Liberalism is not only a political trend. It suggests the presence of certain concepts, views that characterize the economy, social, spiritual sphere in a liberal country. And in this vein, we will consider one very interesting concept. This is economic liberalism. We give its definition, consider the concept, get acquainted with the founder of the idea, and observe the development of theory in history.
What is it?
Economic liberalism is an ideology that is an integral part of classical liberalism. As for economic philosophy, he will support and disseminate the so-called laissez-faire economy. In other words, the policy of non-interference of the state in its own economic life.
The followers of economic liberalism believe that social freedom and political independence are inseparable from economic freedom. In support of their opinion, they cite philosophical arguments. Actively advocate also for the free market.
These ideologists speak negatively about government interference in free market affairs. They stand for maximum freedom of both trade and competition. This distinguishes economic liberalism from a number of other trends. For example, from fascism, Keynesianism and mercantilism.
The founder
The author of the concept of economic liberalism is Adam Smith, a well-known 18th century economist. The subject of the study of economics as a science, he considered the economic development of society, a constant increase in the welfare of society. A. Smith called the source of wealth the sphere of production.
All the basic principles of economics proclaimed by scientists are inextricably linked with the doctrine of the "natural order" presented by the physiocrats. But if they believed that the "natural order" is primarily dependent on the forces of nature, then Smith said that it is determined only by human nature and only corresponds to it.
Selfishness and Economics
Man by nature is an egoist. He can only be interested in achieving personal goals. In society, it is limited, in turn, by the interests of other individuals. Society is a collection of individuals. Therefore, this is the totality of their personal interests. From this it can be argued that the analysis of public interests should always be based on an analysis of the nature and interests of an individual.
Smith said that people need each other, but they need as egoists. Therefore, they render each other mutual services. Hence, the most harmonious and natural form of relations between them is exchange.
As for the economic policy of liberalism, here Adam Smith reasoned somewhat unambiguously. He explained all complex processes only by the motives of the actions of the so-called economic person, whose main goal is wealth.
About concept
The theory of economic liberalism occupies a critical place in the teachings of Adam Smith. The essence of his concept: market laws best influence the development of the economy only in one case - when private interest in society is higher than public. That is, the economic interests of society are only the sum of the economic interests of the individuals that make up it.
But what about the state? It must support the regime of so-called natural freedom. Namely: to take care of law enforcement, to protect frequent property, to provide a free market and free competition. In addition, the state performs such important functions as organizing the education of citizens, communication systems, public services, transport communication structures, etc.
Adam Smith considered the great wheel of circulation only money. The income of ordinary workers is directly dependent on the level of well-being of the entire state. The pattern of reducing wages to the minimum subsistence level was denied to them.
Division of labor
In addition to the principles of economic liberalism, the scientist extensively investigated the topic of the division of labor. The source of wealth, according to Smith, is only labor. The wealth of the whole society depends on two factors at the same time - the share of the working population and total labor productivity.
The second factor, according to the scientist, is of much higher importance. He argued that it is precisely his specialization that enhances labor productivity. Hence, every workflow should not be performed by universal workers. And it should be divided into several operations, each of which will have its own performer.
Specialization, according to Smith, should be maintained from such a simple gradation of the work process to the division into branches of production, social classes at the state level. The division of labor, in turn, will lead to a massive reduction in production costs. Even at one time, the scientist actively advocated for mechanization, automation of labor. He correctly believed that the use of machinery in production would lead to positive economic shifts.
Capital and capitalism
In addition to liberalism and economic freedom, Adam Smith was also engaged in the study of capital. It is important to highlight several key thoughts. Capital is two parts. The first is the one that generates income, the second is the one that will be used for consumption. It was Adam Smith who proposed to divide capital into fixed and circulating.
According to Smith, a capitalist economy can only be in the following states: growth, stagnation and decline. Then he developed two schemes: extended and simple production. Simple is the movement from public stocks to gross product, as well as to a reimbursement fund. In the extended production scheme, accumulation and savings funds are additionally added to it.
