Liberalism: Economy Flashcards
AGREE: Capitalism supports equality
A capitalist economy is a system which maximizes the freedom of the individual; it is a system that guarantees economic freedoms such as property rights. John Locke put forward the notion that individuals possess natural rights that of ‘life, liberty, and the estate’. In addition, capitalism reinforces the idea of formal equality. Markets do not discriminate against people because of their gender, race, sexuality and religion. For employers, to compete in the marketplace they cannot discriminate against the gender, race, and religious attributes – this would make businesses uncompetitive. This is consistent with the views of Mary Wollstonecraft, a classical liberal feminist, who advocated for the extension of formal equality to women, since they were denied opportunities due to the patriarchal attitudes. Betty Friedan a modern liberal feminist, influenced by the ideas of classical liberalism believed that if formal equality were to be extended to women, they would be able to achieve the successful combination of marriage, motherhood, and a career.
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 provision of welfare
Another core disagreement between the classical and modern liberals in understanding of the economy is over the provision of welfare. Classical liberals argue that the free market brings ‘efficient’ allocation of resources and prosperity, the ‘self-regulating’ market does not require government interference to allow individuals to succeed. So, they reject the notion that individuals should have to pay high taxes to provide welfare. Modern liberals argue that this underplays the inequalities in society. In ‘A theory of justice’ (1971) John Rawls, a modern liberal, using the idea of an abstract ‘veil of ignorance’, Rawls demonstrates that to ensure everyone equal life chances an ‘enabling state’ is needed to intervene to redistribute wealth via tax an provide extensive welfare to act as a ‘hand up’ for the disadvantaged in society to succeed.
Disagree: Type of capitalism
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 from that of the state) best facilitates the most efficient allocation of resources in an economy. In the ‘Wealth of Nations’ Adam Smith argued that excessive government intervention is detrimental to economic growth and prosperity. Modern liberals endorse ‘managed capitalism’, they argue that the unregulated free market leads to undesirable consequences. John Maynard Keynes argued that to resolve these issues the state must fine tune the level of demand in an economy.
