“Few words have generated more confusion than the word ‘liberal’. Although the term was not explicitly used until the nineteenth century, the ideas behind liberalism can be traced back to at least the seventeenth century, starting with thinkers like Thomas Hobbes and John Locke. The classical meaning of the term describes a position that gives priority to freedom of the individual. In economic terms, this means protecting the right of the individual to use his property as he pleases, especially to make money. In this view, the ideal government is the one that provides only the minimum conditions that are conducive to the exercise of such a right, such as law and order. Such a government (state) is known as the minimal state. The famous slogan among the liberals of the time was ‘laissez faire’ (let things be), so liberalism is also known as the laissez-faire doctrine.
Today, liberalism is usually equated with the advocacy of democracy, given its emphasis on individual political rights, including the freedom of speech. However, until the mid-twentieth century, most liberals were not democrats. They did reject the conservative view that tradition and social hierarchy should have priority over individual rights. But they also believed that not everyone was worthy of such rights. They thought women lacked full mental faculties and thus did not deserve the right to vote. They also insisted that poor people should not be given the right to vote, since they believed the poor would vote in politicians who would confiscate private properties. Adam Smith openly admitted that the government ‘is in reality instituted for the defence of the rich against the poor, or of those who have some property against those who have none at all’.
What makes it even more confusing is that, in the US, the term ‘liberal’ is used to describe a view that is the left-of-centre. American ‘liberals’, such as Ted Kennedy or Paul Krugman, would be called social democrats in Europe. In Europe, the term is reserved for people like the supporters of the German Free Democratic Party (FDP), who would be called libertarians in the US.
Then there is neo-liberalism, which has been the dominant economic view since the 1980s. It is very close to, but not quite the same as, classical liberalism. Economically, it advocates the classical minimal state but with some modifications – most importantly, it accepts the central bank with note issue monopoly, while the classical liberals thought that there should be competition in the production of money too. In political terms, neo-liberals do not openly oppose democracy, as the classical liberals did. But many of them are willing to sacrifice democracy for the sake of private property and the free market.
Neo-liberalism is also known, especially in developing countries, as the Washington Consensus view, referring to the fact that it is strongly advocated by the three most powerful economic organizations in the world, all based in Washington, DC, namely, the US Treasury, the International Monetary Fund (IMF) and the World Bank.”
Ha-Joon Chang (2014), Economics: The User’s Guide, Pelican Books, p.69-70.