It is expanded production that creates the dynamics of state wealth. It depends on the growth of capital accumulations and their effective application. Technical progress here is one of the factors of expanded production.
The direction of public thought
Now let's move on to modern economic liberalism. It is understood as a direction of social thought, affirming the need to limit the scope of activities and powers of the state. Its supporters today are convinced that the state should only ensure a peaceful, prosperous and comfortable life for its citizens. But in no case do not interfere in their economic affairs. This idea was widely developed by a German scientist, one of the classics of liberalism V. Humboldt in his work "The Experience of Establishing the Boundaries of State Activities".
Discussion of the role of the state in economic life, in liberalism and conservatism today gives rise to a lot of controversy. About the amount of taxes, the extent of subsidies, agricultural and industrial sectors, the paidness or gratuitousness of health and education. But all this, one way or another, comes down to the formula for the limits of state activity outlined by Humboldt.
What is a strong state?
It is important to note that modern economic liberalism advocates for a strong state no less zealously than conservatives. The difference in how they interpret, regard this concept.
When liberals talk about a large, strong state, they do not mean its size. From an economic point of view, they care about something else. What is the share of state income / expenses in the general category of society income / expenses. The more the state collects monetary amounts in the form of taxes on population incomes, the more it will be “bigger and more expensive” from the standpoint of economic liberalism.
Here you can highlight a lot of examples. For example, the "big state" of the USSR, which crushed the economy. But reverse examples are also negative: Reaganomics in the United States and Thatcherism in the UK.
Liberals or conservatives?
So who is winning the debate today? Conservatives, conductors or supporters of political, economic liberalism? It is difficult to answer, because the balance of forces in this confrontation is not static.
For example, at the end of the last century, society recognized the rightness of advocates of liberal ideas. It was possible to judge by the example of many world states that government intervention in economic activity, even justified by its concern for social justice, leads to general impoverishment of citizens. Practice shows one more surprising thing: the economic "pie" incredibly decreases every time you try to redistribute it.
The society today agrees with the liberals: the freedom of an individual is not opposed to common interests. Personal freedom in the modern world is the main driving force of the development of society. Including economic.
Anti-bureaucratic movement
But these are not all the meanings of economic liberalism. It is also understood as a social anti-bureaucratic movement that originally originated in Great Britain, the United States, and New Zealand. Its main goal: to influence that the activity of the public administration system changes radically. Sometimes even such a movement is called the "managerial revolution."
The OECD (the organization into which the most developed countries of the world have united) provides a document with a complete list of the work that has unfolded, which was stimulated precisely by the followers of economic liberalism. And this is a number of effective changes:
- Decentralization of government.
- Delegation of responsibility from higher to lower levels of management.
- A radical or partial review of government responsibilities.
- Reducing the size of the state sector in the economy.
- Corporatization and privatization of state industries in the economy.
- Orientation of production to the final consumer.
- Development of quality standards for the provision of civil services.
"Management without bureaucrats"
Speaking about modern economic liberalism, one cannot fail to mention this joint work of American scientists D. Osborne and P. Plastrick. The book "Management without bureaucrats" presents an ideal entrepreneurial model of public administration.
Here state bodies act as producers of services, and citizens as their consumers. Creating a market environment in such conditions helps to increase the efficiency of the most inflexible bureaucrats.
As for Russia, in our country the problem of economic liberalism is quite relevant. Experts agree that in the Russian Federation it is represented even more sharply than in neighboring states and antipodes. The "managerial revolution" in Russia must pass on time. If the moment is missed, then the country will expect about the same as the Soviet Union, which missed the next scientific and technological revolution.
Economic liberalism is a social thought, a social anti-bureaucratic movement. Its main goal is to minimize government intervention in the economy. After all, it, even for good purposes, leads steadily to one thing - the general impoverishment of the population.