Liberalism: Economy Flashcards
AGREE: Capitalism and property rights
A capitalist economy is based on economic freedom. It guarantees property rights - for John Locke one of the three a natural rights. The work of Adam Smith in ‘Wealth of nations’ (1776), argues that when the market is free from state interference, the ‘invisible hand’ of market forces efficiently allocates resources i.e. by maintaining the economic freedoms of the individual, the economy works best. In spite of John Rawls position on the unfettered free market, he supported private ownership, and agreed capitalism was the best way to run the economy.
DISAGREE: Differing views on the extent of the role of the state
Classical liberals subscribe to ‘laissez faire capitalism’. As they view the concept of liberty to be ‘negative’, egotistical individuals should be left alone as much as possible. The free market (‘free’ being that of the state) facilitates the best and most efficient allocation of resources within an economy. Whereas, excessive government involvement is detrimental to growth and prosperity.
Modern liberals, call for ‘managed capitalism’. They hold that an unregulated free market leads to undesirable consequences.
Influenced by the works of John Maynard Keynes, to resolve these consequences the state needs to intervene, John Rawls and Betty Freidan, believed that the state could ‘fine tune’ the economy by manipulating the level of demand, through government spending.
DISAGREE: Differing views on the role of welfare
Neoliberal thinker Robert Nozick, held that taxation demanded from the state was essentially ‘theft’, in line with John Locke, it poses as an infringement of property - a natural right. Freidrich Hayek, further argued that welfare creates a disincentive, people become overdependent on the state.
Modern liberals view liberty to be ‘positive’. In response to unprecedented levels of inequality as a consequence of the free-market, John Rawls using the ideas of ‘the original position’ and ‘veil of ignorance’, called for an ‘enabling state’ to redistribute wealth, through extensive welfare.
