The Cato Home Study Course, Vol. 10: The Achievements of Nineteenth Century Classical Liberalism

During the nineteenth century the principles of individual liberty, constitutionally limited government, peace, and reliance on the institutions of civil society and the free market for social order and economic prosperity were fused together into a powerful synthesis, known as liberalism. Although the term “liberalism” retains its original meaning in most of the world, it has unfortunately come to have a very different meaning in late twentieth-​century America. Hence terms such as “market liberalism,” “classical liberalism,” or “libertarianism” are often used in its place in America. This module shows how liberalism developed in Europe and America in the nineteenth century. In addition to examining the important debates, such as those between utilitarians and natural rights advocates and between supporters and opponents of state involvement in education, this module traces the rise and the ultimate collapse of liberalism. By the end of the nineteenth century, liberalism had all but died as an intellectual and political movement. It was replaced by various forms of collectivism, such as socialism, fascism, racism, nationalism, imperialism, and corporatism. (The revival and reformulation of liberalism after World War II are covered in the next two modules.)

A number of fascinating chapters in the story of liberalism are developed at length in this module, including the opposition to mercantilism, coercive monopolies, and special privileges; the rise and success of the Anti-​Corn Law League and of the general movement for free trade; the vigorous debates over state education; and the development and application of the idea of freedom of conscience as a guiding principle of liberalism, applicable not only to religion but to charity and other activities. A lengthy examination of the ideas of one of the great figures of nineteenth-​century liberalism, Herbert Spencer, gives insight into both the rise and the fall of liberalism, for Spencer was active during both periods. The ideas of a formidable American liberal, the sociologist William Graham Sumner, who warned of the consequences of abandoning the ideal of limited government and respect for the equal rights of individuals, also receive careful consideration. Each chapter bears important lessons for modern day libertarians.

Of special significance are the remarkable efforts of the French liberal Frederic Bastiat, who explained in remarkably clear language the fallacies of socialist and interventionist thinking. Bastiat, whom Joseph Schumpeter called “the greatest economic journalist who ever lived,” used devastating wit and logic to reveal the errors of protectionist, Keynesian, interventionist, and socialist arguments. He insisted that the good economist is concerned to show, not only the direct effects of a policy, but the indirect ones, as well. Adam Smith had devoted great attention to showing the indirect, or unintended, effects of market exchanges; as he argued in The Wealth of Nations, we do not intend to create a complex social order when we exchange, but that is the result of our action. Bastiat concentrated on showing the indirect effects of state intervention. The American economist Henry Hazlitt, formerly a columnist for the New York Times and for Newsweek, updated that lesson and applied it to American institutions in Economics in One Lesson.

Alexis de Tocqueville, in the reading from his famous Democracy in America, shows how freedom and virtue were made compatible in the America of his day. Richard Cobden, whose work on behalf of freedom of trade and international peace is examined in the audiotapes, explains in the selections from his writings how peace promotes international harmony. Doug Bandow applies the basic principles of “conscience liberalism,” which are explained in the audiotape portion of the module, to a most important contemporary social problem. And the essay from a 1900 issue of The Nation foretells the future with chilling accuracy: “We hear no more of natural rights, but of inferior races, whose part it is to submit to the government of those whom God has made their superiors. The old fallacy of divine right has once more asserted its ruinous power, and before it is again repudiated there must be international struggles on a terrific scale.”

Readings to Accompany The Audio

From The Libertarian Reader: Richard Cobden, “Commerce Is the Great Panacea” (pp. 319-20), “Nonintervention” (pp. 322-23); The Nation, “The Eclipse of Liberalism” (pp. 324-26); Alexis de Tocqueville, “Interest Rightly Understood” (pp. 75-76); Frederic Bastiat, “What Is Seen and What Is Not Seen” (pp. 265-73); Doug Bandow, “Private Prejudice, Private Remedy,” (pp. 112-115).

From Economics in One Lesson: Chapter 1, “The Lesson” (pp. 3-10); Chapter 2, “The Broken Window” (pp. 11-12); Chapter 3, “The Blessings of Destruction” (pp. 13-18); Chapter 4, “Public Works Mean Taxes” (pp. 19-24); Chapter 5, “Taxes Discourage Production” (pp. 25-26); Chapter 6, “Credit Diverts Production” (pp. 27-34); Chapter 11, “Who’s ‘Protected’ by Tariffs?” (pp. 59-69); Chapter 12, “The Drive for Exports” (pp. 70-74).

From How the West Grew Rich: Chapter 5, “The Development of Industry” (pp. 144-88); Chapter 6, “Diversity of Organization: The Corporation” (pp. 189-210).

