Lesson Two: The Origins of Western Democratic Liberalism

1. Introduction

2. Lesson 3.2.1 The Development of Classical Liberalism

3. Lesson 3.2.2 About Economic Systems

Scarcity forces individuals and society to make choices when answering the three basic economic questions:

• What goods should be produced? Should only those goods that satisfy people's basic needs be produced or should there be other goods as well? Who should decide this — the government, businesses, or the people?

• How should goods be produced? What's the best way to make the goods given the resources available? Who should decide this: the government, businesses, or the people?

• Who should get the goods (how should they be distributed)? Should only those who can afford to pay for the goods get them or should everyone have equal access? Who should decide this: the government, businesses, or the people?

While answering the basic economic questions, societies must also consider making the best use of their limited resources called means of production:

• land: natural resources used in the production of goods and services.

• labour: work done by humans used in the production of goods and services.

• capital: the buildings, money, and equipment used in the production of goods and services.

  
  

  The following video will provide a basic introduction to economic systems.

  
  

  
  

The following diagram is an economic model that summarizes how countries organize their economic systems to solve the problem of scarcity. When you look at this model of a economic system, you will see the essential features of any economic system:

An Economic System

• is the organized way in which decisions are made about how resources will be used in a society

• is an organized model for decision making about the distribution of limited resources

• includes basic resources of society—land, labour, and capital—known as the means of production

• includes unlimited demands made for the limited resources

• includes decisions—individualism or collectivism—that must be made because of limited resources (scarcity)

• decides what goods will be produced

• decides how goods will be produced

• decides how goods will be distributed

  
  

4. Lesson 3.2.3 Classical Economic Liberalism

Classical liberalism takes an individualistic approach to an economic system.

Before 1750, life was not easy in the towns and farms of England. People had to work hard, and the primitive methods of farming were not very productive. Most work was done by hand with simple tools or with the help of animals. This method, a feudal system used for centuries, was slow and did not produce enough food for a growing population. In addition, only a limited amount of wealth could be produced under the old feudal system. Laws allowed very limited personal freedoms for most people.

During the 1600s and 1700s, the economic system of mercantilism introduced the world to new trade markets. Mercantilism was an economic system based on the following:

• The wealth of a country measured in gold and silver

• Trade surpluses where a country needed to sell more than it bought by seeking out new trade markets overseas

• Establishment of colonies to get resources and provide markets for selling goods

• Government (absolute monarchies) regulation of business

• Government-controlled monopolies in which only a few business were allowed to trade so profits were made mostly by government and a few businessmen

The new overseas markets introduced European entrepreneurs to new products, industry, machinery, and ways of life. In turn, international trade caused social and economic changes in Europe and helped initiate what became known as the Industrial Revolution.

Please watch the following video explain the Agricultural Revolution which helped lead to the Industrial Revolution:

The Industrial Revolution began with the textile industry in Great Britain around 1750 and reached its peak in 1850. The Industrial Revolution moved Great Britain from an agricultural society to an industrial society. Industrialization meant an increase in profits for those capitalists willing to risk their money in business. New businesses meant new products and a growth in new business.

Please watch the following video on the Industrial Revolution

Video: 

Economic changes in Europe during the Industrial Revolution were based on individualism and gave rise to classical liberal ideology.

5. Lesson 3.2.4 Adam Smith

Adam Smith and Classical Economic Liberalism

Adam Smith (1723-1790) and Classical Economic Liberalism 

The spread of industrialization was helped by the ideas of Enlightenment thinkers influencing the political, economical, and social structure of society. One very influential thinker was Adam Smith. He theorized about classical liberalism and economics.

Examine the following chart illustrating the basic differences between mercantilism and Adam Smith's classical economic liberalism or capitalism:

Adam Smith believed that by limiting government intervention and using laissez-faire economics, the perfect economy could be constructed.

Laissez-faire capitalism is a classical liberal economic system based on the ideas of Adam Smith. It is a form of capitalism based on the idea that the government does not get involved in economic decisions and does little to protect workers. There is no government intervention in a laissez-faire capitalist economy.

Some basic principles of classic economic liberalism according to Adam Smith:

OR, put another way, consider the following Adam Smith economic recipe:

How does classical liberalism approach an economic system?

The direction classical liberalism takes economically is based on individualism

• Limited resources (means of production) of land, labour, and capital should be owned or controlled by individuals.

