We explain what economic liberalism is, its advantages, disadvantages, and characteristics. We also discuss its main representatives. Please read other MTV articles for more information. If you share it, it will be of little help to us.
What is economic liberalism?
Economic liberalism is the economic thought inherent to the philosophical doctrine of liberalism. It is based on the idea that economic activities should be as free as possible from state intervention, and that the market should be allowed to reach a point of self-regulation through free competition.
Emerging in 18th-century Europe, liberalism had an immense impact on the politics, culture, and especially the economy of the time, opposing state intervention in the economy, as was the protectionist norm at the time.
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Initially, this doctrine was called free trade, as it advocated free currency exchange and the reduction of barriers to production and trade. The classical economist Adam Smith was one of its greatest exponents.
Liberal economic thought is often summarized in the French expression laissez-faire, laissez-passer (“let do, let pass”), actually inherited from previous economic theories (specifically Physiocracy), as it defends the free movement of goods and the freedom of economic activity.
Similarly, economic liberalism defends private property and the market economy. To this extent, it is the fundamental thought that fostered the success of capitalism.
Characteristics of Economic Liberalism
In general terms, economic liberalism is based on:
- Defending the economic freedom of private actors from the greatest possible amount of state intervention: barriers, tariffs, controls, etc.
- Defending private property and the free movement of goods as fundamental elements of society.
- Defend the need for free competition among economic actors, which would lead them to maximize their efforts and ingenuity to gain market positions.
- Maintain that the free market will regulate itself, given the opportunity, through the forces of supply and demand, achieving an ideal state of wealth generation.
Advantages and Disadvantages of Economic Liberalism
Economic liberalism combines both great virtues and profound contradictions, depending on the perspective from which it is viewed.
Advantages of Economic Liberalism:
- Free capacity for inventiveness and economic entrepreneurship, which motivates innovation and industrial development (especially technological).
- Promotion of investment and savings as avenues for accumulating wealth and social prestige.
- Independence of economic actors from the state, which also translates into political independence.
Disadvantages of Economic Liberalism
- Concentration of wealth in the industrial and financial strata, which creates social and economic inequality.
- Ruthless exploitation of the working class, especially in the early stages of capitalism, when there was no union representation, no labor laws, and no employee benefits of any kind.
- Possibility of unfair competition, unjust practices, and a lack of the minimum regulations necessary to guarantee social peace.
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Representatives of Economic Liberalism
The main representatives of liberal economic thought were:
Adam Smith (1723-1790)
Scottish economist known as the father of economic liberalism, who approached economics from a philosophical perspective in his 1776 work The Wealth of Nations. In it, he defended human natural tendencies and criticized current institutions, asserting that, if left to their own devices, human beings would find not only what was best for themselves but also what was best for their fellow human beings.
David Ricardo (1772-1823)
An English businessman, politician, and economist of Jewish origin, he is considered a pioneer of modern macroeconomics and one of the key thinkers in the quantitative theory of money. His work, although liberal in nature, is important for both neoclassical and Marxist economists.
Thomas Malthus (1766-1834)
A British-born Anglican clergyman and Fellow of the Royal Society, he was a highly influential thinker in political economy and demography, especially for his work The Population Explosion.
Examples of Economic Liberalism
At the beginning of the 21st century, the entire world is embracing economic freedom, although not necessarily as Enlightenment thought once formulated it. The struggle between labor movements and the dominance of the industrial bourgeoisie produced new and more moderate forms of economic liberalism and capitalism throughout the 19th and 20th centuries.
However, there continues to be a confrontation between sectors that call for a return to the initial liberalism (neoliberalism) and sectors that advocate for a more controlled capitalism (developmentalism or social democracy).
Thus, examples of the most extreme economic liberalism today are the economic models of countries such as the United States, Chile, the United Kingdom, Peru, and Colombia.
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References
All the information we offer is supported by authoritative and up-to-date bibliographic sources, ensuring reliable content in line with our editorial principles.
- What is Economic Liberalism? in Konfio, a financial dictionary
- Adam Smith, Economic Liberalism (video) Entelekia Summaries
- Liberalism, Economic in Encyclopedia.com
- Liberalism in The Encyclopaedia Britannica