Ralph Raico, Classical Liberalism: Historical Essays in Political Economy (New York: Routledge, 1998). This selection of essays is probably the most valuable recent work on the legacy of classical liberalism. In addition to presenting pioneering work, the author is a master of English prose.

Some Problems to Ponder & Discuss

• If it is necessary to bring people to understand both “what is seen” and “what is not seen” if they are to embrace the free society, are libertarians at a disadvantage compared to statists, who can always point to positive benefits to someone that can be attributed to the statist interventions? If there is a natural disadvantage because of the necessarily abstract nature of libertarian political economy, how might that be overcome?

• Was the extension of the franchise a cause of the decline of liberalism or a mechanism to secure the gains that liberals had made against the “sinister interests” of those with power?

• Would the efforts of the Anti-​Corn Law League have been successful in eliminating tariffs if there had not been a famine in Ireland? What is the relationship between the activities and intentions of political reformers, such as the liberal crusaders for freedom of trade, and external factors? How does one know when there are opportunities to advance liberal principles and which fights one should fight?

• How do the insights of Bastiat concerning the “seen and the unseen” refute the fallacies behind such doctrines as “the balance of trade,” “anti-​dumping laws,” and “wartime prosperity”?

• If a population educated in the principles of liberalism-​-​respect for individual rights, understanding of the constitutional limitations on state power, and so on-​-​is necessary for those principles to be sustained, is state education to impart those principles appropriate? If not, how would one diffuse the principles of liberalism sufficiently widely throughout the population to sustain the free society?

• What is the relationship between a right and the reasons for asserting one has the right? What role does the concept of a general rule play in justifying abstract rights?

• If people can be forced to be just, can they be forced to be good? Can belief be forced?

• How do modern libertarians avoid the fate of late-​nineteenth-​century liberals, who failed to stop the onslaught of collectivism and war?

Suggested Additional Reading

Frederic Bastiat, Selected Essays on Political Economy, ed. George B. De Huszar (Irvington-​on-​Hudson, N.Y.: Foundation for Economic Education, 1964). Frederic Bastiat was perhaps the clearest writer on political economy ever to set pen to paper. His brilliant essay “What Is Seen and What Is Not Seen” is essential reading for an understanding of economics (it is excerpted in The Libertarian Reader), and his essays “The Law” and “The State” (in which he noted that “the state is the great fictitious entity by which everyone seeks to live at the expense of everyone else”) are works of genius.

Herbert Spencer, The Man vs. the State. We are fortunate that there are currently two editions of this work in print: The Man vs. the State, with Six Essays on Government, Society, and Freedom, foreword by Eric Mack and introduction by Albert Jay Nock (Indianapolis: Liberty Press, 1982), and Political Writings of Herbert Spencer, John Offer, ed. (Cambridge: Cambridge University Press, 1994). These essays offer Spencer’s mature reflections on the decline of liberalism toward the end of the nineteenth century and his proposals for reinvigorating it. Notably, he concluded his essay “The Great Political Superstition” with the observation: “The function of Liberalism in the past was that of putting a limit to the powers of kings. The function of true Liberalism in the future will be that of putting a limit to the powers of Parliaments.”

Western Liberalism: A History in Documents from Locke to Croce, E. K. Bramsted and K. J. Melhuish, eds. (New York: Longman, 1978). This brilliant collection includes both classical liberal writings and some “revisionist” or “modern” liberal writings, such as those of T. H. Green and John Maynard Keynes.

For Further Study

On Liberty, Society, and Politics: The Essential Essays of William Graham Sumner, Robert C. Bannister, ed. (Indianapolis: Liberty Press, 1992). This outstanding collection of Sumner’s writings includes his prescient essay on the corroding effects of foreign adventurism on republican institutions, “The Conquest of the United States by Spain” (1898); his defense of the taxpayer, “The Forgotten Man” (1883); and his defense of the presumption of liberty, “Laissez Faire” (1886).

Herbert Spencer and the Limits of the State: The Late Nineteenth-​Century Debate between Individualism and Collectivism, Michael Taylor, ed. (Bristol, England: Thoemmes Press, 1996). This collection of original essays brilliantly documents the issues at stake in the debate between individualists and collectivists in the nineteenth century. In his introduction, the editor shows how current debates over the welfare state, socialism, and constitutional limits on state power are largely continuations of debates from the previous century.

Capitalism and the Historians, F. A. Hayek, ed. (Chicago: University of Chicago Press, 1954). This collection of essays examines at the remarkable hostility toward capitalism and industrialism among intellectuals and compares their pronouncements with the available historical record. Although much valuable historical research has been done in the years since this collection was published, this little volume retains its value.