• The economic questions of what, how, and for whom to produce will be answered by the interaction of consumers and producers in the market.

• The government should have no control over ownership of anything in the market.

• The common good will benefit through the economic values of individual economic freedom, competition, self-interest, and private property.

6. Lesson 3.2.5 Liberal Ideas on Political Systems

Classical Liberal Ideas about Political Systems

Before the late 1700s, in feudal Europe of the past, most people lived in the same area in which they had been born. They did the same work as their parents. Most Europeans were poor and uneducated. The chance that their quality of life would improve was very small. They lived a very traditional way of life with very few individual rights. There was a definite class system in which a very small number of powerful people made and enforced the rules-often for their own benefit.

For example, before the French Revolution of 1789, France had a feudal class system, which had been in place for many centuries. Everyone belonged to one of the three classes of French society called estates. The majority of people occupied the lowest class or Third Estate. Most of of the Third Estate were classified as peasants. They did not have any legal rights. Rules were made by the monarch.

Please watch the following video explain the French Revolution

However, with the Enlightenment, society did begin to change. New ideas about individual rights and freedoms were explored by the great thinkers such as Locke, Rousseau, and Hobbes. These ideas began to spread and would be shared by thousands of people around the world. Gradually, ideas about people having a say in government made their way into government policies. Eventually, this led to the liberal democracies  of today in Europe, North and South America, and many other parts of the world.

7. Lesson 3.2.6 John Stuart Mill

Some basic principles of classic political liberalism according to John Stuart Mill are the following:

To reinforce the ideas you just learned about please read pages 101-110 in your textbook, Understandings of Ideologies.  Answer the following questions as you complete your reading.

The Origins of Western Democratic Liberalism (p. 101-110)

1. Examine the diagram on page 103.  How was society structured in Europe between the 1700’s and 1800’s? 

2. What revolution was taking place during this time?  Give a minimum of three examples of how it changed peoples’ lives. (p. 102, paragraph 3)

 3. Read the caption attached to figure 4-6.  Why did liberalism begin to develop in Europe during this period?

 4. Whose writing challenged the traditional economic ways of thinking?  What were his main criticisms of mercantilism? (p. 103, paragraphs 3, 4)

 5. Explain how he thought competition and self interest would create a strong economy? (p. 104, paragraph 1)

6 Explain the “invisible hand.” (p. 104 paragraph 1) 

 7. Examine figure 4-8 and read the text with it.  Explain the law of “supply and demand.”

 8.  What are the advantages of capitalism over mercantilism? (another thinking question)

 9. How do Smith’s ideas reflect the values of classic liberalism. (yup, another thinking one)

 10. What are the key political elements of liberal democracy?

(p. 106, paragraph 1)

 11. What ideas did John Stuart Mill contribute to the ideas of liberalism?

(p. 107, paragraph 2)

 12.  Examine the “Voices Box” on page 108 and answer questions 1-3.

13. How does classical liberalism differ from modern liberalism?

(your last thinking question of the worksheet)

8. Conclusion

The Western European origins of liberalism trace their roots back to significant events.  The Renaissance period (14th to 17th century) in Europe saw the emergence of a modern spirit individualism, which is a central characteristic of liberalism.  By the end of the 18th century, revolutions had taken place in America and in France to establish governments based on the liberal values of freedom and democracy.  The Industrial Revolution during the late 18th and early 19th century in western Europe and North America transformed economic systems.  Classical liberal values led to laissez-faire capitalism, as described by Adam Smith.  Later, during during the mid-19th century, John Stuart Mill advanced Smith's ideas into the political and social realms, and moved them toward what would come to be known as modern liberalism.  

To summarize, how does classical liberalism approach a political system? The direction classical liberalism takes politically is based on individualism

• Political leaders and decision-makers should come from the people.

• Political decision-making process should be open to all individuals in society.

• Political leaders and decision-makers should be selected by society in general.

• Government decision making role should be limited to providing security to individuals and protecting private property.

• Political institutions should be limited in power and their goal should be to protect individual rights and freedoms.

• Political culture should be based on individual rights and freedoms.

• Citizen responsibilities should be not to cause harm to others.

• Citizen individual rights and freedoms should be unlimited, provided they don't interfere with the rights and freedoms of others; much like if one lived in a jungle

• The common good will benefit from everyone having equal individual rights and freedoms.