonial people, then gays. Liberation and innovation dance together.”
History shows us that economic freedom and social freedom are intimately connected. An increase in economic freedom tends to increase the demand for equality of rights and greater social liberty. It’s no coincidence Cuba once had little economic freedom – and was then putting LGBT individuals in prison camps – but after starting to free their markets voted for marriage equality.
We also see those who despise social freedom ultimately turn against free markets or economic liberalism. Once they realise economic liberty leads to social liberty they adopt the sort of regimented markets that would make Stalin proud. In that sense, liberalism is a package deal and it’s important liberals always remember it.